The challenges for instant payments
One size does not fit all payment systems: fragmentation and different implementation approaches across markets threaten the value of real-time clearing and settlement.
Financial institutions and infrastructures need standardisation, interoperability and a cost-effective, flexible interface that boosts technology re-use.
Europe is currently a patchwork of payment infrastructures that have grown up over time, largely to fulfil domestic payment habits, so the success of instant payments in Europe demands interoperability.
As payments market infrastructures (PMIs) build the platforms to make instant payment possible, banks are being forced to restructure their business models. They not only have to provide payments around the clock to their existing domestic customers, but to work out how to inter-operate with multiple payments schemes around the world, combat the increased risk of fraud and develop new services to realise value for their shareholders.
To support banks in their move to providing an instant payments system, best practice design principles are beginning to emerge which include:
- Providing the rails so that banks can offer instant payments 24/7
- Ensuring that interbank settlement risk is effectively managed
- Delivering convenience and confidence to end users
- Enabling simple integration of value-added services
- Operating on common industry standards – ISO 20022 messaging
- Using lean and open architecture to minimise set up and operating costs and reduce time to market
- Offering easy access to all participants to achieve critical mass.
Building a new real-time retail capability that meets these requirements is challenging enough. But the complexity is significantly higher when there is legacy infrastructure, and the design, implementation and deployment of these requirements has to be made taking into account existing system or operational constraints. With this in mind, SWIFT has designed a set of components that can be used as part of the design of any real-time payments system.
In July 2015,SWIFT also established the guidelines for the next generation of Real-Time Retail Payments Systems (RT-RPS). Download the info paper below: