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The real-time payments customer proposition

The UK payments system, Faster Payments, is the world leader in real-time payments. It is likely to process over 1.2 billion transactions in 2015, a volume far ahead of all other similar systems globally. With seven years of operations, there are key learnings and insights from Faster Payments relevant for the growing number of countries planning or building real-time systems. 

First and foremost among these is the customer proposition – real-time payments need to be guaranteed real-time (at least <5 s), available 24x365 and give real-time confirmation to the sender. For the first five years of Faster Payments operation, most UK consumers could not care if payments were real-time or not, same day was good enough. However, over the past 18 months there has been a sea-change in expectations - consumers, and increasingly businesses, expect real-time payments, and complain loudly if there are any delays. 

This has major implications for the way real-time payment systems are accessed – the UK experience shows the traditional direct/indirect, sponsor/agency model to be unfit for real-time payments. Accessing Faster Payments through a sponsor bank creates an intermediate step, which, for technical, operational and compliance reasons makes it difficult, if not impossible, for the sponsor bank to guarantee real-time payments and to provide them 24x365. UK Banks and PSPs without direct access to Faster Payments have a significant competitive disadvantage to those that do. 

Faster Payments’ solution to this issue is to open up access to bank and non-bank PSPs through encouraging aggregator (technology) companies to provide services giving direct technical access. Not only can these services be configured to guarantee real-time payments, and to operate 24x365; as aggregators their economies of scale can enable even low volume PSPs to access Faster Payments at a reasonable transaction cost. 

In addition to customer proposition and economics benefits, these aggregators give strategic benefits to PSPs – choice of supply, control, independence, separation of access from settlement and flexibility to switch providers. 

Countries embarking on real-time payment initiatives have the advantage of benefiting from the UK experience and using lessons from Faster Payments to guide them. In particular, the importance of a customer centric approach to implementing real-time payments, and the limitations of bank-centric arrangements are critical considerations. 

See  for Faster Payments Scheme Ltd's model to open access to UK Faster Payments.


Comments: (2)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 01 July, 2015, 16:26Be the first to give this comment the thumbs up 0 likes

Having had a great experience with implementing Faster Payments at a Top 5 UK bank along side Accenture, I'm happy to see the emergence of third-party aggregators to spread FPS farther and wider! It's also intriguing that, seven years later, no other country has a similar 24/7/365 realtime retail payments system (or is there?).

A Finextra member
A Finextra member 02 July, 2015, 08:40Be the first to give this comment the thumbs up 0 likes

Jeremy, may I add a couple of contextual comments?

Not to wish to take anything from FP as an acct-acct service - it's a huge achievement - but it seems incongruous for FP to claim to be the world leader in realtime patyments, and the mantle for delivering 'the customer proposition – real-time payments need to be guaranteed real-time (at least <5 s), available 24x365 and give real-time confirmation to the sender'. Card payments have being doing that for decades; and were about 61% of total non-cash trns globally in 2012, with debit card transactions growing at 13% and credit cards at 10%. In the cards model ubiquity and reach are all-important in payments; bring on ApplePay, further growth seems probable...

Of course the card model separates the user experience from the settlement experience....whereas FP....?

2. Lowering barriers for challenger banks and PSPs to access FP is good, but of course those providers also need a bank account with a primary participant. Many authorised & regulated PSPs struggle to get bank accounts, for reasons well covered elsewhere. Absent bank accounts, PSPs aren't going to be able to help drive the growth of  FP.

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