Faster Payments

Reflecting On The UK’s Decade Of Faster Payments — And Fraud

From enabling new messaging capabilities in the U.S. to cross-border push payments for expats in Kuwait and Zimbabwe, access to faster payments tools is rapidly accelerating. Still, gaps remain, says John Hutton, director of payments for Nationwide Building Society. In the latest Faster Payments Tracker, Hutton weighs in on how the U.K.’s Faster Payments Scheme has improved consumers’ financial lives, while at the same time raising the bar on fraud detection.

Milestones like a 10-year anniversary often serve as times to reflect on past accomplishments. For those working closely on the U.K.’s Faster Payments system, that period of contemplation and consideration has arrived.

Faster Payments has been busy over the past decade, processing more than 9.1 billion payments since first going live. It is used to transmit over 1.4 billion payments valued at more than £1 trillion ($1.32 trillion USD) each year, according to the system’s website.

Despite its name, Faster Payments has done more than give U.K. citizens and financial services firms speedier payment processing. It has provided consumers the ability to exercise greater control over their financial lives, according to John Hutton, director of payments for the Nationwide Building Society mutual FI, which currently serves roughly 15 million members. PYMNTS recently caught up with Hutton to learn more about how the Faster Payments system is empowering consumers and the opportunities he sees to improve it.

Strengthening Consumers’ Financial Footing

Faster Payments’ availability has been a game changer for U.K. consumers and financial services firms, Hutton said, noting they were previously forced to endure a somewhat cumbersome payment delivery process prior to the system’s launch. This typically involved visiting a bank branch, filling out paperwork, then using a payment service like the CHAPS, Bacs or SWIFT to facilitate the transfer a process which typically took two to three business days to complete.

Faster Payments enables transactions to move in real time, allowing FIs like Nationwide to provide faster payment capabilities and services like quicker bill payments, more efficient transfers and standing payments support — to members.

“The whole payment journey has changed rapidly,” Hutton said. “The almost-instant mechanism has allowed people to own that payment journey.”

The additional speed has provided U.K. customers with more than a fast-acting financial service, though. It gives them greater control over their financial lives, enabling them to quickly make important payments using direct debit. This allows them to pay a last-minute bill on time, for example, or cover an outstanding balance in stages instead of all at once.

“[Faster Payments] gives them ownership and freedom when they want to pay their bills,” Hutton said.

A Financial Gift For Gig Workers

Faster Payments is beginning to evolve now that it is more than a decade old, and developers are looking to add new features and capabilities to the technology. The network is currently working to introduce a “request to pay” — previously known as “request for payment” — functionality designed to cater to different types of players, including freelancers and gig workers. Based on their assignments, these workers often experience varying payment frequencies and month-to-month amounts.

The function is not yet live, Hutton said, but it could offer consumers even more financial empowerment when it does debut.

“An Uber driver [or freelancer] in the gig economy might get paid a different amount each week, but might not be able to afford to wait until the end of the month to pay a bill,” he noted.

Request to pay will allow these workers to request all or part of their salary early, enabling them to make timely payments and remain on steady financial footing.

“It can really help them to manage their finances,” Hutton explained.

Fighting Fraud Faster

The system has already begun to evolve, but Hutton believes more change is needed. Faster Payments has created new opportunities for banks to innovate financial products, but there could be a downside to payments moving so quickly, he said. Specifically, fraudsters and other bad actors have learned they can use the service to more speedily orchestrate scams. Fraud spiked by 132 percent in the year after the system debuted, as the accelerated settlement timeline enabled fraudsters to rapidly make off with money.

System exploitation to perpetuate fraud raises the importance of additional service safeguards, and it can be particularly important to protect elderly consumers, Hutton pointed out.

“Because of the speed, there’s the question of [whether] we want to slow down payments in order to make sure the most vulnerable in our society have an extra layer of security,” he said.

One potential solution under consideration is the “confirmation of payee” protocol, which aims to ensure the recipient of funds is who they claim to be.

“[A fraudster] might have my name, but [might have] changed the account details,” Hutton explained. “So, you think you’re paying me, but they’ve changed my bank account [data].”

Mechanisms like confirmation of payee are needed to ensure that funds are sent to the correct parties and to protect consumers from creative fraudsters.

“These are steps we’re trying to implement to make sure that customers don’t fall for some of these scams that we’re seeing,” he added.

While Faster Payments enabled U.K. consumers to quickly deliver payments, there are still gaps that must be addressed. As the system celebrates its 10-year anniversary, Hutton wants to see the next few years focus on developing a strong liability model to protect consumers. After all, it’s not enough for payments to be delivered quickly. If they are not secured, the speed of payments can easily become a disadvantage.

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