Did our 2017 predictions come true?
Last year our distinguished Editorial Advisory Board shared their predictions for instant payments in 2017. So how accurate were these predictions? We thought it would fun to revisit them and see what 2017 actually held for them.
2017 prediction: We will see the first genuine instant account-to-account payment transactions happening in the US, Australia, Finland, Italy and within the European single euro payments area (SEPA) region as instant credit transfers (SCT Inst) are rolled out.
TRUE in the main. Both the instant SEPA credit transfer (SCT Inst) scheme in Europe and The Clearing House (TCH RTP) real-time payment platform in the US went live, respectively on 21 and 13 November 2017. Australia’s new payment platform (NPP) is due to go live in Q1 2018. EBA Clearing’s RT1 pan-European platform is already processing SCT Inst compliant cross-border instant payments in Europe, reports the Board’s Fred Bär, and some other clearing and settlement mechanisms (CSMs) are adhering to the scheme. Many more need to follow. Individual payment service providers (PSPs) and banks also need to migrate to SCT Inst as only 15% have so far done so.
2017 prediction: The US will have multiple real-time systems in operation by the end of 2017, including that of The Clearing House (TCH).
PARTLY TRUE, but possibly more to come. TCH RTP is live and EWS Zelle is in operation. Visa Direct and MasterCard Send are also offering fast credit transfers over their card networks as an alternative. The former’s service also came to Europe last year. More additions to the deliberately open US instant payment field are possible in 2018, with the US Federal Reserve Taskforce report leaving room for the marketplace to define the country’s landscape. But according to the InstaPay Board’s Steve Ledford of TCH: “US real-time payment networks will focus on achieving ubiquity and growth in 2018 and on establishing interoperability.” Interoperability will be a key theme for 2018.
2017 prediction: Every major developed economy in the world will have started planning for a national real-time payments (RTP) infrastructure (unless they already have one) including new names like Argentina, Indonesia, etc.
IN PROGRESS. Mobile functionality is also proliferating. There have been RTP schemes announced in Malaysia where instant credit transfers will be rolled out next year joining a retail payment platform that will expand to include person-to-person (P2P) mobile functionality in 2018. Payments Network Malaysia (PayNet) are also exploring the possibility of cross-border P2P links to Thailand and Singapore, where the FAST instant payment (IP) infrastructure is well established. Vietnam is also planning to extend and upgrade an existing IP service, reports the Board’s Fred Bär.
2017 prediction: ‘Rip and replace’ IT payment strategies will no longer be favoured by banks due to their high costs and associated business risk.
TRUE. The desire to implement real-time (RT) payments rapidly has led to a choice of: gateway; mini-hub; and third-party hosted options for banks. The latter is often for banks that do not require wholesale replacement of internal payment processing infrastructures, but want to leverage hub-type capabilities to integrate with legacy systems.
2017 prediction: We will see an increase in adoption rates of instant payments by smaller banks, thanks to the arrival of advanced modular payment frameworks.
IN PROGRESS. This is just now starting in the US, says the InstaPay Advisory Board’s Steve Ledford, with Zelle relationships with third-party channels starting to show progress. The US market is traditionally well served by processing firms as there are many more credit unions and other types of smaller FIs. In Europe many of the smaller Landesbanken in Germany and other PSPs that have already migrated to the SCT Inst scheme will likely rely on outside assistance.
2017 prediction: The International card schemes will have started M&A assessments for at least one further payments processor.
NOT EVIDENT YET. The takeover of VocaLink in the UK by MasterCard has happened, but it hasn’t been followed by more such deals. However, rumours abound about Portugal’s position, says the Board’s Fred Bär. WorldPay was acquired by Vantiv in August for $10bn and Nets by H&F in September last year for $5bn, so M&A activity is increasing. But so far it is more driven by venture capital (VC) funds and processors, rather than by the international card schemes.
2017 prediction: There will be at least two countries where interoperability contracts have been signed between different CSMs, to go live in the 2018-2020 timeframe.
NOT TRUE YET. But the timeframe and prediction are still relevant. In Europe there has been a deal between Spain’s Iberpay ACH and EBA Clearing’s pan-European RT1 platform but we’re still awaiting deals between national ACHs in this era of SCT Inst compliant transactions in Europe. A deal is expected imminently between Belgium and the Netherlands reports the Board’s Fred Bär. According to TCH’s Ledford “I think 2019 is a more likely target” for global CSM interoperability deals. “In 2018 the focus will be on ramping up domestic/regional networks”. This will be evident in Europe and the US if other schemes ramp up there.
2017 prediction: By the end of 2017, at least 300 European banks will have registered their interest or joined the new European SCT Inst scheme.
TRUE. At its launch on 21 November last year the European Payments Council (EPC) claimed 585 payment service providers (PSPs) were already live, 15% of the total in Europe. More have since joined. According to the Board’s Fred Bär over 900 bank identifier codes (BICs) have been registered with the EPC, although 600 of these do belong to two large banking groups in Austria and Germany. Larger banks in Germany still need to migrate. A continent-wide 50% PSP migration figure is not being predicted by the EPC until 2020. It’s the same timeframe for US RTP ubiquity.
2017 prediction: The ECB will start discussing the mandating of SCT Inst if the ACH community fails to mobilise with suitable speed and interoperability.
PARTLY TRUE. Even just discussing potential mandatory compliance with SCT Inst in the future could spur its adoption. As the Board’s Bär points out the ECB is also “actively promoting” its Target Instant Payment Settlement (TIPS) platform, due in November 2018. This will act as a de facto spur on the road to compliance as there will be no longer be a viable excuse for not connecting to the scheme. At the moment SCT Inst compliance is voluntary but it will likely become mandatory if migration lags and slow adoption continues into the next decade.