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Real Time: Is it really a big deal?

Currently real time is a hot topic in the banking industry. Last month I joined the Future of Finance Council in London to discuss why. Set up by FIS and the FS Club, some of the most influential financial experts in the UK gathered to discuss if real time is a reality and it appears it is. 

According to experts in the room faster payments are driving this reality. Faster payments increased by 50% last year whilst Bacs payments declined for the first time by 2% - a massive shock to me and the industry. Perhaps an indication of things to come.

The unsurprising thing is that banks are facing large costs to upgrade systems to real time, up to GBP500m, a huge investment for any organisation. We discovered that each real time transaction will cost 35-40p, compared to just a penny on Bacs. The move is expensive and a hugely daunting prospect for the larger and more established banks that operate with complex legacy systems.

So here’s the question: Why the push for real time now? What I found most interesting was that technology companies, like Apple, are revolutionising the way people interact with machines. This is prompting an era of change in the way customers interface and relate with banks. Customers now expect instant information via PCs, tablets and smartphones. To meet this growing and evolving change banks need to provide access to information instantly and on demand. Banks then have to be prepared to act immediately. Yes that age old mystery what comes first the transaction or the information and why did the chicken cross the road.

The role of Government was also a key discussion area. Government is placing pressure on the banking industry to promote healthy commerce and increase levels of spending. If you think about it, faster payments will inject much needed cash flow into the economy and pump valuable data around banking systems faster. Real time can play an interesting role in re-building the UK economy. Think of all that money tied up in Accounts Receivables especially those poor folk who have just been told, contract terms are now 120 days from 90. No money for the next 30 days.

Despite the issues relating to cost and time, the overall feeling in the room was that real time will provide banks with up-to-date information, help them gain a competitive advantage, strengthen fraud management, and enhance their customers’ experience. 

An example of real time coming into practice comes from Australia where banking is over 45% self-service. The model is working and it won’t be long before this becomes the norm in the UK.

The overall consensus from the Future of Finance Council was that there is a case for real time – it’s an exciting prospect at the forefront of banking agendas. 

2021

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