Sibos Preview: The Five Trends Transforming Real-Time Payments

1. Monetization of real-time payments will demand banks’ attention

We are now well into the second phase of the real-time revolution, with banks looking beyond adoption at how to create new value-added services that are enabled by real-time. Customers expect not only speed, but better services at speed. Open APIs will increasingly unlock the value of real-time payments.In Europe and the US, we have seen the emergence of new ‘Request to Pay’ (RtP) services, providing new opportunities to offer value-added services, particularly for merchants.

NatWest in the UK, for example, recently announced it had teamed up with Carphone Warehouse to trial a new online shopping system that allows customers to ditch their cards and pay directly through their bank account. NatWest says that the pilot has proven to be a big hit with customers, cutting purchase times and ensuring that bank balances are immediately accurate. Carphone Warehouse, on the other hand, benefits from lower processing fees and bank-grade security.

I predict that we will see more merchants offering RtP services in the next few months, as they realize that real-time provides access to cheaper money. In fact, a recent survey from Ovum and ACI Worldwide revealed that nearly 80% of global merchants believe real-time payments will replace the use of payment cards over time.

2. Real-time data access will revolutionize the cross-border transaction market

The uptake and success of SWIFT’s cross-border service gpi shows that banks around the world are mobilizing to create a fast and frictionless cross-border payment experience. SWIFT gpi has quickly become the de facto new standard in global payments, with over 200 participating banks. It has also been designed to scale and integrate with real-time systems, and is aiming for 10,000 member banks by 2020.

One of the key reasons that SWIFT gpi has been gaining ground amongst the largest banks is its ability to effectively leverage the enriched data available as part of the new format, and to proactively make that information available to customers. New overlay services will help the industry move into the ‘SWIFT gpi 2.0’ era.

What I think we’ll soon see are the first movers identifying real use cases for this evolution of SWIFT gpi. These future use cases are being actively discussed within our industry, as the leading banks race to be first to market with new customer propositions based on real-time payments.

3. More banks launching real-time use cases for corporate customers

In the last few years, banks have been focused on retail use cases for real-time banking. However, transaction banking now has a huge opportunity to leverage innovation in payment solutions, driving value for their corporate customers. For banks and their customers, it’s about taking cost and pain out of the payments chain, as well as adding value.

In the next few years we’ll see financial institutions increasingly focus on real-time use cases for corporate customers. Helping corporates manage capital more efficiently to drive shareholder value will ultimately grow banks’ own bottom lines – and help lead to the further proliferation real-time payments services globally.

4. The shift to ISO 20022 will accelerate the trend towards monetization of big data

Real-time payment schemes are based on a messaging standard that offers richer data: ISO 20022. And in the new open, real-time banking world, information about a payment is increasingly seen as being as important as the payment itself.

Real-time offers the ability to process, structure and analyze data in completely new ways – and this holds promise for all financial institutions. The use of big data will drive efficiencies and innovation within a bank’s own operations, and is likely to transform the way products and services are provided to all customers – whether consumers or corporates – at a better quality and with more cost-effective solutions.

As we see more schemes being built with ISO 20022, financial institutions will increasingly be able to analyze the data they gather, offer new services and monetize the data itself.

5. Industry efforts to make real-time more secure than ever before

In the past, faster payments have unfortunately often meant faster fraud. When the UK Faster Payments scheme went live in the UK, we saw a spike in ‘account takeover’ fraud, as customers were unaware of the new dangers.

One of the big issues with faster payments is that there is no check between account name and account details. It means that people can be fooled into thinking they are paying the right payee, but are transferring money into a completely different account.

However, the advent of Open APIs means that we can now prevent fraud before a transaction happens, thanks to new overlay services such as ‘Confirmation of Payee.’ This would make real-time payments more secure than ever before.

I believe that we will see new industry efforts to solve these issues. In the UK, for example, by creating a checking facility to cross check the account name with the account details and give the payer certainty.Some countries have implemented similar proxy databases to provide an extra level of certainty to the payer. There is increasing recognition in the industry that real-time fraud monitoring needs to be an essential part of the payments processing solutions that banks employ.

Meet with ACI Worldwide at Sibos 2018 in Sydney, October 22-25 (Booth D41) to find out how to transform your business with real-time payments and Open Banking strategies, or join Craig Ramsey’s presentation “Making Possibilities Happen: One Solution for the New Payments World” 11:30am AEDT, Oct 24 in Open Theatre One.