India is arguably one of the most advanced real-time payments (RTP) ecosystems in the world. One of the key drivers of its success with RTP is the Unified Payments Interface (UPI), which has enabled a vast array of digital overlay services. However, according to the Culture of Innovation Index, recently published by ACI and Ovum, currently just over half of corporate banks regard developing digital overlay services as a priority. During SIBOS 2019, we brought together a panel of global experts to discuss the digital overlay phenomenon, and how other markets are looking to emulate India’s success. The experts spanned the global RTP curve and included leaders from Mindgate Solutions, The Co-operative Bank and Payments NZ. Guhan Muthusamy, co-founder & chief architect, Mindgate, shared his experience of delivering digital overlay services for UPI.
“On the consumer side, India is probably the best example of the commercialization of real-time, particularly in the consumer space. India’s UPI is a mobile-based, real-time payments platform that has quickly emerged as the second most common method of digital payment in India.
UPI can be used for Person-to-Person (P2P) payments and Consumer to Business (C2B) payments. Consumer access and demand has driven demand from merchants and corporates. It’s a virtuous circle that drives up acceptance and, in return, continues to drive usage. Since its launch in 2016, UPI has achieved incredible growth due to its ease-of-use and convenience, and it has now reached the 1 billion transaction mark per month milestone! Indeed, India is leading the global real-time and digital payments revolution, and we are seeing other markets implementing similar end-to-end solutions to drive payments modernization. By 2023, experts predict 60 billion UPI transactions annually, accounting for more than 50 percent of India’s digital payments transactions.” – Guhan Muthusamy
The big question remains: how can corporate banks accelerate their real-time payments implementation with a focus on value-added services; what are banks doing with the richer data; what are they doing to maximize a return on their investment in RTP? Peter Hazou, director, Financial Services, Microsoft, shared his experience of working with global financial institutions on their digital transformation journeys.
“I think the entire view of payments from a bank’s perspective needs transforming. Payments are no longer a bank-on-bank play. The arrival of non-bank players that focus on real-time and on leveraging richer data has changed things fundamentally. In a way, they are eating all our lunches and banks need to wake up to that!
The entire ecosystem is changing; it’s all about information, the flow of data and insights in the era of Open Banking and a new Open Economy. The demand for new services is there. On the retail side, banks are responding with new smartphone services. On the corporate side, payments teams at the heart of banking are yet to capitalize on this opportunity. It’s the bank product managers’ responsibility to develop these new services; the tools are out there, but it’s really about what services banks develop in the corporate space.” – Peter Hazou
Lisa Neary, Head of Payment Schemes & Transformation, The Co-operative Bank, represents a mature RTP market, heading into its second iteration and looking to enable digital overlay services, specifically Request to Pay. Lisa echoes the need for organizations to consider RTP and digital overlay services as part of a broader digital transformation opportunity.
“The pace of change in our industry is unprecedented, with two important aspects that are at front of mind for everyone as we work to keep pace. The industry needs to prepare for ISO 20022, which means more than just RTP messages. We have a new ‘real-time paradigm;’ everything is instantaneous, and payments and transactions should follow suit, but we must balance that with security. It is well-documented that every time a new payments scheme or type is launched, fraudsters move to target it. Fraudsters are always one, two or even three steps ahead of us. So, getting the balance right between offering new real-time services for our customers and leveraging richer data, while also making sure that new payments schemes and services are safe for customers is important. There are a lot of challenges and we need to work more closely together as an industry to tackle what could be problematic.” – Lisa Neary
Steve Wiggins, chief executive, Payments NZ, leads the drive to design a modern RTP scheme for New Zealand, with APIs and the digital overlay services they enable at the heart of the development. New Zealand is approaching the real-time evolution as a payments ecosystem, ensuring that those that will develop innovative new customer propositions can bring them to market in an Open API economy. This requires very open collaboration to complement the Open APIs.
“In New Zealand, we get together as an industry quite regularly. It’s a smaller market, with 13 direct settlement participants (including banks) and 4.8 million people. But we take advantage of this to share a lot of information and experiences across a broad range of payments issues, and fraud is one of those areas. We convene working groups on different topics and we look to get consensus across the industry on key issues. We are leveraging that same process regarding real-time.” – Steve Wiggins
Developing overlay services that drive value for banks and corporates is crucial in the new real-time ecosystem and banks on the retail and corporate side have got their work cut out in this area. India is a trailblazing example and has shown the world what can be done when the right ‘killer’ application has been found.
If we approach real-time payments as just regulation, as just another silo, we are unlikely to realize the real benefits. However, the banks that have been and will be successful are the ones that take a holistic approach and see real-time as the ‘new normal’ for payments, clearing and settlement.
How to Respond to the Advent of Real-Time Payments and Digital Overlay Services
Developing a future-proof strategy for real-time + open payments
The convergence of real-time payments and open banking in digital overlay services is introducing new complexity as well as new opportunities into the payments ecosystem. Understanding the implications of this change and how it will affect the competitive landscape will prove essential to gaining an advantage in this dynamic market. We developed this whitepaper as a key resource to help outline an overarching strategy for navigating these changes successfully:
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ACI Low Value Real-Time Payments 
