We live in a real-time, always-on, always-connected world. The industry’s work to move money faster or make payments faster addresses this new normal in our culture, and that isn’t going to change. The question is, how do we make sure the new ways of doing business are safe, efficient, and convenient for consumers and business?
Faster person-to-person (P2P) payments in the United States have been available for a few years but with limited functionality and reach. The early adoption rate of P2P solutions proves that end users want this service. The accelerating growth of these products represents a challenge to financial institutions and their money-movement services. Given the reality of the faster payments momentum, financial institutions will need to rationalize their current payment strategies, assess the impact on their customers, and create a faster payments implementation timeline. As faster payments adoption accelerates, the timeline for financial institutions to develop a faster payments solution is quickly closing.
For the end user, the transaction should be a very simple, seamless experience that meets expectations.
To accomplish a successful real-time payments system in the United States, financial institutions are faced with several challenges: ubiquity and interoperability; creating value for the end user; and ensuring a safe, secure, and transparent payment ecosystem.
Ubiquity and Interoperability
The financial services industry’s stakeholders will need to participate and collaborate in the creation of the enhanced faster payments ecosystem and cooperate in developing and implementing new standards and services. Areas of focus include: shared directory access, messaging standards, settlement across multiple solution providers, and clear and consistent rules with effective processes for both the successful and disputed transaction.
Industry collaboration should develop minimum security requirements and effective rules and standards to provide a safe, secure environment for all stakeholders.
For the end user, the transaction should be a very simple, seamless experience that meets expectations. The end user should be able to send to anyone, anywhere, and not worry about network interoperability.
Creating Value for the End User
Although some end users are finding value in many of today’s faster payments solutions, most activity is between consumers as P2P transactions. Much work remains to be done to come up with solutions for consumer-to-business, business-to-consumer, and business-to-business use cases and create value for all end users. Consumer and commercial end users are demanding more, giving the financial industry the opportunity to develop innovative products.
The end user wants these key attributes in a faster payments ecosystem:
- Easy to sign up, easy to use, easy to understand: Registration, initiation, and messaging should be user friendly, intuitive, and clear.
- Timely payment notification: Both sending and receiving message notifications should occur within seconds of the payment initiation.
- Transparency of process: Provide clarity around rules, usage, receiver eligibility, and transaction fees.
- Faster access to funds: The expectation is that funds will be available within seconds of payment initiation.
- Finality of payment: Good, usable funds will not be reversed.
- Enriched data: For many use cases, linking transaction information or remittance information is desirable.
Safe and Secure
As financial institutions engage in faster payments, safety, security, and risk mitigation are required for success. As published in “Faster Payments Task Force: Call to Action,” “Effective processes, practices, and controls within and across solutions are integral to minimizing and mitigating fraudulent and erroneous transactions.” All faster payments industry stakeholders have a role to play in the secure initiation and processing of a transaction. The items on the following list must be safe and secure:
- End user’s device
- Financial institution’s faster payments application
- Solution provider’s network
- Receiver’s financial institution
Industry collaboration should develop minimum security requirements and effective rules and standards to provide a secure environment for all stakeholders.
Conclusion: The Road to 2020
To successfully implement a ubiquitous faster payments system in the United States, significant activities must take place now and through 2018.
Financial institutions must listen to their customers, develop a faster payments strategy, implement a solution, develop product education and service, and provide a secure ecosystem. Industry stakeholders need to collaborate on interoperability, safety, and security, and provide a seamless transaction to the end user. A faster payments infrastructure is highly complex, but from the end user’s perspective … it should just work.
