Insights from Money 20/20
This week the Icon team was at Money 20/20 where we saw a lot of discussion around the new ways in which consumers are interacting with their money, modes of payments and service providers. Increasingly, we are seeing a move towards a much more personalised approach to managing money, whether it’s new apps and services affording users more control over how they send and receive payments, or the development of faster payments networks allowing consumers to make payments exactly when it suits them.
P2P payments are a big service for consumers. It is not being used just for bills but for small services as well: Babysitters, team money etc. P2P payments services allow people to send and request money to and from friends and others by simply using their mobile phone number or email. It is giving people the opportunity to request money in a friendlier way, and makes the whole process much easier, by removing the need to request or send bank details and allowing users to access a centralised network send and receive payments. Companies such as Zelle are building P2P payments network which span far beyond the reach of individual banks. These new services are making P2P payments simpler and quicker, but they also play an important role in reaching those in need with charities now able to disburse funds using individuals mobile phone numbers or email addresses.
As speed becomes a crucial component of consumers’ payments experience, another important conversation is around the new payments rail from The Clearing House (TCH), where there seems to be growing demand for real-time which is a major shift from where banks were thinking as recent as 6 – 9 months ago. In Europe, a number of initiatives already exist, with the example of UK Faster Payments and SCT Inst; while Canada, for example, is in the midst of planning for its own new payments scheme.
So, why build a new payment rail rather than enhance the current rails? In short, Real Time Payments (RTP) demand a new infrastructure because RTP are fundamentally different in architecture, agility and messaging compared with what is provided by current payment infrastructures. The new TCH payments rail will be faster, safer and support richer data content, thereby extending the number of use cases. Also, with the opening up of payments via APIs, partners such as FinTechs could build innovative solutions to help customers’ business, hopefully while generating additional benefits for the Bank as well.
In summary, payments processing is trending towards:
- 24 hours a day, 7 days a week
- Zero cost
- Push payment mechanisms
- Massive scale
- Need for real-time fraud prevention
- Value-add or overlay services built on top
- Adoption of more agile payments technologies bank side
To support this, many banks are adopting API-native, cloud-native, open-source technologies, similar to market disrupters such as Alipay.
We are seeing definite signs that the market is moving towards faster payments services that meet individual needs with customers continuously driving further innovation and improvement. The key for banks to keep up seems to be in building maximum flexibility into their new, and existing, infrastructure though enhancing existing rails with technology solutions designed specifically for RTP processing.