by Shirish Wadivkar, Managing Director, Head, Payables, Receivables & Flow FX, Transaction Banking, Standard Chartered Bank
One of the features of our digital lives today is that we live them in ‘real time’. From downloading media content to booking holidays, breaking news or making video calls to friends and family, our digital experience is instantaneous. The next step in the development of an efficient digital economy, and to extend the real time experience to businesses and the wider financial supply chain, is to accelerate the payments process that underpins consumer, business and government transactions. A crucial means of addressing this is the development of immediate, or instant payment schemes. Already mainstream in some countries, instant payments will play an increasingly important role in facilitating international commerce and supporting the business models of the future.
Taking root in domestic markets
The concept of ‘real time’ or immediate payments is not new. Japan’s Zengin scheme has been in operation for more than 40 years, while Faster Payments and FAST are now well-established in countries such as UK and Singapore respectively, and a number of others. According to SWIFT’s recent white paper, The Global Adoption of Real-time Retail Payments Systems (RT-RPS), immediate payment schemes are live in 18 countries, 12 are planned or in development, and a further 17 are exploring ways to introduce instant payments. In Cap Gemini’s World Payments Report 2016, the introduction of immediate payment systems in many markets is seen as one of the most important regulatory initiatives that will have an impact on the global payments business.
Instant payment schemes have a number of characteristics. They usually operate 24/7, with an end-to-end payment process, from payer to payee, of one minute or less. Payments are confirmed or rejected immediately, allowing payment instructions to be corrected and retransmitted promptly and without loss of value or time. Successful payments are final and irrevocable, so they cannot be recalled after transmission. From an inter-bank perspective, participants periodically settle transactions on a net basis once payments have been made, either intra-day or end-of-day.