Real-time payments are more than just speed
February 4, 2021
Real-time payments (RTP) are electronic payment solutions available 24/7, 365. RTP results in immediate or close to immediate interbank clearing of a transaction and crediting of a a payee’s account.
Real-time payments are fast, touchless and also facilitate better data and increased certainty of payment.
Better data
Real time payments systems allow for greater development of value-added services to be built within or on top of the infrastructure. In Australia, the real-time payments system is known as the New Payments Platform (NPP).
As the payments sector is evolving exponentially, data is becoming increasingly important. Real-time reporting and automatic reconciliation also facilitate more effective transfers.
The way payments data is collected, used and shared presents opportunities for financial institutions, payment service providers and their customers. Enhanced data has the potential to create new payments processes, business models and to also improve access for new entrants into the payments sector.
Enhanced data can also strengthen the detection of financial crime and strengthen consumer protections in financial services.
Payments data can be a mix of financial, transactional, behavioural and other types of data.
An enhanced data capability can enable recipients to see information relating to the purpose of the payment, tax and benefit information, a personalised message or underlying business transaction details.
One of the key drivers for instant payments and use of the ISO 20022 standard is the extended data carrying capabilities opened up by its implementation.
ISO 20022 allows for as much data to be included in a payment message. It also allows for the transmission of images, invoices and more.
Challenges
• Standardisation of data in the payments ecosystem. RTP systems are often built alongside existing legacy infrastructure. These rarely interoperate payments data is difficult to share across payment systems. Therefore, it can potentially be a challenge for banks to formulate a consistent customer data proposition across multiple payment systems
• Lack of market practice on data expectations e.g. how to handle unstructured data, storage duration, fraud and crime screening.
• What type of data should be permitted in payments systems. Accounting for any data that needs to be de/re-coupled e.g. non-payment related data
• Utilisation and monetisation. Managing data once it’s been collected
• Data governance. How the data is collected and by whom
International standards groups such as the ISO 20022 Real Time Payments Group have published best practice guidelines on how much data should be passed through a real-time payments system. But further market practice must be developed within each jurisdiction.
Increased payment security
Increasingly, markets are putting in place various solutions to ensure certainty of payment:
- In the UK, the payments industry is creating a Confirmation of Payee (CoP) service. This gives end users of payment systems, greater assurance that they are actually sending their payments to the intended recipient. The CoP is akin to an ‘account name checking service’ that can help avoid payments being misdirected due to manual errors.
- It can also address certain types of Authorised Push Payment (APP) fraud, by introducing another hurdle for fraudsters. The CoP gives effective warnings to customers about the risks of sending funds to an account where the Payee names do not match.
- In the US, The Clearing House RTP system incorporates ‘Request for Information’ messaging. This allows for real-time information exchange between the biller and payer, similar to text messages.
- On SWIFT’s ‘Global Payment Initiative’ (GPI) platform, end-to-end payments tracking has been introduced. SWIFT GPI banks are able to instantly check the status of the payments sent, in progress and received alongside many different payment options.
Customer’s expect greater transparency when they send a payment, and real-time payments provide better data and better security. Real-time payments help businesses anywhere, anytime.