Hurdles in real-time payments despite accelerated uptake

By Michael McCaw | 3 October 2019

Adoption of real-time payments has been picking up recently, according to a recent report by FIS, but not without barriers.

Research by the payments giant suggests retailers and fintechs are embracing open payment initiatives, with firms such as Amazon, Facebook, Alipay, Tencent (WeChat), Baidu and Google expanding their presence in real-time payments. The number of countries live with real-time payments is 54 – a fourfold increase over the past five years. It’s driven by regulators as well as market demand.

“The transparency that the regulators are requesting, both from banks and financial institutions through to payments schemes and the oncoming ISO 20022 and other rules are demanding more transparency around exchanging messages etc,” says Alison Wilkes, head of payments, Europe, FIS. “That’s definitely playing a part, but as individuals, in terms of consumers of anything whether it’s banking services, payment services, or the retail experience on the high street. We want more, more transparency, on-demand, and we want things when we want them and where we want them.”

FIS works with banks and financial institutions to ensure the process of adopting new initiatives such as real-time payments is as pain-free as possible. It’s not easy for those firms, says Wilkes, particularly for multinationals.

“It’s far from straightforward to implement, financial institutions need help around the language that has evolved across payment schemes, across borders,” she says. “The consistency that has to be applied here and the regulations in each jurisdiction.

“The ease with which the systems and the messaging that’s required to be able to adopt the different types of schemes you’ve got to apply all of that thinking, all of those regulations, across all of these schemes and it’s not the easiest thing for organisations to do but it’s one of those things that banks need to do to grow their businesses. And it’s certainly not easy in terms of the legacy infrastructure out there in the market.”

Simon Healy, financial services industry director, EMEA at Unisys, and member of a UK government all-party parliamentary payments group, recognises that real-time payments is at different rates of adoption across the globe but there is consumer demand.

“Without doubt real-time payments is a clear customer need, expectation, it’s that desire to remove any friction – wanting things to happen now, easily, and joined up,” he says. “In the US for example it’s still quite difficult to even get a real-time balance never mind a real-time payment. In that sense the UK is further advanced in that regard.”

However, he says, much was anticipated of the UK’s Open Banking initiative, which was expected to be on a “more aggressive trajectory”.

“One of the fundamental flaws of Open Banking as it currently sits is that the payment structure and the payment experience that it facilitates is actually worse than the experiences that we’ve got in the market already,” he says.

In the US, the Federal Reserve announced in early August plans to create a real-time payment and settlement service – FedNow – with a 90 day comment period currently open before the central bank moves forward. Other national and regional schemes and services have come onboard in recent months in Asia and Africa.

For Wilkes, however, systematic changes can also be expected to boost the possibilities of real-time payments.

“We could see the prevalence of more payments in the market – on scheme and off, that is peer to peer payments, bank to bank payments – I think we’ll see that being used as a mechanism, so there’ll be challenge there. ISO 20022 is going to shift the dimensions of the data that’s being held by us as consumers. That’s really going to help our banks to really tailor the types of products and services, and customer experiences on offer. In this digital day and age, it really is about customer experience.”


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