13 October 2016
Real-time Yields Real Benefits
Payment efficiency is of strategic importance to any modern economy. Therefore, the demand for simple, safe and convenient ways to pay are high on the priority list and real-time payments tick every box.
The added values of real-time technology, such as certainty, immediacy and the convenience of being able to make payment immediately by phone, online or through a branch network, represents the biggest advancement in payments in a generation.
Since the development of real-time payments, the resulting benefits have become increasingly more apparent as the service has evolved. If real-time is deployed successfully, the momentum should build through a ‘network effect’, which will evolve into a whole host of benefits including:
COST REDUCTION - Reduced cost of managing payments, whereby the technology diminishes the number of activities necessary to complete the payment, offering significant savings in the back office
CUTTING FAILED TRANSACTIONS - Reduction in failed transactions as real-time technology flags failed payments immediately, therefore cutting the number of failed transactions, which are charged and even lessening payment failures to zero
REDUCING FRAUD - Helping to reduce fraud by potentially identifying irregularities in payments earlier in the clearance cycle and preventing the money from being lost entirely
TIME REDUCTION - Reduction in the time it takes a payment to clear, which improves cash flow and increases efficiency for users
DRIVING COMPETITION - A platform for innovation could be seen as the most transformational aspect of real-time technology. It acts as a catalyst within banks, other financial institutions and the general business community to launch their own products and compete with each other on their customer appeal, rather than the market position of the bank
ENHANCED PRODUCTS - Real-time payment capabilities enhances corporate product offering in the e-commerce and alternative payment spaces, allowing banks to develop entirely new revenue streams
ENHANCED INFORMATION – Through the implementation of non-payment messages such as Request to pay, request for information and remittance information these systems are essentially pulling together the data and the payment flows. This drives further efficiency for individuals and organisations who are trying to manage their receivables books and finances respectively
These financial and non-financial benefits have and will continue to impact all parties throughout the payment chain including payment providers, businesses, consumers and governments, who will reap the advantages of cost-effective, frictionless instant value.
It has also served as a platform to underpin the government agenda, as they focus on the structure of the financial services industry and the value it delivers to the economy.
Common themes include financial inclusion, modernisation of the payments systems, reducing the use of cash and cheques and promoting competition within financial services. A real-time backbone is supporting the government in many ways.
Here in the UK, the government is the single biggest user of real-time payments, as it allows emergency payments to be made more easily and provide access to cash immediately, increasing convenience for users and facilitating better budgets. Furthermore, it enables richer data to be collected and analysed to gain a deeper understanding of the activities of individuals and organisations to provide policy shaping insights and enhanced planning.
These aspects are just a snapshot of the many ways in which real-time payments are already enhancing economies and benefitting consumers internationally. As we look forward, the focus will be on co-ordination of the standards being used internationally, which will support technical interoperability and opportunities around cross-border payments which could transform the international real-time payments system.