17 April 2015
Standing on the shoulders of giants
Payment efficiency is of strategic importance to any modern economy. Everyone expects to be able to pay who they want, when they want. With the decline of physical instruments, such as cash and cheques, electronic payment has become the natural choice as a simple, safe and convenient way to pay.
For over forty years, the UK has been in the vanguard of payments innovation. Major milestones include the Bacs service in1968, which offers universal connectivity and fund transfers between UK bank accounts and, more recently the Faster Payments Service (FPS) in 2008, which facilitates single immediate interbank payments using real-time technology.
The introduction of real-time technology represents the biggest advancement in payments in a generation. The appeal of FPS has driven uptake throughout the UK and stimulated innovation across the industry. The UK has embraced real-time technology as the bridge between financial services and the 24x7x365 society. This has attracted attention from around the world.
Last year, VocaLink helped implement a ground-breaking real-time payments platform in Singapore. The FAST solution assimilated the technology and functional richness of FPS, but the final deployment surpassed that in the UK in several ways: it included debit requests and push credits and adopted the ISO20022 message standard. All messages are validated, routed and delivered in real time, making Singapore one of the world’s most advanced payment markets. Banks compete on the basis of their individual customer appeal with their ability to innovate in the payment products space no longer constrained by processing limitations.
The success of Singapore demonstrates the practical benefits of international collaboration and how partnership can precipitate innovation. It also validates the adage that the easiest road to success is to build upon the success of others. Embracing collaboration, the global payments community can build on the sum total of everything that has been learnt and achieved in all markets. In this way every real-time deployment enlarges the total sum of practical knowledge: the global payments industry is always ‘standing on the shoulders of giants.’
Many countries are currently looking for real-time systems. In some cases, like the UK, this is driven by legislation, while others such as Sweden, are driven by commercial pressures and competition. Whatever the drivers, the UK experience suggests that the journey to real-time involves a steep climb, but the view from the top justifies the effort. It is also true to say that the world has moved on since the UK implementation and many of the tools and solutions that enable banks to fully take advantage of a real-time service have matured and the challenges are no longer as complex as they once were.
The proposition here is that other countries can learn from the UK and Singapore experiences and make progress faster while mitigating the risk and cost of a strategic technology renewal that affects everyone in an economy.
Learning from the experience of others does not place a ceiling on what can be achieved, but a solid floor on which to build, improve and advance. In this respect every new development begins where the last deployment finished and the international payment community can progress in giant steps.