Immediate payments are gathering momentum around the world. Since the launch of the very earliest schemes – including the UK’s Faster Payments Scheme (FPS) and the Swiss Interbank Clearing (SIC) in Europe, Japan’s Zengin system and Brazil’s SITRAF payments system – the number has steadily grown.
The US has, albeit belatedly, joined the trend and there are currently more than 30 immediate payments programmes in place or in advanced stages of development worldwide. This number is expected to grow exponentially within the next decade.
In the Asia Pacific region alone, there is Singapore’s implementation of Fast And Secure Transfers, aka FAST, Australia’s New Payments Platform (NPP) and other immediate payments programmes in the works for Hong Kong, Malaysia and Thailand.
A combination of technology and consumer demand is creating an environment where payments are increasingly expected to be made in real-time or near real-time. The advent of smartphones means that every person has a computer in their pocket, and communication, access to information and even purchases are done instantaneously at the touch of a button. The expectation for immediacy translates well to payments, and consumers want to see funds move instantaneously.
In some regards, Europe has been on the forefront of instant payments innovation and adoption. The UK introduced FPS in 2008 and eight years later, in 2016, FPS was processing more than 1.2bn transactions worth over £1.2 trillion (US$1.54trn). Additionally, Sweden’s immediate payments scheme, Swish, has been live since 2012, and by last year being was actively used by more than half of the country’s population.
However, today there is an initiative underway that will allow for instant euro payments at a pan-European level. As of November 2017, a pan-European instant payment solution, dubbed RT1, will make pan-European immediate payments a reality. Twenty-eight users are currently preparing to go-live on EBA CLEARING’s real-time infrastructure platform at the time of launch, with more planning to connect in 2018.
Asia watches Europe
In Asia, the Association of Southeast Asian Nations (ASEAN) economic community continues to advance its goals of promoting cooperation and economic integration among its 10 member nations. Similar goals are being explored in the Greater China area; in particular between China and Hong Kong, where the Hong Kong Monetary Authority (HKMA) has indicated that it wants to connect its upcoming HK Faster Payment System (FPS) scheme with China’s real-time China National Advanced Payments System (CNAPS) II scheme, Internet Banking Payment System (IBPS).
It raises the question: could the region be far behind Europe in also implementing a cross-border immediate payments platform? While there are no immediate region-wide plans on the table, banks may want to consider the possibility when developing their immediate payments capabilities. In fact, even if a regional scheme proves never to materialise, today’s global marketplace should still have banks considering cross-border capabilities when they pursue immediate payments.
Looking at various immediate payments schemes implemented around the world – both country-specific and regionally focused – one may deduce that banks approaching immediate payments on a tactical, “one-country-at-a-time” basis are likely to overspend, yet still fail to capture the critical mass of the emergent customer base.
Conversely, banks that recognise the scope of the opportunity and prepare a strategic multi-country response aligning business cases, current capabilities and selecting a solutions partner with proven experience – who can deliver while the scheme is still evolving – are likely to emerge as the winners.
Fortunately, most new schemes are adopting similar message types and standards, including ISO 20022 standards for credit transfers, direct debits, request for pay and centralised addressing services. However, the move to cross-border brings new challenges around foreign exchange (FX) conversion and settlement, but these relate more to policy and risk than technical capability.
Since immediate payments are quickly taking hold around the world and cross-border schemes are being implemented in select instances, Asian banks should begin to prepare for pan-Asian immediate payments. Technical challenges will be minimal for banks developing these capabilities, so with some consideration for policy and risk, Asian banks can position themselves at the front of the race and provide robust cross-border capabilities to their customers.