In Sibos 2015, on the opening day, Thailand announced that Vocalink will enable Real time Payments on Mobile. There is a big bandwagon of countries now moving into Immediate Payments and harmonization on ISO 20022 formats is in the air everywhere.
Immediate Payments is already a reality and the Fintech industry is looking beyond the obvious - immediate realization of funds for the recipient (beneficiary or merchant as the case may apply).
Some of the key aspects of the Real Time Payments are:
Standards - Adoption of ISO 20022 messaging standard (not necessarily used but good to have as it is data rich)
Architecture - Resilient, Scalable and High Available architecture
Access – Access driven by a centralized Alias Management of some form. Powerful and easy to use payment mechanism - Initiation through different form factors leveraging Alias Management
Business Support – Support an endless list of Overlay services like Bill Payments, Remittance delivery etc.
We believe Immediate Payments is all set to trigger a paradigm shift in the way we know payments today, not because of its inherent nature alone but because it fuels innovation for every player in the payments value chain. Given below is a short list of potential shake ups we might see the way payments business is done:
Potential disintermediation of Card Schemes for physical merchant payments by lower cost and guaranteed and immediate settlements. Card Schemes are reacting to this already.
Creating an open loop wallet with Immediate Payments Scheme as interchange / clearing and settlement mechanism
Block chain technology bringing in near real time cross border money transfers disrupting the traditional correspondent banking model
Lot of implications on back office and customer support models including exception handling and fraudulent transactions.
Security becomes even more important in light of the faster settlement mechanisms.
Banks and Financial Institutions should leverage the concept of Immediate Payments and think on the “Customer First” paradigm amongst all other aspects to be counted in the market.
About the author
Rajesh Subramanian leads the Payments Practice for Tech Mahindra with focus on latest trends in Payments Processing, Cash Management and Digital Innovation in Wholesale and Retail Payments.