As the New Payments Platform (NPP) gradually comes together in Australia, we take a peek into a market in which immediate payments are already thriving. Here we chat with Craig Tillotson, Chief Executive of Faster Payments Scheme Limited, a British facilitator that is leading the way in terms of real-time electronic payments. Faster Payments has just surpassed five billion payments, and is growing 20 per cent year on year.
What did Faster Payments offer that banks did not?
The Faster Payments service allows customers to make real-time electronic payments, 24 hours a day, seven days a week. Prior to the introduction of Faster Payments, most electronic payments could take several days to clear.
Faster Payments is a non-profit making organisation, which runs the service on behalf of our 10 members, which includes all of the UK’s largest banks. Banks, building societies and other payment service providers are able to access the central Faster Payments infrastructure to offer this world-leading service to their customers. We are not a competitor to the banks, but rather a facilitator.
What drove the development of Faster Payments?
The genesis of the Faster Payments service in the UK can be traced back to the year 2000, when the Cruickshank Report, a government-commissioned report into competition in UK banking, was published. A recommendation to improve the speed of electronic and internet payments led to a Payments Systems Task Force being set up by the Office of Fair Trading, to lead the collaborative innovation that ultimately led to the creation of Faster Payments.
The UK’s largest banks were involved from the outset. Faster Payments was introduced in May 2008 and has been growing strongly ever since. At the time, no-one else in the world offered a real-time, 24/7 service, so the UK banks were at the forefront of innovation.
How many payments have been made via this system?
It is six years since Faster Payments was launched. The service has been a great success. An annualised growth of 20 per cent means we are now processing in excess of 100 million payments each month. In the last week we processed our five billionth transaction.
What are the benefits of Faster Payments for merchants?
Thanks to Faster Payments, a UK high-street retailer is able to reduce the need to hold stock, as it is able to make real-time payments to suppliers for goods. In practice this can mean instead of making 12 payments each year to buy new stock each month, the retailer now initiates hundreds of Faster Payments each year, one for each order. The net result for the retailer is elimination of stock and working capital tied up in stock, as well as higher customer satisfaction. The customer benefits, too, with fast and efficient customer service and even the possibility of lower prices being passed on.
What were the main challenges involved in putting such a system in place?
Collaborative innovation on the scale of a development such as Faster Payments requires a concerted, industry-wide effort with backing from regulators and government. For any industry-wide innovation, a key challenge is getting all of the players to the start line at the same time, and clear communication to customers of how the new service works. The next challenge is ensuring a level playing field for any firm that wants to offer immediate or real-time payments. Faster Payments is working to address this through the introduction of a competitive market in technology vendor-operated aggregation services.
What can Australia learn from your experience?
We have met with representatives from the Reserve Bank of Australia (RBA), the NPP program and individuals from a number of Australian banks are keen to learn how we have made Faster Payments such an important part of banking in the UK. The UK’s Payment Systems Regulator has recognised the need for broader access and it is a call that is fully supported by the Faster Payments Scheme. We have identified the different challenges we believe payment service providers face, and developed a new access model to address them. More detail is available here.
We believe Faster Payments will be an integral part of keeping the UK at the centre of the digital and financial technology revolution. There is nothing to suggest Australia wouldn’t benefit from a similar halo effect following the introduction of a comparable, real-time payment service.
How do you see new payment types, such as e-wallets or Apple Pay, impacting payments?
We live in an increasingly digital world where ‘now’ rather than ‘soon’ is the new norm. Furthermore, consumer expectation has changed dramatically in the seven years since Faster Payments became available, thanks in no small part to smartphones.
The proliferation of new payment propositions such as Paym (a new overlay service for Faster Payments that lets consumers pay each other using just their mobile number) and other digital and mobile payment services will increasingly require a ubiquitous real-time experience for customers. This means Faster Payments is well placed to continue growing – irrespective of the manner in which access to the Faster Payments infrastructure is provided.