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My trip to payments geek paradise...

...and I loved it.

Payments professionals from a wide range of geographies gathered in Barcelona for Nacha’s Payments Innovation Alliance last week. The main topics of conversation centred on real-time payments, the upcoming PSD II, new entrants to the market and, of course, the blockchain.

While the actual sessions themselves were under the Chatham House Rule, I can give you a flavour of what was discussed and debated in sunny Spain last week.

It can be easy, for those outside our industry, to dismiss the ‘plumbing’ aspects of banking – the payments processing, the regulations, the KYC - as boring or regulated to the realm of commoditisation. Nacha gathered a group of people in a room – mostly from North America and Europe – who talked (sometimes passionately) about payments. Person to person, business to person, person to business and, of course, business to business. The gritty, dirty, sometimes baffling way payments happen, how they are regulated, how payments are changing and how we can make payments faster (or if we even need to).

I had a number of takeaways from my time with the payments geeks (of which I am, most definitely, one)

The plumbing is broken and we’re here to fix it – Many banks are trying to build innovative customer facing products and services on top of legacy infrastructure. They are slowly waking up to the fact that the failure of these initiatives lies with the failure of the foundation. This needs to change – in some way shape or form.

UK banks do not see access to Faster Payments as a competitive advantage, nor do they make any effort to inform the public of the advantages it brings. This one was not a surprise – but it is still odd. Finextra held (another Chatham House Rule) roundtable in London looking at easing access to Faster Payments. The new entrants and challenger banks in the room most definitely saw access, and the complexity of access, to Faster Payments as a competitive advantage – for the banks.

Access to Faster Payments is indeed a competitive advantage, which is why the new Payments Services Regulator in the UK has set its sights on issues around access.

Real-time payments in the US will not come about because of a mandate – but will instead be driven by market forces. Now this one did surprise me. This opinion came from several US attendees. I’m not sure this will emerge to be true as I have never known a bank to spend money on any infrastructure projects without a regulatory mandate.

However, a market driven approach to real-time payments, instant payments or faster payments (whatever you choose to call it) may figure out that thorny issue of definition that dominated a recent VocaLink-sponsored breakfast roundtable at EBADay this year. Do you need ‘real-time payments’ all the time? What exactly do you mean by real time?

Does payroll have to be real-time? Surely that is scheduled payment and therefore ‘batch’? Person-to-person payments, like ones done via a mobile, need to be ‘real-time’ or instantaneous. But are there any payments that can be satisfied with a few seconds delay? Would consumers be happy with real-time confirmation (effectively being real-time to them) but clearing the payment happens (maybe just seconds or few hours) longer? How much risk is inherent in those seconds or hours? Are some businesses happy to know that a payment will happen ‘by end of the business day’? Would the ‘market’ figure out the answers to these questions better than the regulator?

Blockchain…interesting…The second day of the conference saw a session on transaction networks and distributed networks. At the lunch that followed, I figured almost every group was having a reasoned and intelligent discussion about bitcoin and blockchain and ‘how can we use this?’ Don’t try to blind payments nerds with hype about bitcoin – they have been transferring value for quite some time. Show them a more efficient and simpler way to do that and they don’t see a revolution, they see new opportunities.

I am not a big fan of the echo chamber. It is the human equivalent of the silo. The same people, talking the same systems to each other in a closed loop of anti-progress. Nacha organised an intimate group of multinationals from banks, supply side vendors, financial organisations and new market entrants to sip Cava on a rooftop terrace in Barcelona and discuss the plumbing that underwrites almost everything that supports international business and commerce. The conversations did not disappoint this payments nerd. 

We will be publishing a series of videos done at the event with represenatives from Ripple, ING, CBW Bank, Currency Cloud, Equens, Earthport, Glenbrook Partners and in the comming weeks on Finextra. 


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