Request for Payment and Other Real-Time Payments Trends That Will Shape 2020
In 2020, the conversation around real-time payments will increasingly be about what banks can do with real-time, as they move beyond setting up to support real-time payments schemes. New use cases will emerge – but there are a few main trends that are likely to shape the direction of real-time in the year ahead.
Request to Pay will be the talk of the town
Consumers – and increasingly corporations – around the world are demanding products and services that interact with them in real-time. Of course, that extends to interactions with payments. Digital overlay services will be the talk of the town as banks look for new products and services that leverage newly created real-time rails.
Request for Payment (RfP) is one such overlay service where there will be plenty of discussion. In 2019, several major U.S. 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 RfP 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.
Real-time enables the democratization of payments
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.
Banks embrace public cloud deployment to support real-time payments
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 amongst the most likely to do so. According the Culture of Innovation Index, recently published by ACI Worldwide and Ovum, 92 percent 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.
Migration to ISO 20022 will become mandatory
The global trend toward capitalizing on richer payments data and enabling for value-added overlay services on real-time rails aligns with another major global shift just around the corner: November 2021 will mark the beginning of the move to ISO 20022, with Europe shifting first.
ISO 20022 messages deliver more, through structured data that allows payment providers to exchange information seamlessly between systems—providing a consistent customer experience across markets. The transition (November 2021 for Europe and all SWIFT correspondent banking members from November 2022) will run until November 2025. There’s a lot to do between now and the deadline – and pressure will mount in 2020. Participants need to procure and sign a contract with a Network Service Provider, finalize internal development plans, adapt their IT and internal processes, complete connectivity and user testing, finalize their configuration and then complete migration activities on production environments.
It is fair to say that many banks have underestimated the enormity of the task ahead and planning for migration should be on top of the agenda for financial institutions in Europe and beyond. Migrating as soon as possible will deliver early benefits for payment providers and their customers, including end-to-end visibility on payment flows, easier reconciliation and transmission of more data to the final customer.
Universal Confirmations will become mandatory for all financial institutions using SWIFT
Since it was launched in 2016, SWIFT gpi has without doubt transformed the cross-border payments experience. Over 500 banks have joined the service and gpi customer payments are now being made in nearly 150 currencies, across more than 1,300 country corridors.
SWIFT gpi has quickly become the new norm for cross-border payments and enables financial institutions to provide fast, transparent, certain and trackable cross-border payments to their customers. By the end of 2020, SWIFT will extend the benefits of tracking and confirming payments to every financial institution. As part of this, every single payment (MT 103 on FIN) will require a confirmation that funds have been credited to the end beneficiary account within two business days.
Financial institutions on SWIFT that are not gpi-enabled will be able to confirm their incoming payments manually using a new Basic Tracker, as well as through a range of other automated solutions. SWIFT gpi member banks will continue to be able to access the full gpi Tracker to confirm payments, as well as benefit from the full search and tracking features of gpi, along with the suite of value-added services. Many customers are demanding the transparency that Universal Confirmations offer and are determined to action as soon as possible. Additionally, SWIFT provides access to the testing robot for all its pilot members as a free resource – so it makes sense to take advantage of this.
Real-time payments are on the rise globally, creating the opportunity for banks, processors, acquirers and national infrastructure providers to grab market share. Discover how and when volumes will peak in your market by reading ACI's "Prime Time for Real-Time: The Global Real-Time Payments Report."
This article originally appeared on PaymentsSource.
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