The Faster Payments initiative has made significant strides in the United Kingdom, so much so that the scheme has been held up as a model for other nations globally. Yet the work is far from done. There are still numbers of businesses and consumers that are not yet linked up to the grid, so to speak, and even fewer products for consumers to take advantage of.
In an interview with Karen Webster, William Proctor, vice president and product line manager of UP Immediate Payments at ACI Worldwide, delved into the triumphs and trials seen thus far.
The Faster Payments scheme has a goal of reaching every single consumer in the U.K. What are the main barriers to entry for people, businesses and payment providers looking to be a part of the U.K. Faster Payments scheme?
U.K. Faster Payments has seen very successful adoption. It’s clear that the service is valuable as the transaction growth rates continue to be in the double digits year over year. Some of the barriers that had prevented adoption to date, such as value limits, have largely been eliminated.
Now, the primary barriers are reaching the consumers and small businesses who are not customers of direct member banks, as well as enabling larger businesses to integrate real-time processing into their back offices. Delivering on ubiquity is the key objective, and the push to make more indirect members, direct members will help significantly.
Enabling payment service providers to access the payment systems offered, called The New Access Model, will also lead to more innovation, itself creating a new payment ecosystem. Finally, there is always the issue of education. The U.K. market understands the options very well. In other markets looking to offer real-time services, education will be an important element to drive adoption.
The fixed costs of communication links between PSPs and central infrastructure is causing issues with potential users of Faster Payments services, especially smaller players. What is being done to allow them the same advantage and ability to use the service?
The New Access Model approach from Faster Payments Scheme Ltd (FPSL) introduces the concept of Aggregator Services to simplify and reduce the cost of access for an organization seeking to offer real-time payment services. This is a smart approach as it gives smaller banks, FinTechs and all other payment intermediaries greater options for connecting to the scheme.
Organizations can be a direct member and have an account with U.K. Faster Payments or they can use a sponsor relationship. By using a technical aggregator, the costs of connectivity are shared across several tenants using the same infrastructure.
This flexibility allows businesses to connect with the solution that makes the most strategic and economic sense to them. It allows them to really focus on the end user, a business or a consumer, to offer new and unique services. This is what the real-time capability is all about – driving innovation, competition and enhanced value on the back of real-time processing.
Given where the U.S. market is going with multiple real-time schemes, we expect this Aggregator approach could make a lot of sense there, too, to enable the vast number and types of institutions that offer real-time payments. We’ll need an approach that addresses many more participants, both banks and non-banks.
It has been identified that the gap between the scheme’s central interfaces and PSP's diverse capabilities and infrastructures need to be bridged, but not to the extent of using a 'single pipe' solution. Would having multiple connection points open up more ways for fraudsters? How is the consumer or business protected?
New models such as this are always a target for fraud. When Faster Payments first went live, online banking fraud more than doubled from the prior year. The model itself is not more susceptible, but with more participants in the scheme and more end users, there is a greater threat. It’s critical that organizations offering any new products and services look comprehensively at their systems and processes to enhance fraud prevention techniques as required. This is an area that needs ongoing attention as technology evolves. Open API initiatives such as PSD2 will equally be challenged by new fraud threats. It’s critical to have a real-time fraud approach that looks across access origination channels and processing engines — a layered, multi-channel approach to your fraud strategy.
Smartphones have drastically changed consumer expectations and brought about multiple new digital and mobile payment services. How does faster payments enable product innovation as well as future technology advancements?
The smartphone has driven a demand for real-time, instantaneous information. This transposes into our expectations for making payments. We see these experiences converging across digital formats, mobile to social for example and we have shifted from caring about the transaction to caring about the experience. A delay or a complex process makes no sense, but it’s not that simple to change. Years of transformation and evolution are behind current payment models.
However, that is also what is really interesting about where we are today in payments. The newer players entering the space as well as the established financial institutions and payment intermediaries are heavily embracing technology and change. Whether it takes the form of competition or partnership, the industry is moving forward at a very fast pace. The real-time payments schemes are just the enabling rails for terrific innovation. We have a new customer anticipating huge benefits from adding real-time processing to their foreign exchange services.
We see all types of FinTechs, but also banks and processors, launching creative new services, where real-time payments are a cornerstone to these offerings and in many cases are the foundation to delivering the user experience.
William Proctor, WA, is Vice President and Product Line Manager of the UP Immediate Payments solution at ACI Worldwide. In this role, WA drives the development of the company’s real-time, immediate payments strategy.