Can Real-Time Payments Really Go Global?

While we are witnessing a global race for instant payments, this momentum isn’t likely to result in a global real-time payments solution anytime soon.

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With three major instant-payment schemes launched within a month of each other, 2018 is already shaping up to be the year when real-time payments replace archaic, batch-based processes that fail to meet modern needs.

The New Payments Platform (NPP) recently went live in Australia, enabling customers of ANZ, Commonwealth Bank, National Australia Bank and Westpac to send money via a service called PayID. It follows the Real-Time Payments (RTP) system in the US and the pan-European SEPA Instant Credit Transfer scheme.

A recent report by software vendor FIS identified 25 active real-time payment programs around the world and a further 11 programs under development.

“Over the next five years we can expect greater adoption of immediate-payment services as consumers increasingly realize the benefits of frictionless payment options that allow additional value-added services to be provided to them and the banking ecosystem,” states Matt Williamson, global head, Payments and Cash Management at software vendor Finastra. “These services might include loans or FX, cross-border payments and even better offerings from utility providers as the bank aggregates data from payments made through immediate-payment platforms.”

While we are witnessing a global race for instant payments, this momentum isn’t likely to result in a global real-time payments solution anytime soon. Unlike domestic payments and the EU scheme—which only deals with one currency and regulator—there are myriad considerations for cross-border payments that carry increased information requirements and are more complex to process.

One of the reasons it has taken a decade longer for the US to launch real-time payments than the UK, for example, boils down to its vast size and increased number of regulators.

Before a global real-time payments system can exist, there needs to be interoperability, a clear direction and a concerted global effort to solve settlement, clearing, compliance and regulatory issues.

According to Harold Bossé, global head of Product and Innovation at payments provider Earthport, a consequence of the Second Payment Services Directive’s open account access is that real-time payments may be offered by alternative providers, potentially bypassing the banks.

Could increased competition spur a global system? While no silver bullet, the adoption of the widely accepted and agreed-upon ISO 20022 XML standard is viewed as a step toward a global instant-payment standard. It remains to be seen when this step becomes a giant leap forward.