FLAVORS OF FAST FLAVORS OF FAST REPORT 2018 - FIS
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Contents Contents 3. Welcome 19. The Faster Payment Innovation Index 4. Introduction 21. FPII Map and Ranking 5. Openness, Overlays and Immediacy 22. The Movers and Shakers 6. Opening Up Banking 22. Growth In India 6. API Access 22. China Leading The World 7. Legislating Openness 22. New Payments In Australia 8. Innovate On Open 22. US Onboard 8. Open Up To Fast 22. Europe Goes Live 9. The QR Resurgence 10. Putting the Faster Rails to Good Use 23. Interviews and Insights 11. The Asian QR Code Explosion 23. Citi Treasury And Trade Solutions: 12. Some QR Offers Real-Time, APIs and Corporate Treasury 12. Dynamic QR 26. United States Roundtable: 12. QR Futures The Federal Reserve, The Clearing House 13. Social Network Integration and BB&T on Faster Payments 14. Reinventing The Supermarket CX In Europe 29. Payments Canada: 15. Open Australia Journey to Modernization 16. A Suite Of Innovation On Open + Fast 32. Blueprint for the United Kingdom: Redesigning Real-Time 17. A Definition of “Fast” 18. Need Not Apply 36. Country Reports 18. Beyond Just Retail 37. Live Countries 18. Other Factors Of Interest 76. On The Radar 83. Under Development ©2018 FIS FIS and the FIS logo are trademarks or registered trademarks of FIS or its subsidiaries in the U.S. and/or other countries. Other parties’ marks are the property of their respective owners.
Welcome Welcome Welcome This year, that number jumped to an astounding 40 countries For example, we’ve seen APIs transform the traditionally batch- live with faster payment schemes, fueled in part by regions oriented world of corporate treasury into one that runs on real like Australia, the United States (US), and the launch of the time, and overlay services that allow consumers to apply for a SEPA Instant Credit Transfer (SCT Inst) scheme, created by loan and receive near immediate approval and funding. the European Payments Council (EPC). SCT Inst is expected to progressively bring faster payments to more than 30 We predict this is the start of a continued revolution in faster countries over the course of the next year. payments schemes, and one that will make speed just one sliver of a much larger story. In addition to the surge in new schemes, we’ve seen some earlier adopters of faster payments explore how to FIS is a global leader in advanced payments solutions and modernize their existing systems, both to fuel the new supports real-time payments production environments in 27 innovations that open APIs and collaboration on real- countries worldwide. We look forward to continuing our role as a time rails will make possible, and to shift toward global fintech leader who is dedicated to helping every one of our clients messaging standards like ISO 20022. Our 2018 findings identify how faster payments can fit their unique business now, also indicate steady growth in terms of usage and adoption and the one they’re working to build for the future. in a number of existing schemes. 2018 marks FIS’ fifth year producing our We hope you’ll enjoy reading our 2018 Flavors of Fast report, annual Flavors of Fast report, which was Perhaps most importantly, 2018 marks the start of what and invite you to be a part of the faster payments conversation. we sense will be a pivotal shift in how scheme operators, originally inspired to capture the early participants and end users come to perceive the potential, Sincerely, but remarkable influences we saw faster value, functionality and relevance of real-time payment rails. In various parts of the globe this year, we’ve noted a variety payment schemes making around the of value-added services and emerging use cases that world. When we published our 2014 report, are raising expectations and possibilities for what faster payments can accomplish, for end users as well as the we counted a total of 14 live schemes. institutions, fintech and authorized third-party providers who By the time we released 2017 Flavors can use real-time rails as an underpinning to deliver new Raja Gopalakrishnan of Fast, there were 25 countries live with products and ways of serving customers. GFS, Payments faster payment schemes.
Introduction Introduction Real-time payments are about more than just speed. As past Flavors of Fast reports have indicated speed is not They create frictionless commerce and enable a financial the only consideration for the retail consumer when making world in which the entire payment process occurs seamlessly payment. The value proposition must deliver an ease of and immediately. An open payments system can also use that is comparable to cash, without the need for the Real-time payments are the first step provide opportunities for financial institutions to help payer to know the account number of the beneficiary. toward a new world of payments; the commercial and retail customers better understand Costs must be competitive, with no compromise on security. instant nature of payments is merely and manage their financial picture with greater ease. Corporations need to provide customers with options that By developing innovative overlay services on top of the are in line with changing expectations, and ensure that a launchpad for a new payments faster payment rails, whether through open banking instant payments are cost-effective and provide an improved ecosystem. initiatives or new ways of initiating payments through alternative to existing models (from a treasury perspective). QR code scanning, all parties in the value chain benefit. One game-changing factor is the use of the ISO 20022 Initiatives like the sharing of application programming message standard in many instant payment schemes. This interface (API) access among financial institutions, as standard provides an added benefit for corporates from a an introduction to customers and their customers’ data, data perspective, as more information can be sent along with has shifted the conversation about the potential for faster payments to simplify the end-to-end process. They can better payments. The discussion is no longer about the business understand market trends and create new products and value- case for faster payments, but adding real business value to added services that meet emerging business or consumer commerce in all spheres of operation. needs, especially those that create efficiencies for end users. The use of ISO 20022 is a critical factor in our scoring of the What is driving increased interest in the deployment and various instant payment schemes, and the corresponding uptake of real-time payments, what has changed and what rank on our Faster Payments Innovation Index (FPII). does this mean for consumers, merchants, governments and corporations? Are instant payments primarily a peer-to- In addition to being instant, the peer (P2P) instrument, or will they become a mainstream tool used in the business-to-business (B2B) sphere too? key word for future payments is Once the instant payment infrastructure is in place, the real debate lies in the solutions and use cases that are available openness: open to sharing data, in the market and how to tailor the characteristics of these open to new channels, open to new services to each customer segment. applications, and open to being open.
Openness, Overlays and Immediacy Openness, Overlays and Immediacy The speed of settlement, ease of use, and ways in which the service improves and streamlines people’s lives are certainly paramount to the success of a faster payments scheme — but they are not differentiators. Overlay services can be defined as any payment service offered by a bank or third party that connects to an instant payment clearing and settlement infrastructure or its participants, but adds greater functionality for users. The emerging overlay services that are receiving the most attention have the potential to generate revenues for banks, and provide enhanced value propositions when packaged with coordinated information. It should be noted that the term “overlay” can have specific definitions in some regions. (Under NPP in Australia, for example, an overlay service is essentially a scheme that lives on top of the NPP scheme, and that requires multiple parties to participate.)
Openness, Overlays and Immediacy Opening up banking API access Open banking is set to be the most seismic shift in The use of APIs by banks has become an increasingly financial services since the emergence of online banking. common way to drive new banking models that enable Payments must be an enabler in an increasingly networked consumers and businesses to manage their money in world; they need to be an integral part of the context better ways. Use of such innovative applications will of everyday life. When walking into a store, browsing a provide personalized information and services to meet website or using a smartphone app, customers are not numerous financial needs in one place. Collectively there to make a payment, the transaction is just a part of known as open banking, this technology revolution aims the bigger experience. Benefits will accrue as the rollout to liberate customer and business data from the systems progresses from more convenient and data-rich payments, and infrastructure of various financial services to facilitate to easier cross-border commerce, to a wide variety of these enhanced services, by leveraging connected value-added real-time payment services. networks instead of centralization. The provision of API services empowers application developers to create and deliver services that go beyond The result of open banking will be the underlying payment. Immediate payments underpin new marketplaces, new choices these value-added services in a way that traditional credit transfers or card payments cannot. By embedding and added transparency. immediate payment mechanisms into otherwise purely To do that, financial systems must non-transactional offerings, business value is enhanced. An instant messaging app can become a means to pay modernize the way they connect to the restaurant bill; payday loan applications can provide instant access to funds; insurance providers can make other systems and to customers. instant payouts on claims.
Openness, Overlays and Immediacy Legislating openness A follow-up from Europe’s first Payment Services Directive, PSD2 has been front-and-center in the banking industry for more than a year, and not just in Europe. It aims to change the way retail banking is performed in the EU and provides the legal framework within which all Payment Service Providers (PSPs) must operate. The Directive’s purpose is to increase Pan-European competition and participation in the payments industry, including nonbanks, and to provide a level playing field by harmonizing consumer protection and the rights and obligations for PSPs. Under PSD2, banks and other financial institutions must give certain licensed third-parties access to account information. At the same time, they cannot treat payments that go through third-party service providers any differently. There are two types of third parties providers (TPPs), the Account Information Service Providers (AISP) and the Payment Initiation Service Provider (PISP). The AISP provides information about an individual’s accounts and balances, and the PISP initiates payments without going through the payment networks. Open banking is not simply an attractive concept, it is backed by legislation in Europe.
Openness, Overlays and Immediacy Innovate on open Open up to fast Open APIs and instant payment mechanisms are Open access to accounts running on faster payment rails inextricably linked; the combination of both will release the goes much deeper than simply smoothing the way for potential for fundamental change. By opening up financial additional merchant services. A bank’s customers create institutions to the outside world, faster payments can be a massive amount of data that often goes underutilized; used to drive new innovative use cases on a global scale. technology can now give customers access to refined and Third parties will gain access to account information usable data to improve their personal financial situation. and payment initiation capability, enabling a host of new With open access, apps can directly inquire about propositions to emerge. Open banking and APIs give consumer behavior and payment history (assuming the banks the opportunity to reinvent their business models, owner approves) and add real business value. Third-party but this must be guided by a sense of purpose. lenders could have access to historic transactional data to determine a borrower’s risk level, potentially providing By using an ecosystem of third-party applications and customers access to more personalized loan terms. services – enabled by APIs – banks can rapidly advance their digital transformation agenda in the open banking Open APIs offer significant opportunities and challenges world. In practical terms, the entire payment value chain for the industry, and the payments sector will take a needs to be disconnected into discrete elements. This leading role in their development and implementation. creates new opportunities and challenges, but opens the Open APIs could have a fundamental impact on the door for new business models that demand new ways of customer-bank relationship and significantly alter the thinking. For example, third-party application developers landscape of players and providers. may distribute payment services via their own channels, changing the traditional financial institution’s direct Instant goes beyond the payment, as all the processes footprint of responsibility and interaction. around payments– including reconciliation, testing and fraud monitoring—also need to accommodate real-time. To succeed in an immediate payments world, banks must Banks must evaluate their deliver a full digital service and meet client expectations in this evolving “always-on” landscape. position as either a pure infrastructure provider, or play an active role within the emerging ecosystem and maintain a direct relationship with customers – it’s a critical strategic choice.
Openness, Overlays and Immediacy The QR resurgence A few years ago, QR codes were everywhere. From 2011 For brick-and-mortar stores in particular, mobile and to 2013, brands splashed them across posters, put online couponing via QR codes offers a way to cement them in shop windows and integrated them into creative customers’ loyalty and compete with digital stores. advertising. Yet, a combination of poor implementation, This move goes beyond simply creating brand awareness subpar technology, and a lack of native smartphone support and now facilitates payments via mobile devices. The reduced their popularity. However, faster payments may consequence is a deeper and richer integration of digital- help QR codes experience a comeback. loyalty programs. In fact, QR codes have become the preferred payment There is a significant rise in the usage of QR codes on method in some of the world’s largest mobile payments mobile devices outside of core Asian markets, enabled by markets, like Asia, over the last few years. Usage is handset manufacturers adding QR scanning technology significantly lower across Europe and North America, into native camera applications and the rise of app where mobile payment technology was focused on NFC- ecosystems which exchange QR codes to initiate fast based systems including those used by Apple Pay and payments. This may be an early indication that a “QR code Google Pay. In China, market leaders Alipay and WeChat comeback” in Europe, New Zealand, Australia and the US both use QR code vouchers to add loyalty elements to is on the horizon. their mobile wallet offerings, and have integrated instant payment mechanisms into their fabric. QR codes are increasingly used in China, India and elsewhere in Asia to facilitate payments and the exchange of personal details, proving that QR codes can add value when approached with a truly mobile-first mindset.
Putting the Faster Rails to Good Use Putting the Faster Rails to Good Use The real question that hints to the potential for continued innovation is: What can you do once the rails are built? The focus is often initially on P2P payments, but this is just the start. Initiatives are underway to deeply embed payments into the social fabric of society, for consumers, SMBs and corporates. Once the underlying real-time payment infrastructure is synchronized across the industry, the services offered on these real-time payment rails help communities take advantage of the benefits of the underlying infrastructure. To achieve this, banks and other payment service providers need to re-evaluate their position and relationship to their customer, and determine how they’ll become open to new ways of doing business.
Putting the Faster Rails to Good Use The Asian QR code explosion Asia has much lower levels of credit card usage compared to other countries, and consequently, many smaller merchants do not accept them. For these markets, QR codes are a simple and viable way to initiate transactions and reduce the high use of cash. Thailand, India, China and Singapore have established payment services based on QR codes that use the new faster payment mechanisms. The use of QR codes has been pioneered with the small retailers and service providers, such as street food vendors and motorbike taxis, who do not normally offer electronic payment options. Merchants who register for the service are provided with a static QR code that contains credit card-type information and the alias the merchant uses. This alias is used to resolve payments to the bank account of the merchant. Registered customers also have an alias that links to their preferred bank account used for payments. The process is simple: The customer scans the merchants QR code, gets confirmation of who will be paid, enters the price (unless the price is also in the QR code), and sends the payment. The merchant gets a notification that the payment has been made to their bank account, and the transaction is Government payments in complete – all in real time. Thailand and the Philippines QR codes have also become a government-endorsed are now being pushed using solution to reducing cash reliance. The goals are to move more people away from the black economy, raise tax QR codes and the underlying revenue and guard against fraud and money laundering. faster payment rails.
Putting the Faster Rails to Good Use SoMe QR offers QR futures An adaptation of the standard QR code purchase on-the- The resurgence in the use of QR codes as an accelerator for go, social media (SoMe) networks are making payments faster payments shows no signs of slowing. The emergence part of the social fabric. Pioneered in China through the of QR codes as transaction initiator began in China (WeChat phenomenally successful WeChat and Alibaba messaging and Alipay) and India (Bharat), but the phenomenal success apps, end-users can receive temporary discounted offers inspired many followers, including Thailand, Malaysia, from merchants. Using behavioral analytics, the social Singapore and other Asian countries who are either live or on media algorithms predict which offers will be of most the verge of launching QR-based services. interest to different customers, and then send targeted offers with a strong likelihood of uptake. Governments, banks and merchants are also looking to encourage and publicize QR-based services as they migrate toward cashless economies. For banks, it is a race to capture merchants for their services through a sophisticated and Dynamic QR well-designed app. What are the chances that the QR-code revolution will The static QR code, often printed as a poster for easy spread to the West? We will likely see pilots, but the drivers scanning at checkout, can also be dynamic if presented of success in Asia do not necessarily match the market through a screen at checkout. Asian merchants have needs elsewhere. With higher credit card usage in the West, adopted QR codes to promote offers depending on stock and the imminent emergence of innovative services built on levels. For example, a retailer may offer a 50 percent open banking standards, QR code initiation may not prove as discount on the first 100 items sold, but the discount can popular as it has been in Asia. dynamically drop to 25 percent for the next 100 items sold. The scanning of the code triggers an inventory check and adapts the QR code accordingly, in real time. The combination of social networks The QR code defines the business scenario, and the code and payments has proven to be a can change as the scenario evolves. By linking the payment service to other merchant or retailer systems, such as inventory, primary driver of growth. the payment itself becomes embedded in the middle of the value chain as an enabler.
Putting the Faster Rails to Good Use Social network integration Services in China like WeChat and Alibaba (and Alipay) have These services need a client base to succeed, and the closed- seen phenomenal success by incorporating P2P payment user-group nature of these services works to their advantage. capability. In India, the biggest first movers include services that continue to merge payments with messaging; money While Facebook, WhatsApp, Apple Pay and Google Pay have transfer apps like Tez, Bharat and Paytm payment services now all offered (or attempted) similar functionality in the past, feature chatting capability. Established chatting apps such as the consumer uptake of these services (where available) WhatsApp and Hike have added instant payment mechanisms. has been less than meteoric. There are other electronic payment alternatives that are simpler and easier to use, Other Asian economies are looking to the success of these and many generate repeat use through generous loyalty social networks and the huge uptake in mobile payments, schemes. Social media payments are not even close to and planning their responses accordingly. Social network critical mass outside of Asia. services like WeChat, Alipay, and Bharat have started to make neighboring countries rethink their strategy. Until recently, With enormous client reach, these networks remained within their geographic borders, while offering their members payment options while abroad. sometimes approaching one Alipay, for example, launched services in Malaysia, and others billion active users per month, look to export their success to other nations in the region. these services threaten to bypass the traditional financial services players altogether.
Putting the Faster Rails to Good Use Reinventing the supermarket experience in Europe In Europe, the launch of SEPA Instant Payments (SCT Inst), The supermarket sees enormous advantage in the entire has inspired a number of players to look at reinventing their process. By adopting open banking capabilities with SCT payments capability, for a streamlined customer experience Inst, the retailer can offer customers good discounts to (CX). In the world of retail, for example, a European supermarket encourage uptake and grow loyalty through well targeted chain is leveraging its financial services wing to simplify the deals. However, the interchange fees vary; such a solution checkout process for its client base, using open banking APIs may not be as attractive where the fees are lower. based on PSD2. Once operational, the supermarket plans to build out the user Through its smartphone app, the supermarket’s customers experience around the payment mechanism to further drive can directly pay at checkout. Without the need to connect traffic and generate loyalty. The supermarket can offer unique to conventional POS devices, customers initiate the payment deals to customers based on their behavior and past history, through the app, which connects to the customer’s bank based on geolocation in the store, directly onto the app itself. directly to make the SCT Inst payment. Funds are credited The payment experience is only the first step toward a more to the supermarket’s bank instantly. The payment confirmation fully digitized and immersive customer experience. is sent to the customer’s app while at the checkout – within a few seconds – and the transaction is complete. In countries where interchange fees are high, customers who continue to pay with conventional credit cards are an expensive option.
Putting the Faster Rails to Good Use Open Australia Australia recently launched its New Payments Platform (NPP) that offers instant payments across the country. However, the government is planning to go further and encourage open banking by mandating open data accessibility to improve customer outcomes and increase competition in the financial sector. The new open banking implementations will be phased in from summer 2019, bringing the potential to transform the competitive landscape in financial services and the way in which Australians interact with the banking system. The goal is to give banking customers greater access to the data their banks hold, and the ability to direct that it be safely transferred to trusted and accredited service providers of their choice. Customers may be able to use their new data rights to find better deals on credit cards, mortgages and other banking products. With increased open access to accounts, comparison services will be able to assess the value and suitability of all available products, taking into account the individual circumstances and needs of the customer. The rollout of open banking on top of NPP will also allow entrepreneurs, in cooperation with their banks, to develop new services and products tailored to customers’ needs, disrupting business models within the banking sector that do not put customers first. Government payments are prime targets for the improved services being promised by combining open banking and the faster payments service. The Australian bill payment mechanism for SMBs, which could also greatly benefit from increased speed, convenience and an improved user experience, should be part of the early transition.
Putting the Faster Rails to Good Use A suite of innovation on open + fast Across the world, as faster payment services are combined with the open banking paradigm, a wealth of innovative services are being proposed, piloted and rolled out. These initiatives confirm that the conversation about faster payments has shifted from building the business case for a faster payments scheme, into a discussion on how faster payments can add real value. Deliveries upgrade Lending streamlined A recurring use case being rolled out in many regions In Portugal, a challenger bank is offering instant loan caters to the delivery vans that service restaurants and availability with an SCT Inst payment. The bank can use other stores. By combining faster payments and open open API banking to credit check the loan applicant banking into a single app, the driver can send a “request directly through their bank before making the funds to pay” directly to the business owner. Alternatively, the available instantly. driver could present a QR code to be scanned by the business owner to initiate payment, without the delay Commuter delay soothing and paper trail of traditional models. In the UK, an initiative called #YayDelay uses an algorithm to monitor real-time train delays and tweets containing Ticket sales reimagined #YayDelay unlock discounted gin and tonics for frustrated A number of ticket purchasing ecosystems are rolling commuters. out streamlined payment services that bypass traditional card transactions in favor of open banking APIs and underlying faster payment rails. Deutsche Bank, in line with PSD2 and SCT Inst, has teamed up with a number of airlines to improve fraud protection with direct money transfers initiated through the single app. The fact that direct payments will be processed and received in near real-time means airlines benefit from the acceleration of their funds, generating significant working capital and liquidity benefits. For travelers, this will result in more choice, a smoother and less complex payments process and more convenience when paying for airline travel. A similar process is under evaluation in Australia.
A Definition of “Fast” A Definition of “Fast” The Flavors of Fast definition of a faster payment: “Inter-bank fully electronic payment systems in which irrevocable funds are transferred from one bank account to another, and where confirmation back to the originator and receiver of the payment is available in one minute or less.” We may consider faster payment schemes to be a modern phenomenon, but the first retail schemes to embody real-time characteristics date back to the early 1970s. Japan had an operational payment system in 1973, and Korea and Switzerland had one in place in the 1980s. On a basic level, fast payments can be defined as payments in which the transmission of the payment message and the availability of final funds to the payee occur in real-time, or near real-time, as close as possible to 24/7. As we move from fast payments, to faster, factors like customer perception of real time, should be considered. Consequently, faster payments do not need to be strictly real-time, immediate nor instant. Operational faster payment services function within nation states in a single national currency. The exception is the release of SCT Inst, where euro payments cross national borders. Looking ahead, it is likely that established domestic faster payment systems will be interlinked to create multiple cross- border faster payment systems.
A Definition of “Fast” Need not apply We have explicitly excluded a number of long-established payment mechanisms that would normally be thought of as fast, including any card-based transaction, niche real-time global settlement (RTGS) systems and any payment system that includes paper origination. The advent of alternative currencies and mechanisms such as Bitcoin, Ripple and Litecoin, have significant impact on the banking market, but we have consciously excluded cryptocurrencies from this research. Faster payments may be credit transfers or direct debits, so long as the confirmation messages and the funds are available quickly. (While a digital origination is critical, batch payments are also included.) Beyond just retail Originally, faster payment systems were primarily focused on the retail market (P2P and P2B), but increasingly, business payments (B2P and B2B) are taking advantage of them. Additionally, use cases for payments to and from government services (P2G, G2P, B2G and G2B) continue to widen, and have become increasingly common. Other factors of interest The requirement for a faster payment scheme to operate 24/7 throughout the year is not mandatory. We do accept schemes that accept payments 24/7 but have a delayed availability of funds outside normal working hours/days.
Faster Payment Innovation Index Faster Payments Innovation Index The Faster Payment Innovation Index (FPII) was first established in 2014 to create a comparative rating system where diverse payment schemes around the globe could be compared and contrasted. While inclusion in the FPII demanded only some basic requirements (electronic payments between accounts available quickly), a higher FPII score requires more demanding criteria, and ideally, opens up the road to innovation on top of a faster payment service. Consequently, the FPII measures not only the speed with which transferred funds become available, but how the scheme in question is applied in its local market. Since the first edition, new market initiatives have gained ground, often as a direct result of the availability of an underlying faster payment service. We have therefore re-evaluated our criteria. In addition to standard credit transfers (push payments), we have included the ability to pull payments. A pull payment could take two distinct forms: Real time direct debit or a request to pay. Both services add value to the overall offering, and the provision of either increases a country’s FPII rating. We’ve also added a new element to the FPII that indicates whether the domestic schemes under review have made use of faster payments to champion overlay services, possibly through QR code usage or open access through an API layer. It should be noted that the open API element may be part of the overall instant payment scheme itself, or it could originate from a separate source.
Faster Payment Innovation Index Faster Payments Innovation Index (FPII) 4+ 5 Optional features Overlay services – API or QR code Remittance information maximizing Alternative identifier (aliases) Batch and individual payments customer value Fast settlement 4+ 4 Push and pull payment capability Highly desirable Universal access 4+ 3 ISO standard features enchancing (ISO 20022 or 8583) 24/7 availability customer value 4+ 2 Requested Interbank Account to account 4+ 1 features < 1 min end-to-end Irrevocable The higher the FPII score, the stronger the possibilities for innovation.
FPII Map and Ranking FPII Map and Ranking 4 4+ Payments in Real Time Sweden NETS RealTime 24/7 Denmark 4+ Siirto Finland Norway 4 Pan-European Payments SCT Inst 2 Greidsluveitan Iceland 4+ Express ELIXIR Poland 3 Zengin Japan Internet Banking 4 UK Faster Payments United Kingdom Czech Republic 4 Payment System China Hungary Interbank Home/ 2 Firm Banking Network Republic of Korea 4 Swiss Interbank Clearing Switzerland 1 CIFS Taiwan Faster Payment System Hong Kong 4 PromptPay Thailand The Real-Time Rail Canada 4 Iberpay Spain 5 Immediate Payment Service - India Vietnam 4 Real-Time Payments USA 2 LankaPay Sri Lanka Retail Payment Sistema de pagos 2 System 2 electronicos interbancarios Mexico Turkey 3 Philippines InstaPay Scoring: 3 Fawri+ Bahrain Retail Payments Platform Colombia 2 GhIPSS / GIP Ghana Malaysia 5 Meets most features maximizing customer value 2 Funds Transfer System NIBSS Instant Saudi Arabia 4+ Fast and Secure Transfers Singapore 4 Meets some features maximizing customer value Brazil 2 Payments Nigeria 3 Meets most features enhancing customer value 2 Meets some features enhancing customer value 3 Transferencias en Línea Chile 3 Real-Time Clearing 4+ New Payments Platform Australia South Africa 1 Meets base required features only Under development New Zealand On the radar Peru 4 PesaLink Kenya
The Movers and Shakers The Movers and Shakers Fifteen regions went live with faster payments since our Flavors of Fast 2017 was released. Here are some of this year’s highlights. Growth in India US onboard Since launching the Immediate Payment Service (IMPS) in 2010, India arguably has the most The Clearing House launched Real-Time Payments (RTP)® in November 2017, a new real- evolved and sophisticated public digital payments infrastructure in the world. It is one of the time payments system open to all US financial institutions. As the first new major payments fastest-growing immediate payment services in the world, rising from two million transactions infrastructure since the ACH in the 1970s, RTP is built to support digital commerce and per day in 2017 to 2.8 million this year. become a platform for innovation. In addition to being faster than conventional payments – settling payments in seconds, not end-of-day or next-day – RTP includes features like payment The growth is partly attributed to the fact that the second most populous country in confirmation and requests for payment that enable pull payments to deliver bills and invoices the world has embraced the smartphone as a payment vehicle, but is primarily driven through digital channels. by the additional overlay services offered on top of the faster payments rails. These overlay services are offered through the Unified Payments Interface (UPI), an overlay on Since there is no mandate for faster payments in the US, RTP is doing extensive marketing IMPS which gives an API interface to application developers to enable the initiation and and outreach to evangelize the new service and demonstrate how RTP could be integrated collection of payments. UPI-based services have led to the creation of a wealth of new into current payments processes and bolster business clients’ end-user value propositions. innovative payment solutions, and the adoption rates of instant payments in India reflect The aim is to expand the services offered on the new real-time payment rails to include that evolution. In fact, the numbers of transactions originating through these apps have simple P2P transfers and business solutions for instant cash-on-delivery payments, supply adversely impacted traditional debit and credit card numbers. chain payments for just-in-time inventory, and cash concentration for corporate liquidity, trade settlement, etc. There are also plans to use ISO 20022 messaging for the delivery of China leading the world standard purchase orders on goods purchased. Uptake of faster payments in China more than doubled over the last 12 months, from 12 million payments per day to 25 million. Going forward, expectations are that banks and Read our exclusive interview with executives from the Federal Reserve, The Clearinghouse third-party organizations will develop new and innovative products and services on top and BB&T, one of the earliest adopters to go live with RTP, on page 26. of the instant payment rails, leading to higher market penetration and dominance. China has made extensive use of QR code-initiated payments where citizens scan QR codes at Europe goes live convenience stores, subway stations or street vendors to make instant payments. Such The European journey toward instant payments has formally begun with the launch of initiatives have sparked a noticeable spike in use. Instant SEPA Credit Transfer (SCT Inst) in November 2017. By mid-2018, these fifteen countries have banks signed up and adhering to the EPC SCT Inst scheme: New payments in Australia Australia went live with with its NPP in February 2018. While the initial registration for the Austria, Estonia, Germany, Italy, Latvia, Lithuania, the Netherlands, service has been strong, wider availability and the advent of value-adding overlay services Spain, France, Portugal, Malta, Bulgaria, Sweden, Belgium and the UK. is expected to accelerate growth. Banks in other countries will be coming online throughout 2018 and 2019 to progressively span more than 34 European countries. The hope is that SCT Inst will become the primary scheme for all euro transactions, with instant becoming the new normal.
Interviews and Insights FEATURED INTERVIEW: CITI TREASURY AND TRADE SOLUTIONS In October 2017, Citi Treasury and Trade Solutions and FIS partnered to leverage CitiConnect® APIs to connect FIS’ Trax corporate payment factory solutions to Citi’s Treasury and Trade Solutions suite. The Citi Treasury and Trade collabortion has empowered Citi and FIS’ corporate treasury customers to take advantage of the many potential benefits faster payments offer to cash management, including enhanced visibility, real-time Solutions’ Rene Schuurman payment initiation, transaction status inquiry and balance inquiry. In addition to the fact that mutual clients of FIS and Citi Treasury and Trade Solutions can now execute, manage, monitor and report on on Open APIs and the their transaction flows in real time, they’re better prepared to adapt to new initiatives like open banking and cross-border payments requirements that will continue to impact corporate treasury functions. Impact of Faster Payments on Corporate Treasury FIS spoke to Rene Schuurman, Global Product Manager Channel Services, Citi Treasury and Trade Solutions, to learn more about the project, and what he envisions for the future of faster payments in corporate treasury. What were the some of the main business challenges or How much experience did Citi have using APIs or faster biggest opportunities that originally inspired this project? payments prior to this initiative? We had the need to switch from batch-oriented processes Treasury and Trade Solutions went live with API to real-time processes to meet the needs of our customers, capabilities in November of 2016. Since then we have been and to become truly 24/7. APIs and technology are a onboarding and implementing customers onto our API building block and a great enabler to help us achieve those capabilities at a steady pace. As more and more markets objectives where instant data capabilities are available. come online with capabilities and applications, and The emergence of instant payment schemes is a great e-merchants and vendors look to adopt instant payment catalyst but, it’s not about the payment itself. There’s an capabilities as a replacement for credit cards, we expect to incremental need to also have access to reconciliation, see a very quick and aggressive adoption. remittance-related information and data. It’s one thing to pay fast, but also important to make sure you reconcile We’re seeing APIs applied to all fast and understand cash positions, all in support of right controls. Now we’re seeing getting clients energized different parts of transaction and excited to start looking at other means of applying the same principles that APIs and true data and instant banking. We see this becoming a processing bring along. common technology platform very quickly, very rapidly.
Interviews and Insights What type of education or messaging did you have to put What type of reaction did you get from your customers We’ll probably begin to see a lot of value-added services into the market as you were onboarding customers to knowing that while this presents great opportunity, it may emerge as well. Once you have access to data and encourage use and adoption? require that they change processes? information, and become a provider of services or an As a financial services industry, we are relatively late It simply represents the steep learning curve. Consider aggregator of services, there are additional capabilities in adopting APIs as a technology. It has required some the sales tagline of instant payments: it’s considered to you could develop. These may create new opportunities recent developments, deeper and more robust security be a potential replacement for credit cards. I think that’s a solutions and the embedding of API capabilities into the to sell additional financial services, or further digitize or profound statement because it can be true in many different streamline how we as an industry provide our services to core native treasury applications our customers use to get to a point where we can start exploring and applying the ways. Credit card processing is not typically a core treasury customers. I think we are only seeing the tip of the iceberg. use of APIs in transaction banking. function; treasury simply monitors the deposits into the accounts and reconciles charged cards. Adopting instant We’ve traditionally been a very batch-driven industry. Our payment schemes will expose the treasury organization Financial services is undergoing the clients are accustomed to creating messages or files, sending them to us before a cut- off time, and logging much more directly to the core of the underlying business type of disruption that we’ve seen and processes of any enterprise, than previously has been back into the system to collect bank statements. With instant payments, there is no set time by when you should the norm. The treasury organization needs to adapt, reinvent across industries like hospitality, but make your payments, and that means clients may need to itself and find ways to control and manage these particular banks are not put in a position to rethink how they fund their accounts. In the old world, you could think of all the transactions scheduled to disburse in challenges. have to react or be surprised; they’re a day and secure funding accordingly. In the new world of What do you perceive as some of the most interesting, in the midst of it. instant payments, that is a fluid, moving target. relevant or important use cases that we are going to see instant or real-time bring for corporates? Settlement also becomes instant and final. It’s going to In the markets where the adoption of instant payments is Each bank won’t be equally require greater discipline, stricter controls on the side of our customers to make sure that they pay the right person, mandatory, we expect to see an accelerated realization and successful in navigating this transformation of treasury functions and how banks offer for the right amount, into the right account when they adopt instant payments. products and services, versus markets where it’s optional. disruption, but we are probably going We’re expecting to see aggregation services start emerging. to be in a financial services world Companies and consumers will likely look for one provider, that is extremely different from today whether it’s a bank or fintech firm or another trusted third- - in just a few years. party provider, for aggregation services on the account statement side as well as the payment processing side. We’ve seen regulators and governing entities copy and replicate policies, procedures, and ideas that have been implemented in one market; concepts and ideas like PSD2 may be replicated across multiple markets.
Interviews and Insights A great example is the insurance industry. If two people Any other impacts you think initiatives like open banking The various disciplines and streams and PSD2 are going to have on treasury specifically? get into a fender bender, many insurance companies of what is needed to keep a company have an app where customers can take a picture of the Once the full reality of instant payments sinks in, we’re going functioning from a working capital accident, describe what happened, and submit a claim. to see a cascading effect. For example, if there is no cut-off With the assistance of artificial intelligence and automated time, if payment processing is 24/ 7, what does that mean for aspect are all going to be impacted determining your actual cash position? How are you going claims processing, many insurance companies can quickly by this switch and move to instant review, assess and agree to approve these claims. Despite to baseline accounts? How are you going to determine your payments. that the claim is approved quickly, the payment may be assets? The concept of time is going to be very critical. There’s issued by a check that’s mailed, or an ACH deposit that going to be a lot more automation and risk assessments. It takes up to five days to be applied to the account. If the may completely change and alter how we, as banks, offer That’s going to take a lot of insurance company could instantly deposit funds into the credit to our customers. We may need to start looking into iterations, review, fine tuning, careful account of the insured, the customer could immediately the right controls or mechanisms to form instant access to credit facilities for our customers. For example, if an insurance interactions and discussions with move forward with making repairs. In this type of scenario, instant payments could start to replace a traditional company has to start paying out a lot of claims after a natural customers and technology vendors instrument, like checks. disaster, we want to make sure such a company is able to make in the space to understand how we all of its payments-- but that might have a very profound impact on how the company needs to be liquid. can form partnerships and start Going back to the traditional use case of instant payments as an alternative to credit cards, Citi is part of the UK Open transforming the entire working Banking Initiative. Credit cards are relatively dominant in Specific to this project, what best practices or key takeaways capital discussion to make it even the UK, but only about one-third of consumers in the UK might you want to share with others in the industry who may not currently be leveraging open APIs or faster payments? easier and more effective for all of us. uses a credit card; there’s a large group who are hindered Make sure you are ready from a technology, resource and in purchasing goods and services online because they budget perspective. A lot of systems and applications are don’t have access to a good payment mechanism. already capable of handling APIs - but not all of them are. You need to truly look at it from end to end. For instant payments, every process and platform that touches the What other impacts are you seeing in banking channels The UK Open Banking Initiative will empower everyone payment needs to be instant as well. Hire and secure the outside of treasury because of real-time payments? with a banking account in the UK to start procuring goods right skills in your organization, and be smart about your The discussion has become solutions-designed thinking and services in a fashion that is pretty much identical to funding and budget. The emerging systems and platforms about the problems and challenges that our corporations a credit card transaction. Rather than a credit card or a are completely new, and that means relatively big and customers are facing, and how we can provide the right 16-digit account number, the person uses a tokenized form investments. It may require capabilities and technologies that you need to acquire, develop and integrate, but the solution to help our customers. Only at the tail end is the of identification, like a self-created handle. The banks will old ones aren’t going away. As an industry we need to be question: ‘Will an instant payment help or not?’ help facilitate the exchange of funds effectively, efficiently very careful to develop these capabilities in a model that and in a secure manner. makes sense for all involved. Not only for banks, but for the corporations and consumers they offer these services.
Interviews and Insights FEATURED INTERVIEW: UNITED STATES In July 2017, the Federal Reserve System’s Faster Payments Task Force (of which FIS was a member) released its official plans and call to action to payments stakeholders to evolve the US payment system Experts from the Clearing into one “that is faster, ubiquitous, broadly inclusive, safe, highly secure, and efficient by 2020.” The Clearing House, a banking association and payments company owned by the largest commercial House, BB&T and the banks, launched its RTP in November 2017 to serve as the real-time rail that financial institutions in the US will use to clear and settle payments in real time, and to perform additional capabilities that provide Federal Reserve System customers with unique and enhanced faster payments services. Share Insights on the In July 2018, FIS asked a panel of financial insiders who have been directly involved with these faster United States’ Move payments initiatives – Steve Ledford, SVP Products & Strategy at The Clearing House (TCH), Sue McBride, senior vice president, BB&T Treasury Services Product Management and Sean Rodriguez, to Faster Payments executive vice president, Faster Payments Strategy Leader, Federal Reserve System - to share their insights on the move to faster payments in the US. What has been the overall experience in entering the The industry has come a long way to making real-time faster payments rails for the earliest adopters? payments a reality, but there is still significant work to be Ledford (The Clearing House): Many moving parts had done to bring this solution to our clients. Now the focus is to come together to launch successfully in November; on facilitating a client readiness program to incent adoption the RTP core payments system was just one piece. Early and usage. There is strong commitment in the industry and adopter banks had to stand up the requisite systems within BB&T to make this a success from day one. and operations; meet the legal, regulatory and risk management requirements; and line up pilot clients. Rodriguez (Federal Reserve System): Early adopters are Technology vendors created platforms to process both challenged with the expense of upgrading their systems, payments and novel non-payment messages. Bank to safely and securely process, post, clear and settle regulators had to adapt policies and procedures for new transactions more quickly. This is a significant upfront payment models, and the Federal Reserve implemented investment with a long-term payback. Financial institutions processes for opening and overseeing the joint account that adopt these cutting-edge payment services, however, RTP uses to prefund settlement. All subsequent have the advantage of enhanced customer relationships implementations can benefit from this foundational work. and the ability to offer innovative new products in the face of increasing competition. But the value doesn’t really McBride (BB&T): BB&T is in the early stages of launching begin to materialize until we have material adoption by real-time payments. We have fully enabled our clients large numbers of financial institutions, which makes the to receive real-time payments with initiation capability industry focus on ubiquity so important. following later in 2018.
Interviews and Insights What are some key learnings from the early adopters that Rodriguez (Federal Reserve System): The Faster Payments Though the RTP is not dependent on overlays, I do believe they could be useful for others who are preparing to enter (or Task Force envisioned an inclusive governing body that play an important role in deploying certain use cases, such as those who are not quite convinced that they need to make it would work to help support faster payments implementation P2P payments routed on the basis of a phone number or email a priority)? and be a forum for lessons learned and best practices. address. Services like Zelle add important capabilities to underlying Ledford (TCH): Get started early, and get the whole bank Work is currently underway to establish such a body with payment systems, by populating and maintaining directories of or credit union involved. Financial institutions that waited the expectation that it will be active in 2019. By developing, aliases, establishing a common user-friendly experience, creating too long to involve important areas such as regulatory coordinating and delivering broad awareness across the awareness and preventing fraudulent transactions. compliance, risk management, information security, legal market, those who are not quite convinced that they need to counsel or customer service operations found themselves make faster payments a priority may reconsider, given the I’m not sure if open APIs will be a significant factor in faster having to go to extraordinary lengths to catch up and avoid extensive benefits it could potentially provide. Furthermore, payments in the US, but APIs (open or not) will be important. delays. If you wait until you are feeling market pressure, any technical and operational implementation plan also RTP payments that are initiated via APIs and provided to end you may be too late to avoid competitive disadvantage. We needs a go-to-market strategy that considers how value users by their banks are already driving usage. APIs also equip also found that launching RTP required close coordination can be delivered where reach is limited, during this window commercial users to integrate faster payments into their own between the line of business, operations and technology. where we do not have ubiquity. business processes, which may spur creative use cases that deliver value well beyond simply moving money. McBride (BB&T): Develop a comprehensive payment strategy We’re seeing new use cases and value-adds emerge with — this is not just a new “tool” to facilitate a payment. Dedicate overlay services that run on the rails and/or use open McBride (BB&T): We should look at APIs as a natural resources to design, deploy and support a multi-year RTP APIs to enhance the functionality and relevance of faster payments around the world. In what ways might these extension, progression and evolution that makes it easier for program, to mitigate the risk that conflicting priorities could influence faster payments systems in the US? our corporate clients to do business. I consider this business result in a reallocation of resources. Don’t underestimate Ledford (TCH): The RTP® system was designed to be fully technology to be applicable across our clients’ financial the level of effort involved in enabling this new solution; it functional without formal overlay services, but can also serve business process in terms of how they can pay and transact may require new infrastructure, UI modifications, numerous as a solid foundation for overlays. For example, capabilities (not just for faster payments). commercialization activities and internal collaboration like Request for Payment (RFP) can be used to deliver bills or with various lines of businesslike risk, legal, compliance, invoices without requiring that the sender or receiver subscribe Rodriguez (Federal Reserve System): Technological operations and customer service. Lastly, get actively involved to the same overlay; comprehensive services like P2P or B2B innovations like APIs are providing new opportunities for in industry forums and working committees to collaborate networks can use the rich RTP message set to support a payment providers to implement faster and more user-friendly and exchange ideas and best practices. distinct end-to-end value proposition. payment capabilities, and are being used more frequently to connect software and web applications from multiple providers. US providers could look to APIs to integrate a greater web of systems and services that can help address the challenges of ‘electronifying’ business invoicing payments and remittance processes.
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