It would appear that simplicity is a concept that is valued worldwide.
The ability to send money between parties quickly is gaining popularity. Across the pond, for example, the latest statistics from the U.K.’s Faster Payments scheme indicate 129.7 million payments — totaling £112.6 billion ($141.3 billion) — were processed in January alone, a 23 percent spike from the amount processed in January 2016.
As new faster payment infrastructures arise, some payment providers are turning to proxy services to distribute funds. These proxy services aim to make the payments progress smoother by eliminating the need for users to exchange information, such as bank account details, like they do with checks, and to instead rely on mobile phone numbers or email addresses.
By providing consumers a proxy option to share their money, companies are not only trying to offer consumers a more convenient way for users to deliver funds to family and friends, but the services also reduce the anxiety some users have about sharing personal financial information with others.
For the March Faster Payments Tracker™ feature story, PYMNTS caught up with George Evers, director of immediate payments for U.K.-based VocaLink, the 2016 recipient of NACHA’s Payments Award for innovation, expansion and development of products supporting faster payments to increase payments access, efficiency and security across the globe. Evers discussed the company’s faster payments work with proxy services and why these solutions are important steps toward banking modernization.
Faster Payments with Proxy Services
A proxy service is a directory of information that allows user information to be stored and accessed independent of associated financial applications.
The feature allows users to send money to their contacts without revealing their bank account information or requesting the recipient’s account information. Evers noted that these solutions help make faster payments simpler for consumers.
“One of the challenges for people using payment systems historically has been the need to know a sort code or an account number,” he said. “The proxy server is really a way of simplifying access to those payment systems and making it easier for people to identify a destination account for them to send money.”
By removing the requirement to store, remember or input bank account information, Evers said, proxy services are alleviating some of the friction involved in faster payments and changing the way consumers and merchants exchange funds. Additionally, these services could ease the hesitation users may have around sharing their personal finance information and eliminate the need to carry cash.
Instead of using bank account information to authorize payments, customers send money using common communication and identification methods, such as mobile phone numbers, email addresses or national ID numbers. Using this information rather than bank account details provides an effective way to identify payment recipients, because these tools are already widely utilized, said Evers.
“Use of those identifiers like a mobile number or an email address are consistent with the way we communicate and connect with other people,” he said.
In addition to offering users a simpler and potentially safer method of identifying payment recipients, some proxy solutions also offer a messaging service related to payment transactions. These messaging features can act as an invoicing tool to help users identify the purpose of a funds transfer or a request for payment.
Put together, Evers said proxy services and payment messages can offer businesses and consumers faster access to money and greater data on how and why money is exchanged.
“Those two things combined suddenly create a ton more value in payment infrastructure,” he said.
Testing Faster Payments in Foreign Markets
Beyond the U.K., other global markets are showing an interest in offering faster and simpler payment solutions to local merchants and consumers.
As VocaLink’s director of immediate payments, Evers said one part of his job often involves bringing the company’s payment solutions to new global markets, while also researching payment innovations in those markets and evaluating if they should be brought back to the U.K. market.
Exploring payment innovations from different parts of the world allows financial service providers in different markets to learn from each other as they work to modernize their own local payment infrastructures, Evers said.
He pointed to an example of a proxy service the company introduced in Thailand called PromptPay, which uses VocaLink’s Multi Proxy Platform and Immediate Payment Solution to help bring a faster payment infrastructure to that country. Evers explained that PromptPay acts as a proxy database, allowing users to store a mobile phone or national ID number to authorize sending money from one party to another.
With the PromptPay proxy service now in place, Evers believes Thailand’s consumers and merchants will be able to enjoy the benefits of real-time payments.
But Evers also said that Thailand’s success with faster payment innovations can offer lessons back in the U.K. market.
“When the U.K. gets to the point where it’s going to refresh its infrastructure or start its own modernization program,” he said, “then we have a brand new and proven platform that has been built with input from payments participants around the world.”
Keeping Faster Payments in Line with Expectations
Evers expects the adoption of faster payments will progress at an increasingly rapid rate and that the demand for faster access to money will mirror the easier access consumers currently have to digital media.
“The ability to move money in real time is consistent with our expectations around how quickly I can access music, content, videos, etc.,” he said. “I think there’s an alignment there.”
The demand for faster payment solutions could greatly increase as more millennials come of age and become consumers. According to newly published research by VocaLink on how millennials will impact the future of payment industries in Europe, 75 percent of U.K. millennials said they like technology that allows them to tailor things to suit their specific needs.
As more millennials open their own bank accounts and enter the digital payment space, Evers recommends that communities recognize the value of offering effective real-time payment systems that meet consumers’ expectations around sending money quickly and that they take the necessary steps to drive the adoption.
Evers hopes that the real-time communities will work quickly to adopt data-rich, faster payment systems so that their consumers and merchants can enjoy the efficiency and inclusiveness that they provide.
“In more developed economies, the benefits associated with a new set of payment messages and data sets will be a powerful asset to business, governments and financial institutions,” he said.
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About the Tracker
The PYMNTS Faster Payments Tracker™, powered by NACHA, is your go-to resource for staying up-to-date on a month-by-month basis. The Tracker highlights the contribution of different stakeholders, including institutions and technology coming together to make this happen.