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.
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 (from November 2021) 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.
Related Blog Posts
Taking a Holistic View of ISO 20022 Migration and Payments Modernization in the Pacific
Today’s payments modernization efforts, most notably real-time payments, not only work to satisfy changing consumer preferences and behaviors, they also serve to future-proof national economies throughout the world. But for real-time payments to deliver maximum value, consumers and financial institutions must be able to exchange meaningful and actionable information — hence the development of ISO 20022, a standard for electronic data interchange that facilitates the fast, standardized and secure exchange of financial messages across borders.
How ISO 20022 Represents Both a Challenge and an Opportunity for Southeast Asia’s Payments Landscape
Governments across Southeast Asia (SEA) are increasingly recognizing the vital role that payments play in the engines of their economies, which has resulted in a number of payments modernization initiatives such as those in Vietnam and Malaysia (PayNet). Yet there is one particular area in which SEA’s financial institutions might still be lagging behind their global counterparts: the adoption of ISO 20022, which has become the global standard for high-value payments and immediate payments (IP) when it comes to cross-border payments.
Ready or Not, The Time Is Now for Real-Time Payments
Research from ACI and GlobalData confirms that demand for real-time payments is only going in one direction: up. The root cause of this increasing demand is rising customer expectations and behaviors; clunky and opaque payment experiences are becoming less tolerable in a world where customers can buy, watch and listen to almost anything with a swipe, tap or click.
When It Comes to Payments, COVID-19 Crisis Could Lead to Long-Term Shifts in Consumer Behavior [Q&A]
ACI Worldwide and GlobalData recently launched Prime Time for Real-Time, a new global report tracking and analyzing real-time payments volumes, growth and dynamics across 30 global markets. According to the global research, an industry first, more than half a trillion real-time payments transactions will be processed over the next five years. I discussed what the findings mean, and how the COVID-19 pandemic might be a further catalyst for behavioral change, with ACI’s global head of real-time payments, Craig Ramsey.
TCH RTP and FedNow: What’s Next for U.S. Immediate Payments?
It has taken some time, but immediate payments (IP) are on the move in the United States. Although the speed of adoption has been slightly behind the curve of regions like India, the Nordics and the U.K., the U.S. has seen significant year-on-year IP growth of 69 percent.
Social, Mobile and Instant Payments: How Digital Payment Overlay Services Will Power Up P27
For some years now, the Nordics region has been a global-standard bearer for payments and financial services innovation. Sweden has for many years been a leader in the progressive move towards cashlessness, championing the range of efficiencies that it brings. Major payments innovators like Klarna, FundedByMe and iZettle are based in the region, rubber-stamping Stockholm as a genuine fintech hub. Analysts and insight leaders also regularly single the Nordics out as a genuine leader, in particular praising the collaboration between governments, regulators, financial institutions and businesses that has led to such fertile ground for financial modernization initiatives.
Women in Payments: Celebrating International Women’s Day 2020
International Women’s Day, celebrated on March 8, honors the social, economic, cultural and political achievements of women – including equality for all women.
To commemorate the occasion, we spoke with a few female leaders in the payments industry about what the day means both for them and for the wider payments industry. The comments and insights we received were nothing short of inspiring and encouraging.
Women in Payments: Student Perspectives on the Payments Industry (Part 1)
Last month, ACI’s Omaha office hosted six students from the University of Nebraska Omaha’s Information Technology department for a one-day event, showcasing ACI’s solution offerings and the company’s role in the global payments industry. The six students, all of whom were members of UNO’s Association for Computing Machinery-Women (ACM-W) chapter, had previously participated in one of ACI Omaha’s Coding for Girls Camps.
How to Meet ISO 20022 Migration Deadlines for Fedwire and SWIFT
Over the next decade, we will undoubtedly see huge shifts in how financial institutions throughout North America transact, whether domestically or across international borders. This will be driven not just by changing technologies, but also by regulatory events – such as the widespread adoption of financial messaging standards like ISO 20022.
How Can European Banks Meet the ISO 20022 Migration Deadlines for TARGET2 and SWIFT?
First published in 2004 – and already broadly used in some quarters – ISO 20022 is rapidly set to become the de facto standard for financial messaging around the world, replacing MT messages.