This month is the ten-year anniversary of the launch of the Faster Payments Service network in the UK. In May 2008, UK bank account holders transitioned from being restricted by a three-day processing period to complete inter-bank transactions to being to do so almost instantaneously, revolutionising payments and money transfer in the country in the process.
This sea change caused by the introduction of the Faster Payments network was one of the most significant evolutions in payments in the UK for decades, but perhaps the most extraordinary aspect of this monumental innovation is that it quickly stopped being considered remarkable by consumers. Despite the fact that the majority of other markets, including the US, do not currently have access to a fully functioning real-time payments network, in the UK the Faster Payments scheme is a relatively unsung hero in banking.
Increasingly today consumers and merchants do not laud wholesale improvements in user experience and functionalities of payments; expectations are such that they demand them. Convenience, security, and speed are all scrutinised more carefully by those making and receiving payments; the origins of this shift in attitude can be traced back to the introduction of Faster Payments.
PSPs and Faster Payments: Working in harmony
In addition to the development of the Faster Payments network itself, the market has seen PSPs develop evolutionary products for the benefit of both merchants and consumers that are dependent on the Faster Payments Network to function. This trend will only continue with the rolling out of Open Banking during the next decade.
An example of a payment product that taps into the benefits of RTP, and in doing so satisfies today’s consumer and merchant expectations, is Skrill’s Rapid Transfer. Using this product, customers can pay merchants for goods or services via a direct bank transfer, which is processed instantly. And as the payments landscape develops in the new post-PSD2 world, the number of services offered by third party providers (TPPs) will multiply. Competition will increase and so services will advance, for the benefit and in line with the expectation of consumers.
Evidently trust in new non-bank PSPs will have to be established before we see mass adoption of more of these types of TPP services in the market, but with consumer appetite for new services being so strong, coupled with an acknowledgement from the regulator and providers that security is paramount, take-up of new non-bank transaction facilities will not be a slow process.
Ten more years of RTP: Where are we heading next?
It will certainly be interesting to watch how real-time payments take shape the next ten years, and its impact on businesses and consumers globally. If the pace of change we’ve seen since Faster Payments launched ten years ago is anything to go by, we’ll continue to see some significant progression.
Perhaps the most immediate and predictable trend of real-time payments will be its continued geographical spread. The success of Faster Payments in the UK has been such that there is a desire to replicate it globally, both nationally and cross-border. The SEPA Instant Credit Transfer scheme launched in November 2017, redefining the RTP landscape in Europe, and perhaps more monumentally momentum is gathering for the US to introduce its instant payments network in 2018. Early adopters have already begun rolling out and testing launches (US Bank and BNY Mellon completed the first transactions in November 2017), with general industry adoption expecting to happen throughout 2018 and into Q1 2019.
The new system is the first new payment network to launch in the US since the automated clearing house went live in 1974 and could prove to be a turning point for a region that has traditionally lagged behind when it comes to payments innovation for the benefit of consumers.
At Paysafe we are already working on solutions for merchants in the US that harness the power of Faster Payments, that will be active in the market in the near future. Todd Linden, CEO of Payment Processing, North America, will be discussing what the US faster payments scheme means for consumers, merchants, and PSP on the Paysafe Stories blog next week.
A second development we may see in the UK that has the potential to shape Faster Payments is the acceptance of new members to the network. Already we have seen a digital-only challenger bank be accepted into the scheme and last month the first non-bank PSP joined the network. It is too early to determine whether these developments signal in which direction the next phase of RTP evolution will progress, but they have opened doors to potentially the most seismic shake-up to the system since its launch that we will certainly be monitoring.
The future for Faster Payments in the UK may be unpredictable but one thing is not; the driver and consequence of its evolution will be improved consumer expectations.