Instantaneous transactions are the goal, so what's the issue?
Technology innovation is a fickle thing.
It’s naturally disruptive nature is heralding in new systems and products, services and designs, all with ease, efficiency and experience in mind. On the flipside, this is forcing businesses to keep up with the expectations of the customer - a notorious challenge.
In banking, this duality has come to the fore in real-time payments.
In fact, so important is this issue to the industry it represented the very first session of one of the most important financial services event in the calendar, Sibos, hosted this year in Geneva. The Perfect Storm in Payments highlighted how customers are demanding instant experiences more often, requiring response and action from the industry – real-time payments is one such initiative aiming to gratify consumers.
It’s all part of the real-time economy, touted as the next-generation banking for…this generation. Automated, instantaneous transactions are the goal, but the issue lies in the generally slow nature of banks to embrace not only the capabilities on offer, but the technology and infrastructure needed to realise it.
Also imperative to the discussion – and mentioned a great deal during the Swiss meet – is the revised payments directive, or PSD2, adopted earlier this year. The European Parliament’s decision to level the playing field for start-ups in the fintech space has revolutionized the European payment industry, affecting many areas of the market, including: account information service providers; prohibition of card surcharges; and security of online payments.
But this all ties in with the problem of agility: banks’ reform will require it to act faster and more effectively. At present, the picture isn’t rosy, in fact we have a very long way to go: Sibos guests heard that it can still take three to seven days to transfer funds across accounts and settle transactions. Not quite real-time.
The financial services industry needs to address underlying settlement systems and introduce interoperability, maybe between different institutions, even. Closing comments remained optimistic, despite the acknowledgement that there is a lot of work left to do.
But time for a dose of optimism. Real-time, digital payments at the point of sale demands have been met – albeit for low value payments. Shoppers can pay for their goods with a simple swipe of a contactless card or smart phone, and further innovation maybe just around the corner as 39 banks across Europe were reported to be working on instant payment initiatives. There is still some way to go for transfers, but fast consumer experience is gaining traction.
Real-time payments are an exciting response to customers wanting a more efficient and effective relationship with their bank or financial institution. It shows that the industry is listening to consumer feedback and finding cool ways of implementing their suggestions. To sustain this momentum, a more collaborative effort between organizations can help promote knowledge and best practice as the industry works towards a common goal of instantaneous experiences.