U.K. and India show how real-time payments are done
The conversation around real-time payments is increasingly about what banks can do with real-time, as they move beyond setting up to support real-time payments schemes.
Request for Payment (RfP) is one such overlay service where there will be plenty of discussion. In 2019, several major US banks announced new RfP messaging capabilities for their customers on The Clearing House’s Real-Time Payments (RTP) network.
In the U.K., Mastercard is planning to launch its own RtP solution, following accreditation from Pay.UK. The service will enable consumers and businesses to receive payment requests, view bills and pay using real-time payments or card. And in Europe, the EBA is planning to develop a pan-European RfP infrastructure. The project is supported by 26 payment service providers from 11 countries and is scheduled to go live in the second half of 2020.
Banks will need new technology solutions to support RfP at the processing level, as well the customer-facing channels to be able to support it.
India’s Unified Payments Interface (UPI) is probably the biggest global RfP success story, which brings me to the next big trend – the democratization of payments. The introduction of UPI has changed the Indian payments landscape dramatically.
UPI’s popularity has grown exponentially since its introduction; from 21 banks in 2016 to more than 140 currently; in November 2019 alone, UPI amassed 1.22 billion transactions in one month. Transactions via UPI could surpass cards within a couple of years based on current growth estimates.
It’s the interoperability – bank to bank, social media to social media – that makes UPI the most promising real-time payments system in the world, and one that other countries are watching closely.
While there has been much debate and a backlash against the cashless society in many parts of the world, the example of India demonstrates that digital payments can lead to a democratization of payments, making it easier and cheaper for the unbanked or underbanked to transfer money. Evidence suggests that if businesses can bring consumers from an unbanked or underbanked situation into a banked one, it will increase security and help them to better manage their money.
Renovating and updating existing payments infrastructure will be another big topic for 2020. One of the biggest changes we have seen in recent years has been the shift in the relationship between banks and the public cloud. While financial institutions were initially reluctant to embrace the technology, they are now among the most likely to do so. According the Culture of Innovation Index, recently published by ACI Worldwide and Ovum, 92% of corporate banks are either already making significant use of the cloud, or planning to make further investments in 2020.
What has prompted this shift? Banks now realize that the cloud is a key enabler towards the digital transformation of their business. Coupled with the understanding that it is secure and that cloud providers have more spending power to maintain their clouds, banks are fast realizing that adopting the cloud enables banks to run a more cost-effective operating model, while providing them with the agility to adapt to the ever-changing financial environment and enter new markets. Ultimately, this means they can focus their time and effort on delivering the customer experience required to remain relevant in an increasingly competitive environment.