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The Need for Speed
Henry adds. But, they do get excited about the idea of a new payments system that shares more relevant data with each transaction to help them reconcile incoming and outgoing payments.
“There’s an age-old problem of
‘I know I got paid, but I’m not sure what for,’” Henry continues. “Many of the systems we’re using in the U.S. are decades old and don’t pass a lot of data with transac- tions.” As banks and organizations
leSSOnS frOm VOcalInk
like TCH—BofAML is one of 24 owner banks—look to build a new system, the data that can accompany transactions will be a key consideration.
Same Old Story
The main reason the U.S. has lagged behind the rest of the world in regard to real-time payments
is one reason it’s the last major market to migrate to EMV—its thousands of financial institu-
tions. Such a large number
of FIs means that the cost and time to integrate with a new system are significant.
“The U.S. presents a number of challenges,” McQuerry says. “The primary issue is we have so many financial institutions. Mexico had faster payments10 years ago, but the country had maybe 25 banks when they started,” she adds. “Now they have just over 100. It’s a much different scale to figure out how to make this happen in the U.S.”
Faster Payments in the U.K. came about in response to a regulatory mandate to speed up bank-to-bank transfers, which typically took three days to settle,
and reduce float. The service, which runs on the Voca-
Faster Payments didn’t have universal reach until 2012. That’s when volume really took off.
2. a real-time system is more expensive and more difficult to maintain. You can’t spend the weekend fixing things. You have to do things on the fly. To keep the system running 24/7/365, VocaLink uses an active/active system with two switches. If an update needs to be made, one switch is turned off and updated, while the other one continues to run.
3. testing is time-consuming and crucial. Testing is quite onerous to make sure everything is working as it should across the participating banks. If one bank goes offline for an hour, that’s immediately visible to ev- eryone. It’s important to work out the bugs in advance.
4. Starting today, use ISO 20022. When Faster Pay- ments was in development the ISO 20022 technical standard was not nearly as common as it is now, so the banks decided to build the system around the debit card standard ISO 8583. Now the de facto standard for real-time payments in many markets is ISO 20022, which may hold the key to global interoperability. VocaLink is working with industry groups on standard- izing transaction messages to enable domestic real-time systems to connect with each other.
chris dunne
Link platform, began in 2008. In 2014, more than 1 billion payments were made via Faster Payments, with a total value of more than £1.2 trillion (US$1.88 trillion). Customers of 10 member banks, which represent 90 percent of British current accounts, can make payments to one another using the service. Faster Payments is
also the backbone of the mobile P2P service in the U.K. Since Paym launched in April 2014, users have sent more than 1.25 million payments worth £70 million (US$109.5 million). Chris Dunne, director of market development and industry relations at VocaLink, has been at the company since the beginning. He spoke with Paybefore about key lessons for others looking
to adopt a real-time system.
1. Ubiquity drives adoption. If you can’t pay the per- son you want to, that really impedes the take-up.
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