Real-Time Payments: A Mix of Simple, Smart and Secure Will Be Crucial for Further Adoption
In our global payments report, we predicted that 2020 would be Prime Time for Real-Time. And that was before the COVID-19 pandemic accelerated the adoption of real-time and digital payments around the world, which quickly became a necessity in keeping citizens safe and businesses afloat. During the recent ACI Edge Virtual event for banks and intermediaries, we discussed the challenges of real-time adoption with some of the industry’s leading experts. I caught up after the event with Lisa Neary, head of payments at Co-op Bank UK, Ian Gausden, head of real-time payments at Mastercard, Vincent Brennan, head of group payments and business continuity management at Bank of Ireland and Enrico Albertelli, head of payments and digital banking solutions at Nexi.
Katrin Boettger: Real-time payments are truly global now. What challenges does that present, given the fact that markets around the world are in different levels of maturity?
Lisa Neary: All U.K. retail banks face two key questions: How do you compete and how do you secure the investment to compete? A huge amount of investment has been cut this year due to the global pandemic, and banks will need to figure out how best to respond to that while still growing and developing their payments infrastructure.
KB: Ian, what are the biggest challenges you are seeing from a global perspective at Mastercard?
Ian Gausden: We see a variety of different challenges in markets around the world for real-time payments. For example, the U.K. is using real-time for business-to-business transactions and peer-to-peer transactions, but not so much at the point of sale or for retail-type transactions. The opposite is true in some Asian countries, for example Thailand. There, we see a lot of consumer-to-merchant transactions happening at the point of sale via the real-time network. So, developing the right use cases that fill a real gap in a particular market is the big challenge for all players globally.
KB: Vincent and Enrico, maybe you can add a European perspective?
Vincent Brennan: In Europe, real-time payments are gaining a strong foothold. Look for example at RT1 from EBA Clearing. At this stage RT1 is processing over one million transactions and €600m daily from across 24 countries, coming from PSPs that are accountable for about 80 percent of the European credit transfer market. Banks are actively working on upgrading legacy systems and many are building new propositions on the back of their open banking capabilities, linked with real-time payments.
Enrico Albertelli: Around 80 percent of bank accounts in Italy are reachable via real-time payments, and it is a very successful service for banks as they have now reached a complete return on investment. The lesson we learned was around interoperability, and how crucial it was to interlink our ACH to EBA and TIPS. Additionally, corporates are some of the main users of real-time payments in Italy, so the maximum payment limit has been recently revised and increased to support those use cases.
KB: Ian, what are the lessons we can learn from the world of cards and how can we apply them to new real-time propositions?
IG: Yes, real-time payments have a lot to learn from cards. We have been providing a robust and reliable infrastructure for 50 years now with the card network. Some of the secrets behind that success are: Ubiquity, knowing where you can use your card and being confident that you can use it at a particular point in time. Plus confidence that you can use your card to make your purchases wherever you're shopping. And, last but not least, the safety of the payments instrument and having a simple and straightforward user experience. So that mix of simple, safe and smart is tremendously important for all payment services, particularly real-time and card-type experiences.
KB: That leads me to another question. As customers adopt more digital payment options and use more digital channels, how do banks adapt to the expectations of the customer?
LN: First, I think the degree to which customers have adapted is remarkable, and I think COVID has proven that more than anything else. The first challenge for banks is to keep innovating and the second is that not all customers are equal. For example, the vulnerable customer group may not move as quickly as everybody else, but our experience is that with some extra attention and some extra focus, they will convert. So, I think the banks are doing better than perhaps they were in the past in terms of that enablement piece and keeping up with the competition in terms of digital propositions.
EA: Italy is country that was not so digital until a few years ago. This was a particularly complicated issue because we have a digital divide by geography; north was more developed than much of the south. This is an issue that all banks and the technology providers have to handle with care and this is the reason why in the Nexi proposition we do not only process the transaction, but we also include security and fraud value-added services to protect the entire value chain, helping banks to provide turnkey solutions to their end customers.
KB: We can’t talk about real-time payments without talking about “Request to Pay.” Vincent, how do you see the Request to Pay market evolving in 2021?
VB: I think the market is ripe for Request to Pay right now, and in Europe we are seeing lots of initiatives such as the one underway as EBA Clearing. Think of it as Lego bricks; the different components for the ideal Request to Pay proposition are there. You’ve got PSD2, which brings secure authentication and the ability to use account information services and payment initiation services through APIs. The real-time piece means this can be done instantaneously. And the Request to Pay capability then brings these together. So, I would not be surprised at all to see these services proliferating in Europe pretty quickly.
KB: The big question is, as digital payment volumes continue to increase, and digital overlay services continue to proliferate, how can banks best prepare for payments modernization?
IG: I would say two things. One would be on standards; the more we can work on standardization, the faster real-time services will take off. The second one is security, and strong customer authentication is a massive step in the right direction. We need to build on both of those.
EA: I think customer experience is crucial, if you focus on creating the best solutions and services for your customer, you are benefiting the whole value chain.
To find out how to capitalize on the growth of real-time payments, please visit: ACI Low Value Real-Time Payments
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