Real-time payments (RTP) is a global initiative that’s been a decade in the making and counting, one that has gained momentum over the last several years. More than 50 countries are actively pursuing, piloting or already live with real-time payment programs.
Just last week, the Nordic region — an area that includes Denmark, Sweden, Norway and Finland — took real-time payments up a level through an initiative led by the P27 Nordic Payments Platform, which is owned by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank. It announced a partnership with Mastercard to enable real-time and batch payments across the Nordic markets, a region that has closely connected populations and trade.
In a new PYMNTS interview, Paul Stoddart, president of new payment platforms at Mastercard, spoke with Karen Webster about where real-time payments stand at this mid-point of 2019. They also talked about where that technology is headed as a new decade approaches, along with the applicability of the real-time payments playbook that P27 is creating to other regions.
The real significance of this partnership, Stoddart told Webster, is that it marks the first time a region has decided to move from having its own, individual clearing infrastructures, and create one solution that can be deployed for the region. Stoddard emphasized that it’s not only the real-time payment capability that is important in all this, but the batch clearing. The need to send big files is not going away anytime soon, so it makes sense to attach batch clearing to real-time payments.
“Batch is the oldest form of clearing,” Stoddart said, “but a lot corporates use it.”
This decision to replace what Stoddart described as real-time payments “version one” — one country, one currency — with one capable of handling multiple currencies across those countries allows consumers and businesses to transact with each other without the constraint of country boundaries.
Stoddart believes that getting more RTP standards and best practices — homogenization — in play is important to getting more from real-time payments in its second life. The RTP trend is about 12 years old, and, according to the PYMNTS Faster Payments Tracker, it was projected that more than 56 real-time payment rails would be live by 2020. The demand for faster payments is strong, but not all financial players agree on how to achieve it, especially within that time frame.
Even so, businesses seem aware of the benefits of RTP. PYMNTS research found that 82 percent of businesses said real-time payments could resolve many of their existing payment challenges.
The Nordic region is relatively small in terms of population and global economic impact. Yet, the countries in that region have digitally sophisticated consumer bases that use some of the latest online and mobile technologies for commerce and transactions. That, Stoddart said, makes the region fertile ground for this next demonstration of real-time payments’ potential — an effort that could inspire other tightly connected trading areas, such as the European Union and South Asia.
The real-time payments effort in the Nordic region is designed to enable businesses to move closer to their own paces when it comes to real-time payment deployments. Sure, these initiatives are gaining steam, Stoddart and Webster agreed, but businesses still face massive challenges when it comes to investing in RTP technology, and revising their own in-house systems to work within a real-time payments ecosystem.
Specifically, Stoddart said successful RTP migration can be a balancing act — one doesn’t want to put too much pressure on businesses to disrupt their normal investment cycles, which can cause its own problems. That said, banks and governments are applying more pressure in favor of real-time payment deployments, which means the pace of innovation and deployments are going to speed up as the 2020s begin.
In addition, standards are emerging. The newer real-time payment systems around the world, he added, will conform to the ISO 20022 standard, enabling the movement of rich data with the funds.
The U.K., Stoddart said, offers at least a rough idea of RTP timelines, and how they are speeding up. About one-third of payments clearing volume there has moved to real-time payments, a job that took about seven years. However, things are now accelerating, as this program focused on the Nordic countries is demonstrating.
Furthermore, proponents and developers of RTP have learned valuable lessons over the last decade or so. These include how to make the value proposition of real-time payments clear, but also the benefits of being able to transmit large volumes of payment-related data at reduced costs.
Among the most important lessons so far — one that informs the work planned on real-time payments for the Nordic region? That would be the deep level of collaboration required among all participants in any real-time payments ecosystem. In addition, RTP systems must be designed with enough agility and flexibility so that those systems can easily absorb the inevitable tech upgrades that come. After all, RTP is a long-term project, and is intended to have a long-term impact.
“It takes time for an entire ecosystem to shift,” he said. “But when it comes to real-time payments, that time is coming, and businesses are figuring out how to get aboard this growing trend.”