On the face of it, the lure of real-time payments might seem like an inevitability. The concept is gaining traction and deployment across any number of avenues and several countries. In a recent example, in the U.S., a number of leading tech companies have become vocal in their support of a real-time payments (RTP) network, to be created under the leadership of the Federal Reserve and different from what has been previously proposed by the big banks.
The advocacy comes in the wake of real-time payments infrastructure deployment and use in countries such as the United Kingdom and Singapore.
Among that pantheon lies Australia, where the New Payments Platform (NPP) debuted earlier in the year as a way to accelerate the movement of funds between consumers and businesses. Just last month, a reserve bank in Asia-Pacific said that cash and checks are on their way to becoming a “niche” payment in the wake of an uptake in digital payments, and with more than 400,000 transactions logged across the platform. The confluence of infrastructure enabling always-on transactions and the willingness of various participants in commerce to move away from paper (bills and checks) and coins hardly seems a coincidence.
Key Drivers in Place
The road has been long and winding for Australia’s march toward real-time payments, tracing its genesis back to 2012. And in an interview with Karen Webster, Daniel Houseman, partner of transformation program management at KPMG — which helped guide the NPP’s development — took note of the returns on investment accruing to early adopters in financial services and beyond.
The success of the NPP, Houseman said, comes from a number of key drivers. He took note of the support of regulators in helping foster collaboration between far-flung stakeholders, setting clear goals In NPP’s timetable.
Competition between new entrants and established players in financial services, with an eye on developing and improving the way their services work, also has led to NPP’s growth.
A third driver, said Houseman, is tied to consumer demand, which has meant balancing the twin goals of making sure the platform works well operationally and technically while at the same time allowing for commercial success, enough so that the banks and service providers are motivated to actually use NPP. The relatively nascent platform offers some lessons on how to approach real-time payments, as a concept and as a (rather complex) project.
The balancing act described above becomes especially apparent when it comes to cross-border transactions that make their way across time zones and currencies, the goal of any robust RTP system.
“From where we are now,” Houseman told Webster, “the jump to having country-to-country transfer from one consumer to another or from a consumer to a business or a business to a business doesn’t seem that far away.”
But to have that true global presence, he said, standardization is necessary. Different countries operate on different messaging systems, a challenge that can be addressed by standards such as ISO 20022.
“Every country will operate slightly differently,” said Houseman, “but if you get the basics of that right and the mapping of that right … interoperability is helped from a messaging perspective and a translation perspective.” Alignment is also necessary in collaborative efforts by governments and financial services firms to work with effective fraud, AML and sanctions screens, where efforts can be fragmented.
Signing On, With ROI in Sight
As NPP was designed to be “a commercial success for the banks and not simply a cost,” Houseman stated that the most visible use cases come as both speed and improved range of services prove valuable for customers — especially corporate customers.
He said “businesses are crying out for [RTP]” as part of their everyday interactions with one another. “You are more likely making a commercial return [as a financial service provider] on the business side than on the consumer side. Businesses are looking for better ways to manage their cash flow and working capital.”
A real-time payments system, Houseman noted, allows companies to manage cash in and cash out activities at any time of the day or night, or over the weekend. Plus, he added, there is integration with accounting packages — and in a B2B setting, running this software embedded with real-time functionalities can generate instructions to pay suppliers, making supply chains more efficient.
Use cases that are gaining ground in Australia, Houseman said, include property settlement — purchases of houses, for example. RTP options help remove several error-prone and manual parts of transactions.
“We are also starting to see utility companies offering new real-time payment options, as opposed to using a credit card or debit card,” he pointed out.
For consumers, Houseman noted that online transactions are increasingly being done directly from bank accounts and bypassing card accounts, as a substitution effect comes amid greater trust in NPP. Incidentally, he added, the data shows there has been no increase in fraud that can be traced to the use of NPP.
The common denominator, whether transactions are done amid consumers or businesses, is that “all of these use cases are providing one of two things,” said Houseman. “They are either providing a new offering or they are providing a smarter way to provide a service that is now available.” And, he added, since NPP exists as an intersection of several payment rails, it can support a range of payment options and providers.
“There is definitely room for coexistence,” he said. “The future is one where there are multiple payment methods,” tech-enabled and interoperable, even between countries, as transactions become ever more global and mobile. “The benefits and the upside of RTP are there, and they are real — and sooner rather than later, people will expect them.”