Katrin Boettger: What’s the current state of play when it comes to real-time payments?
Dean Wallace: Many banks already have real-time capabilities, or they are planning to launch them soon. Real-time is a catalyst and will have a knock-on effect on how everything else works in the bank. More importantly, real-time enables new digital payment layers and capabilities – such as Request to Pay services – in which many banks are investing.
To echo the views of one senior banker I spoke to during the event, real-time is not a product banks have asked for. It’s been pushed into the market, and with “Big Tech” and the likes of Google Pay expected to come to market by harnessing real-time payments through PSD2 capabilities, we are now looking at a “do or die” moment for some banks’ payment offerings. Real-time payments are the new normal, not only in Europe, but globally. Real-time drives commoditization of financial payment processing and the end-game scenario is a complete instant global banking world, which will be based on the ISO 20022 technical standard and leveraged through real-time and digital means for enhanced customer experiences.
KB: Are banks responding quickly enough to support their businesses in this real-time world?
DW: It’s been picking up pace in Europe, though the region is still not as far as other markets, including China, Malaysia and India, among others. On the flipside, many of these markets are also looking to Europe and the models developed here, like PSD2 and open banking, and the products and services being offered to corporates.
During the recent EBAday session, the audience was asked “what best describes your bank’s current position, when considering what businesses need from banks to reap the benefits of real-time payments.” 39 percent said they are currently building real-time propositions for their business customers and 32 percent said they already have real-time propositions for their business customers. 19 percent answered that they already have real-time propositions for their business customers and are seeking fintech partners to enhance their proposition, while 10 percent already have real-time propositions for their business customers and have integrated fintech propositions into their customer services. This shows that building new services for business customers is very much on the agenda for banks – and that partnerships with fintechs will play a major role.
KB: When considering real-time services for businesses, what do you think the “killer propositions” will be?
DW: In the U.K. we have a saying, “horses for courses.” In other words, it depends very much on the type of corporate. The needs of a corporate are different compared to those of a small business. Typically, a small to medium-sized business needs liquidity; it is looking for real-time funds and for direct settlement. At the other end of the spectrum, let’s take a large supermarket chain for example; they will not be looking for liquidity, but will need the data quickly. They want to mine and analyze it so they can make better offers to their customers and add value back into their business. They will also be looking to lower costs and improve operational efficiency. Looking at another industry, for example airlines, both liquidity and data will help improve the price offering for flights. So, what the “killer propositions” will be depends very much on what kind of business you are looking at.
KB: Looking ahead, what are the key developments and trends we are going to see in the next few years?
DW: There is an expectation that, as an industry, we will deliver cross-border, real-time payments. Even regionally, cross-border, real-time payments are not easy, but in international cross-border, there are new challenges and complexities that don’t exist in a domestic or regional setting. SWIFT is playing an important role already with some offerings. We certainly see interesting developments in Europe with the EPC SEPA Instant Credit Transfer (SCT Inst) scheme, with the TARGET Instant Payment Settlement (TIPS), as well as the P27 initiative across the Nordic countries. In Malaysia, ACI provides the central infrastructure solutions with our partner PayNet, supporting the development of a broader Asia payments network. So, you have the emergence of these “corridors” in Europe and Asia, while LATAM is starting to pick up pace, and the U.S. has TCH and FedNow on the horizon…all these schemes are following the same adoption patterns. I can see a world where that interoperability will happen.
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