Smarter Payments

Why Payment Rails Need More Than Just Speed

In the financial services sector, payment rail networks are a valuable resource for quickly moving and settling payments between parties. As more companies go global and engage in cross-border trade, these rails will face increased demand to efficiently deliver money, and there will be a growing need for the adoption of a common protocol to improve interoperability between payment systems, opening doors for new players to expand their reach.

These systems allow businesses to transition away from legacy systems, and, in recent years, players in the space have worked to push the speed of transactions even further.

In the U.S., for example, the last of three same-day ACH phases was rolled out earlier this year, which requires receiving depository financial institutions to make funds available by 5 p.m. local time on the same day as ACH credits. Previous phases, including same-day ACH credits and debits, were rolled out in 2016 and 2017, respectively. According to the latest figures from NACHA – The Electronic Payments Association, the ACH network moves $43 trillion in commerce annually.

Meanwhile, in other global regions, payment rail infrastructures are experiencing changes of their own. In Europe, for example, cross-border messaging service provider SWIFT recently received certification from the Eurosystem, which should help the company expand its European footprint. The certification allows SWIFT to provide access to its TARGET Instant Payment Settlement platform.

However, SWIFT is facing new competition from rising FinTech players. Among them is Ripple, which recently claimed it can facilitate the cross-border transfer of funds within a few minutes, rather than two to three days.

But payment rails need more than speed to win over clients, according to Manish Kohli, global head of payments for Treasury and Trade Solutions at Citi. In the latest Smarter Payments Tracker, Kohli spoke with PYMNTS’ Karen Webster and outlined the five pillars that payment rails need to deliver on to win and keep clients: speed, transparency, convenience, lower costs and security.

Find that story, along with the latest payment rail headlines and a deep dive on the potential of blockchain to disrupt payment rails, in the brand new Tracker.


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