2017: The year of Instant Payments
Unless you’ve spent the last 365 days hiding under a rock, you’ll be fully aware that 2017 has been the year of Instant Payments. Regulators and industry bodies around the world launched more Instant Payment systems than ever before. While 2016 only saw five new systems launch, in 2017 this more than doubled to eleven new systems including a number of high profile initiatives such as SCT Inst in Europe and The Clearing House in the United States. We also saw headline grabbing Instant Payment service launches such as Zelle which is competing with other major mobile P2P services like Venmo.
This groundswell of adoption is being driven by one fundamental principle – archaic, batch-based payment processing can no longer support the ambitions of financial institutions globally nor the customers that they serve. Put simply, if consumers now have the ability to monitor the progress of their Uber driver in real-time, they should be able to do the same with their payments.
2017 was also the year when the self-inflicted wounds of Brexit began to bleed. Some banks have already initiated projects to move their Euro clearing business away from London and into the Euro zone, and incentives offered by organizations such as the Deutsche Börse will further erode this €1 trillion per day market.
2018: PSD2 is still 18 months from reality
January will be a false dawn for PSD2. While the long awaited Regulatory Technical Standards that underpin PSD2 Access to Accounts will finally be ratified in October, there is still a lack of clarity around numerous areas of the Regulation making practical implementation near impossible. I expect confusion will reign for at least 18 months and it will be mid-2019 before PSD2 compliant services are launched.
The industry is highly focused on this issue, it’s all you hear about at events and all you read about in the media. The real danger with this regulatory incoherence is not just the delay, it’s the loss of momentum. Without the ability to implement, many banks will take the opportunity to sit back and wait after three years spent getting them out of their chairs. But this is a mistake. Pioneering banks are pushing ahead with implementation, despite the technical challenges, and laying the ground work for change under their own steam rather than waiting for the rest of the world to move forward.
2018 will be the year when cross-border Instant Payments start to materialise – in the Euro zone, at any rate. So far, banks that have launched SCT Inst initiatives have focused on their domestic markets, even though SCT Inst is a Euro-zone wide initiative. In 2018, we will see interoperability between CSMs start to emerge.
2018 will also be the year when banks start building value-added services on top of Instant Payments. It’s not about doing the same old things faster, it’s about delivering new and better products and services to consumers and business customers. The UK Payment Strategy Forum has consulted on the blueprint for the New Payments Architecture, which will use a foundation of instant credit transfers and deliver API-based additional services on top. We expect to see banks across Europe adopt a similar model – APIs plus Instant Payments form a powerful combination on which to base new product innovation.