05 October 2015
The advance of push payment technology
Fifty years ago, in April 1965, an article in the New Scientist magazine about the automation of cheque clearing predicted that in a generation the transfer of money would be completely automatic and “the payment of a birthday fiver from an uncle to a favourite nephew merely a matter of direction and timing of electronic impulses”.
Within a year of this, the first Barclaycards were in customers’ hands and a year after that Reg Varney was launching the first ATM (in Enfield, North London). A year later, in 1968, the precursor to Bacs was formed and direct debits were launched. Yet that birthday fiver was still sent by post. As it was in 1975. And 1985. And 1995. Perhaps, just perhaps, it went by PayPal in 2005, by which time Bacs was processing two billion direct credits per annum. But today? In 2015, it could well be by Paym or the Faster Payments Service (FPS), WeChat or Venmo, Facebook or M-PESA. The payment times are finally changing. So how will that birthday five hundred pounds (adjusted for inflation) wend its way in 2025?
How can we begin to think about the payments landscape a decade from now when we can see that so much is going to change on the technological, social, business and most importantly of all, regulatory fronts? Well, one of the techniques of futurologists trying to assess the magnitude and direction of technology-induced change is to find an appropriate point in the past to compare with. If you want to imagine the changes coming a generation from now, they would argue, you have to look back two generations into the past in order to correct for the accelerating pace of change.
That line of thinking suggests that if we want to imagine the world of payments a decade from now, we need to look back two decades into the past and understand that landscape and the dynamics that changed it. A simple way of doing this is to look at the technologies that support products in the marketplace and, particularly, the security needed to make them useful.
This perspective-led approach makes good sense for the topic at hand because 1995 was a cusp in the coevolution of payments, technology and security. Twenty years ago, the world was experimenting with different kinds of debit proposition, smart card technology, offline operation and electronification in the mass-market (salaries, benefits, bill payments and so on). Some failed and some succeeded, but the experimentation began a period of growth that saw the debit card rise to become the consumer’s instrument of choice. In the UK this year, cash was finally reduced to less than half of retail payments and the debit card is the proximate cause. The march of electronification means that the direct debit has become the way that most consumers pay most regular bills (eight out of ten UK adults have at least one).
The rise of the internet led consumers and business to want new solutions, yet it was another decade before work started on the immediate payments system that became the Faster Payments Service (FPS). The UK then led the world in introducing what we will call instant payments. FPS has been an outstanding success, bringing us to the point where British consumers expect to be able to use their mobile phones to send money from one account to another, instantly and reliably. Around the world, other countries are following in these footsteps and evolving that infrastructure still further by bringing in more sophisticated data representation and management to add the ability to carry value-adding data along with the payment. By 2025, the UK will have refreshed and done the same, completely transforming the potential for the infrastructure to support individuals, organisations and government to automate around payments.
Read the full article in Moving Money 2025