To use a straightforward example, isn’t it strange that, in a tech-mad world, we still need to employ advanced mental arithmetic skills to work out how much money we have in our bank accounts.
At first glance, we might see we have £1,100 in the checking account, but looked at another way, our funds remaining are £2,500. That’s because we have an overdraft facility of £1,500. But hold on, then where is the extra hundred we ought to have when we add overdraft to current funds? That’s right, we bought a pair of jeans last week and it’s obviously not showing up just yet. And anyway, it’s all academic because tomorrow it’s the first day of the month and we have £1,600 of direct debits going out. Do we have the funds to cope with that?
And so on. This is one of literally hundreds of examples as to why the world is crying out for faster payments systems and processors. Take businesses, for example. Add 3 or 4 zeros onto the calculations in the previous paragraph, and multiply the risk and complexity by 10, and you have the kind of calculations that many businesses must cope with on a daily basis, just to mitigate the risk of bankruptcy, a liquidity crisis, and a scenario in which employees livelihoods are put at risk and customer relationships in jeopardy at every turn.
That is why I’d like to draw your attention to the introductory paragraph of advanced payments solutions provider FIS’ 5th annual Flavors of Fast report.
“Real-time payments are about more than just speed. They create frictionless commerce and enable a financial world in which the entire payment process occurs seamlessly and immediately. An open payments system can also provide opportunities for financial institutions to help commercial and retail customers better understand and manage their financial picture with greater ease. By developing innovative overlay services on top of the faster payment rails, whether through open banking initiatives or new ways of initiating payments through QR code scanning, all parties in the value chain benefit.”
The world of payments is changing, and changing fast, and FIS’ report helps track its progress. Whether it be through Open APIs, which help third party service providers access real-time information from major banks, or major banks use third party service providers to augment their service offerings, depending on which angle you look at it from, or the implications for P2P transactions, or B2B, B2C, or financial messaging services like SWIFT or ISO20022, real-time instant payments open the doors to greater efficiency, cheaper services, and mass data analytics leading to customer personalisation.
The report focuses in detail on how new payment rails infrastructures, from QR codes, to legislation brought about by the likes of the PSD2 regulation in Europe, are creating new possibilities not only in the financial world, but across ecommerce, traditional retail, FX, and just about any product or service you can think of.
The report discusses the impact that China and India are having on global trends, with their advanced, digitalized and mobile micro-payments systems, as well as Silicon Valley services like Facebook, WhatsApp, and Apple Pay.
In reality, faster payments services have been around since the 1970’s, typified by the likes of SWIFT, but FIS has created a scoring system that ranks how effectively countries are using such services, and their modern day rivals, and the results are surprising.
India is the only country awarded a 5 out of 5. Its Immediate Payment Service which processes 2.8 million transactions per day is state of the art, and is one of the payments worlds fastest growing services. China, awarded 4, is “leading the world” say FIS, but it is Australia that receives a 4+, alongside Singapore. The strength of these two States emphasises the pre-eminent position of Asia when it comes to innovation in the payments space, a hugely impactful subsector of fintech.
The UK, Nordics, and Switzerland score 4 or 4+ in Europe, while despite being awarded a 4, the US is reportedly struggling as a result of the lack of a clear mandate as to how, and by whom, faster payments services should be implemented.
In total, FIS has identified 40 countries who have implemented faster payments services. Can they be made interoperable, and if so by whom? Can they be applied to all industries, and used by governments to help improve the financial situations of their countries citizens? Can we find greater efficiencies that will lead to better overseas money transfer services and the ability to move money around the world nearly instantaneously, and without paying excess fees and skewed exchange rates.
And will I ever be able to discover how much money I really have just by glancing at my Apple Watch, iPhone or accessing my mobile wallet?
FIS’ report provides plenty of indications that the holy grail of effective and instant global money management for time-poor citizens and businesses is getting tantalisingly closer – of that there is no doubt. If you aren’t already, watch this space.
This content is sourced and brought to you by The Money Cloud – comparing the best rates for sending money overseas offered by hand-picked, regulated brokers and money transfer agencies.