Maybe it's coincidence, or maybe it's progress — in recent weeks, a number of large payment networks have suffered brief but widespread outages, particularly in Europe.
Just last week, Lloyds and Halifax had an outage in the U.K., attributed to the U.K.'s Faster Payments Service, which had suffered another outage earlier in July. And both Visa and Mastercard went down at separate times over the past two months. Visa's outage lasted 10 hours and covered mostly Europe, while Mastercard's outage was only two hours, but impacted users in both Europe and North America.
All of these incidents took place when banks and card networks are aggressively promoting digital payments, APIs, real-time settlement and other aspects of always-connected commerce. But these services are typically built on top of an aging infrastructure that has its roots in an age when the magstripe card was the height of technology.
"Payments are perhaps the most visible part of banking. We tend to notice it more when things don’t work," said Gareth Lodge, a senior analyst at Celent. "If my online banking is slow to respond when I want to check my balance, it’s an irritation. If I’m at a point of sale with a queue behind me, it’s an inconvenience at the very least."
Complaints about stranded travelers, apologies from digital payment companies, and an inability to pay at grocery stores probably won't kill e-commerce and real-time processing permanently. But it's still unwelcome publicity that calls the structural integrity of processing at gateways into question and portends IT expense for both the networks and banks.
In the case of Visa's outage, the issue was infrastructure. The card brand is upgrading its network as part of its integration of Visa Europe, a project that will add scale to payment processing by placing the European system on the global VisaNet. That project, which would make an outage such as this summer's much less likely, was already underway at the time of the incident and should be done by the end of the year.
Mastercard attributed its outage to a "processing issue." Mastercard's efforts to accommodate faster payments include blockchain work and an initiative at its Vocalink subsidiary to handle a greater variety and volume of digital transactions and data sharing from open banking.
Amid a series of outages, the U.K. Faster Payments Scheme has opened bidding for a platform provider. The scheme did not return a request for comment, though part of its requirement is the provider can handle scale for new volume levels.
"Their platform is only 10 year old," said Sarah Grotta, director of the debit and alternative products advisory service at Mercator, who adds cards and digital payments are too ingrained to have a permanent impact, though there is some onus on the industry to prove these are intermittent exceptions. "It does seem that instances of outages are occurring with greater frequency or at least are getting reported more often."
The U.K.'s Faster Payments scheme is growing rapidly. In June it processed 163 million payments, or 20% more than June 2017's total of about 130 million. The second quarter saw 500 million payments, or a 25% increase from the second quarter of 2017's total of about 400 million. 2017 was also a record year for U.K. Faster Payments. Global mobile payments, which rely on fast processing, are on pace to double in the four years between 2015 and 2019.
And Capgemini's World Payments Report contends PSD2's influence on digital payments will pressure market participants to upgrade technology to manage more volume. Since faster payments and digital shopping go hand in hand, any spike in one pressures the technology that supports the other.
While the bitcoin industry used the card network outages as a selling point for its model of decentralized processing, cryptocurrencies have infrastructure issues of their own, namely their stress on electrical grids. And the digital processing upgrades at the card networks are designed to decentralized processing through greater redundancies and geographic diversification. Also, card networks and network switches aren't the only cause of outages, as issues with core banking interfaces or a bank's infrastructure can also cause an outage, Lodge said.
Amid these bigger outages, Amazon also had processing and navigation issues at the start of Amazon Prime Day, despite the company expecting a surge of traffic once its annual sale began.
"Non-stop systems remain extremely difficult to design, deploy and operate," said Tim Sloane, vice president of payments innovation at Mercator Advisory group, adding Netflix suffered an outage despite deploying tools that test redundancy. "Even those that have built a non-stop system in the past discover changes in suppliers and technology create new challenges."