As PSD2 hits Europe and real-time payments systems gain traction globally, the question of infrastructure has perhaps never been higher up the agenda for the industry.
Technology-led disruption to the way we view how to pay and what is expected from a transaction means constant reassessment of the fabric of the payments sector.
Some countries are further on than others – the UK has had Faster Payments for years, while the US has only just started to look at a real-time system. Europe is about to level the playing field for third party payment providers, while access to the market in other regions is a lot harder. But broadly speaking payments are converging along certain lines – real-time, tokens, non-banks etc.
Tim Yudin, Payments UK’s director of design and delivery, says: “Changes in technology, regulation, and consumer preferences mean that the pace of change in the payments sector has never been greater. This makes it the perfect time to assess which future developments can deliver the very best outcomes for consumers, businesses and the public sector.”
So what are the priorities for payments, and what steps are being taken to move things on? Payments UK, Britain’s recently launched trade association that replaced the Payments Council, has put together its four most important areas for improvement.
Access to the payments infrastructure for those who offer payments to customers
This also happens to be the key change for the industry with PSD2, which creates a new form of regulated entity, the third party payment service provider (TPP).
This is payments’ Big Bang. It will fundamentally alter the dynamic for banks and card schemes and mean that any authorised entity can handle a payment from start to finish. Third parties will even have direct access to a consumer’s bank account data to facilitate transactions.
Confirmation of payee before making a payment
Payments UK believes it is vital for the person paying to know they are sending funds to the right account. This taps into the idea that an individual doesn’t set out to ‘make a payment’, they are sending money to a friend or buying dinner, for example. The payment process happens unseen and, for the consumer, that is just how they like it.
Schemes like Paym – where users link an account to their phone number – are interesting. But it’s not the only version of personalised payments – Gmail lets users attach funds to an email with a linked card. Facebook is rolling out its own version of person-to-person payments that lets you send money in messenger. Ultimately the consumer wants to pay a person, not an account number.
More control over outgoing payments for customers
Consumers, from the individual to the government department, want more say over when and how funds are sent out. Outgoing, regular payments have traditionally been pretty restrictive, for example by tying people into making all their direct debits on the 1st of the month. If your salary is weekly or paid in the middle of the month, it’s been hard to align incomings and outgoings. For business paid irregularly it can be particularly challenging.
Given technological advances, it should be much easier to attach more data to a payment. For example, businesses want to be able to attach additional reference information to an electronic payment to improve reconciliation. It would also make bill pay a lot easier for consumers, particularly in cases where a payment is over or under the amount invoiced. This could in turn save money on customer service staff like call centres. More data attached to a payment makes automation easier and more successful.
Until now payments have been thought of as a bank process that the consumer participates in – these four priorities show this is being turned on its head. From now on, payments will be a process led by the consumer – individual person, business, charity, etc – that banks, card schemes and third party payment providers will facilitate.