While startups across the globe focus on building new payments technology, countries may fare better by recycling their old technology when building a national infrastructure for faster payments.
Swift has been speaking with its large bank clients in the U.S. about how best to keep costs down for construction and implementation of a real-time payments platform. The idea is "to not reinvent the wheel every time in every country," said Juliette Kennel, head of market infrastructures at Swift. "If there's something that can be reused, we should reuse it."
This attitude puts Swift, which already provides secure financial messaging for the majority of international banks, in a good position, she said. U.S. companies have expressed interest in partnering with legacy providers to build a faster payments platform.
"It's too early to say exactly where we'll fit in but I'm sure we'll have some part to play," Kennel said. In late April, during the Swift Business Forum in London, Swift representatives said they believed The Clearing House, which processes about 50% of the commercial ACH volume in the U.S. would be tasked to build the country's faster payments platform. But because of the complexity of the U.S. financial market, other platforms will be built as well.
Not every payment platform will have real-time capability at all times, said Carlo Palmers, who manages the real-time payments business for Swift.
Proponents for financial inclusion might worry that the big banks and their higher-net-worth customers will be able to implement real-time payments quicker and obtain better access than the smaller banks and the traditionally underbanked. But Palmers said smaller banks might have an advantage in adopting real-time payments because their systems are more straightforward.
As a result of Swift's work building real-time payments infrastructure in other countries, Kennel said, the organization can advise on best practices and mistakes to steer clear of. Plus, it can help countries adopt and implement the ISO 20002 messaging standard, which allows banks and merchants to transport much more data with a payment.
Swift, with the help of Fiserv, is currently developing Australia's New Payment Platform (NPP). In Australia, the concept of "overlay services," or consumer-facing services that can run on top of the real-time rails, has been attractive, said Kennel.
Australia's model demonstrates a business case for U.S. banks, which can monetize the consumer services to recoup the infrastructure costs.
But as startups focused on digital and mobile channels put pressure on incumbents' pricing, industry experts are skeptical that consumers will be willing to dole out money on fees for payments services.
Palmers says there's value in bundling. Many consumers don't need all payments to settle instantly, but would welcome the service when paying bills at the last minute. Consumers might be willing to pay a few dollars for a bundle of five or 10 instant payments, he said.
By the end of next year, The Federal Reserve plans to publish its final recommendations on a U.S. faster payments system. In June, the Fed published a paper urging cooperation among competing systems for the benefit of consumers and merchants.
U.S. banks are focusing on interoperability and ubiquity, Palmers said.
Swift is also getting requests from other countries that want to build a real-time system, said Kennel.
Today, only 18 countries are live with real-time payment systems, according to Swift's recent whitepaper on the topic. Twelve countries are "planning, building or exploring" a real-time system, plus the 17 Eurozone countries are exploring as well. The European Central Bank has also discussed a pan-European real-time payments system that Swift is interested in.
"Expect that in five to 10 years the payments landscape will look very different because of the faster payment disruption," Kennel said.