The forces of change in payments are swift and coming from seemingly everywhere. Digital migration is wiping away historical industry barriers, facilitating unexpected partnerships and enabling customer relationships that go deeper than the transaction.
Consumers increasingly expect an always-on, omni-channel experience in all aspects of their lives. According to a recent Accenture survey of 4,000 Americans, consumer adoption of mobile payments and digital currencies is quickening.
As financial services organizations increasingly embrace digital, the need for speed in payments is becoming more urgent. With the volume and velocity of digital transactions increasing, payments must keep pace in order to meet consumers and businesses needs, while also minimizing risk, fraud and payment processing costs.
The challenge facing payments providers, however, is meeting the market need for a real-time payments system while simultaneously making capital investments needed to fund regulatory compliance demands, digital strategies and other initiatives.
While the benefits of upgrading to a real-time payments system are many, several challenges loom, including the cost of development, implementation and integration; accounting, risk and fraud systems will need enhancing to match the speed of real-time clearing and settlement and 24/7 operational and technical support; and regulatory requirements (OFAC, AML, BSA) must be addressed.
Individually, these changes could be expensive in the near-term; together, they may be cost prohibitive.
If the desired outcome of the current faster payments discussion in the U.S. is the guarantee of good funds and the mitigation of transactional level risk, then communication of a successful transaction and commitment of funds which may be available immediately needs to occur in real-time, but settlement can occur later.
Thus, it may be sufficient, for now, to achieve near-real-time payments meeting these goals, but stopping short of settlement. By providing the impression of near-real-time, or faster, payments through memo posting and verification of a completed transaction, payments providers should be able to meet the needs of the market without significant investment in core systems. As for potential systemic risks, the financial services industry is will versed in mitigating this concern.
Based on Accentures global experience with faster payments in the U.K., Australia and Singapore, we believe that regardless of what design the service ultimately takes in the U.S., it should adhere to the following principles:
Assuring customersthat however their payments are processed, they will be handled in a timely and secure manner. While theres no certainty as to how real-time payments will be used, offering the service at a premium price is necessary in todays transaction environment to meet expectations and manage risk and fraud.
Certainty of payment (i.e., good funds) and the communication of a successfully completed transaction among all parties is one of the highest priority features of a real-time or near real-time payments system.
A technology agnostic solution must be followed, focusing on desired outcomes rather than specific technologies or operational investments.
Participation should be voluntary and bank participants should be allowed to migrate in as their own strategy and technology allow, and based upon their customer needs.
Without question, real-time clearing and settlement of funds is an ideal goal the industry should ultimately adopt, both home and abroad. However, the significant near-term costs of forcing a change can be avoided with readily available, less costly ways of achieving the same goal, without compromising consumer protection.
Developing faster payments capabilities will be a critical element of the banking industrys digital transformation. Now is the time to begin investigating how to seize the underlying market opportunity and avoid falling behind peers.
Matthew Friend is managing director and head of Accenture Payment Services in North America and Kimberly Kacal is managing director for Accenture Payment Services.