Behind The ACI/VocaLink Real-Time Payments Push

VocaLink and ACI Worldwide announced in September that they would join forces to bring immediate payments to domestic and regional schemes globally.

In an interview with PYMNTS, WA Proctor, who serves as vice president and product line manager of UP Immediate Payments for ACI, discussed the strategy, integration, rollout and goals of the VocaLink/ACI faster payments push.

PYMNTS: What is the scope of this partnership? Aren’t you typically competing with one another?

WAP: This partnership is about bringing together two market-leading solutions to provide a comprehensive immediate payments solution for any market.

VocaLink will provide its Immediate Payments System to the central infrastructure solution; ACI will provide our UP Immediate Payments solution, pre-integrated, with VocaLink to enable financial institutions and other PSPs to process transactions and connect to the central infrastructure.

In response to the claims of competitive rivalry, both VocaLink and ACI have clearly defined roles, which, in combination, offer a better solution for the participants. We look at it as faster payments first — the first time there is a joint approach between a leading central infrastructure provider and an access provider for immediate payments. This facilitates quicker onboarding to a scheme, lowers risk, and it enables a broader and accelerated reach to more participants, which, in turn, facilitates adoption.

PYMNTS: What is the significance and key benefits of the partnership for financial institutions?

WAP: Pre-integration with the VocaLink central service provides a financial institution with added assurance of speed and efficiency. The integration project will have already been completed by ACI and VocaLink, so the financial institution or a PSP only has to focus on how they’d like to deploy the capability. This reduces the risk of unknown integration issues that might occur if the organization uses another option for the connection to the central infrastructure. The software is pre-integrated and ready for use by the bank, reducing testing times, simplifying the entire connectivity process for this new payment type and enabling the adoption of future updates in a seamless manner.

Furthermore, the participating organizations receive a cohesive solution that will be servicing a community of banking customers. This offers a concentrated focus and economies of scale for providing a superior operating environment and a working group that shares best practices and ideas for innovation going forward.

To get a sense of how the mechanics work, VocaLink has software that is run at the central infrastructure — you can think of them as a hub — while ACI has software that we run at the financial institutions, who, in turn, connect to that central infrastructure. You can think of them as spokes. We work together in advance to connect and integrate those pieces together. So, when a financial institution buys the combined solution, there is less work to be done on their end.

PYMNTS: Is there a particular region where you see greater interest in this type of offering?

WAP: There are currently 18 immediate payments systems live globally, and almost 30 other countries around the world are currently deploying or exploring an immediate payments scheme. All regions (with the exception of the existing U.K. scheme) where VocaLink are, or will be, the CI provider will benefit from this partnership. An example is The Clearing House in the U.S., which is using VocaLink. ACI still provides access to any scheme globally, regardless of the solution a CI deploys.

PYMNTS: The business case for immediate payments can be a challenge for banks. Does this partnership help their case at all?

WAP: Various FinTechs and payment service providers are impacting the status quo and effectively pushing banks to either innovate or be disintermediated. A prudent business case for banks to put forward is one that offers a new business model to retain and acquire new customers, highlights a reduction in risk of implementation and ensures efficient scheme compliance going forward. Those banks that move fastest will benefit from offering the service sooner; they can also influence best practices and help set priorities for the network based on customer feedback.

The motivation for immediate payments is clear. In the instantaneous world in which we live, the speed of commerce has accelerated, but payments have not always kept pace. Immediate payments offer the potential to generate new revenues with creative solutions. Real-time payments offer an ability to carry much more information with the transaction in the ISO 20022 standard.

This, in turn, provides tremendous value to the recipient of the transaction, especially businesses. Banks can package services based on this information and drive new sources of revenue. Yet, a business case often seeks cost reductions and doesn’t fully take into account the demands for more effective technology and the increased competition within payments.

This is where the business case model must consider the downside of a “do-nothing” or “wait-and-see” approach. This position incurs a lot of risk and has the potential to cause an institution to lose business to their competition.

The ACI-VocaLink approach helps create a more predictable cost model for the real-time payments implementation project. In addition, a Software-as-a-Service solution can also help manage some of this, as a cloud solution gives a financial institution the option to almost “trial” a service without making such a large commitment to the infrastructure. Our joint solution also guarantees compliance with any scheme changes going forward.

PYMNTS: When should financial institutions start adopting immediate payments?

WAP: The quick answer is now — you can be sure that other banks are not waiting. They are moving forward at full speed to offer market-ready solutions for the first go-live in their regions. For banks in the EU, instant payments are entwined with PSD2 and open APIs. Institutions there are feeling a significant competitive threat and are identifying all means possible to offer compelling services to retain clients. These are the banks that are determined to stay ahead of the curve.

And they’re right — our research predicts that 45 percent of consumers who can’t get immediate payment capabilities from their existing bank are likely to switch to a rival (YouGov survey, June 2015).

Getting ready does not mean an institution has to wait for the network to be available. There are many steps an organization can take to make sure they are ready to move forward when a network is ready, and those that are prepared will gain the advantages of early adoption. This is one of the benefits of the ACI-VocaLink solution. There can continue to be refinement of the message standards and scheme rules implemented at the CI, but their participating banks can still get started with their immediate payments deployments. The partnership between ACI and VocaLink ensures that the message standards are adhered to and manages the coordination.