Immediate Payments are catching on across the globe and being implemented in country after country. Mexico, the United Kingdom, Singapore, Sweden, and Australia, among others, have led the way in adopting Immediate Payments schemes. Fundtech expects at least 20 more countries to institute such schemes over the next ten years and 50 more countries over the next two decades. There is a good chance that the United States will be among the next to join the Immediate Payments club sooner rather than later (even though the official date is still 2023). Looking back to those countries that have already implemented Immediate Payments schemes provides insight into the value they can provide, and important lessons regarding best practices for success. There are numerous benefits that Immediate Payments brings customers. For instance, customers won’t need to obtain a cashier’s check for significant purchases, like a car. And commerce moves further into cyberspace, crime is significantly reduced. Less cash carrying means less opportunistic robbery and crime. Sweden, in particular, has seen less cash use as reducing the overall level of violent crime in society. Additionally, increased digital usage greatly reduces the most significant fraud cases: tax and check fraud. And reduction in fraud and in exception management brings immediate cost reductions to banks.</p> In the United States, credit cards, the most popular mechanism of payments today, are notoriously insecure. The move to implement EMV security is the most expensive upgrade to payment infrastructure in U.S. history. For the industry, the cost to replace the nearly 500 million credit cards in circulation is over $1 billion, and for merchants, accepting credit card payments is costly. Immediate Payments, however, are symmetrical; they do not penalize the merchant who is, in essence, paying for customer acquisition. Immediate Payments delivers a lean, efficient model as opposed to today’s complex, customer acquisition-focused system.</p> Mexico’s SPEI, the UK’s Faster Payments Scheme (FPS), Sweden’s Immediate Payments Scheme (BiR) and Singapore’s G3 system all provide good case studies into the industry’s evolution. Learning by example and being prepared are key elements to successful system implementations at banks. Even if a country’s specific Immediate Payments scheme is unknown, banks can look to these models and start aligning their business cases now. This includes:</p> Assessing the business model impact to banks</strong> - The UK’s experience shows us that there is a definite first-mover advantage. Thus, in Singapore, all leading retail banks quickly joined the first implementation wave.</li> Developing cost effective services </strong>- The model will change—rapidly as in Singapore or slowly as in Sweden, and banks need to be flexible. Banks should invest in automation—such as STP improvements and customer self-service—in order to be ready for the future.</li> Evolving to meet real-time requirements </strong>- This should be the case through the entire payments value chain, and could involve stand-in processing should a bank’s system not be capable of 24/7 operation.</li> Focusing on scalability </strong>- As Mexico and the UK show, massive multi-year volume growth should be anticipated.</li> Preparing to implement differentiated services </strong>- Once Immediate Payments basics are clear, it is common to have value-added services to be designed at inception.</li> Conducting staffing analysis </strong>- As Immediate Payments get underway, other payments options are used less frequently and staff adjustments should be anticipated.</li> Considering security measures </strong>- Enhancements should look beyond just today’s needs and account for what is on the horizon.</li> Remember the education element </strong>- Immediate Payments will be an adjustment for consumers. Through proper preparation though, the industry can ease the transition to an immediate, 24 hour operation.</li> </ol>The Immediate Payments revolution is underway and the pace of adoption is accelerating. The future of payments is real-time, and lessons from those that have implemented schemes can benefit those that will follow.</p> Fundtech examines various schemes, lessons learned and provides a strategic response to this paradigm shift in its white paper, Immediate Payments: Innovation is Knocking</a>.</p> </p> Article by Gene Neyer, SVP, FundTech.</em></p>