Real-time, real opportunity: overhauling real-time payments
Ross Jones, Product Line Manager, Global Payments, Treasury Services, BNY Mellon discusses the fast-moving real-time payments environment and how technology is fuelling an overhaul of the way in which we transact.
Real-time payments initiatives are gaining traction, driven by new technological developments, customer expectations and evolving regulatory requirements. A growing number of countries in regions across the globe have implemented, or are planning to implement, their own systems to facilitate instant domestic transactions. 2017 is set to be a particularly eventful year in the realm of real-time payment developments, with Australia’s New Payments Platform (NPP) launching in the second half of the year, and the US Real-Time Payment (RTP) initiative due to be introduced in May.
The Clearing House’s (TCH) real-time payments initiative will be the first significant change to core US payment platforms since the arrival of the Automated Clearing House (ACH) in the 1970s. With the global payments landscape evolving faster than ever before, RTP will leverage new technology capabilities in order to cater to today’s fast-paced digital lifestyles, providing consumers and businesses with instant payments, 24/7/365 service and reduced costs.
Furthermore, both the payment originator and the beneficiary will have the benefit of immediate confirmation of payment and notification of receipt (as opposed to receiving an end-of-day file, for instance). This enhanced transparency and insight into reliable, up-to-the-minute liquidity positions will be of huge benefit in terms of cash management and reconciliation. In fact, the introduction of real-time payments could alter the very culture of US payments, creating a shift in terms of how and when consumers and businesses choose to transact. The restriction of business hours and cut-off times will become a thing of the past, while the speed of payments will be particularly useful for urgent or ‘last-minute’ payments albeit with an initial limit of $25,000. Real-time payments can also speed up value chains – quicker receipt of payments means goods can be despatched sooner.
The next step
While such systems are transforming domestic payments, the need to apply similar capabilities to cross-border payments is of equal importance; albeit considerably more challenging. Change of such scale requires standardisation and interoperability, and although the domestic infrastructures introduced by individual countries may share common characteristics – for example, round-the-clock operation and instant clearing confirmation – the intricacies of clearing and settlement vary from system to system. This fragmentation is therefore an obstacle to applying instant capabilities to international payments.