The Global Opportunity for Real-Time Payment Systems

by Tristan Hugo-Webb 0

In late September 2013, Cleveland FederalReserve President Sandra Pianalto commented on the prospect ofreal-time payment systems in the U.S. saying, “The pursuit ofnear-real-time payments in the United States is not a given. We arein the early stages of thinking about such a solution for thiscountry. There are many challenges to consider. Overall, I see moreopportunities than challenges. . . . I am in favor of seizing thoseopportunities.”

To date, only a few countries, like South Africa, Nigeria, and theUnited Kingdom, have systems capable of making these payments.However, the U.S. is just one country among many that isconsidering implementing a real-time payment system as consumer andbusiness demands for real-time or near real-time payments increaseand as existing systems demonstrate their value.

Faster Payments in the U.K. is a real-time payment system that hasenjoyed great success and subsequently has raised interest inreplicating the system elsewhere in the world. Since its launch in2008, Faster Payments’ overall volume of transactions has grownrobustly. The compound annual growth rate (CAGR) was 26.46 percentbetween Q1 2009 and Q3 2013 according to statistics provided by theU.K. Payments Council. The value of transactions handled over thesystem has increased similarly. According to the U.K. PaymentsCouncil, the average value of a Faster Payment transaction in thesecond quarter of 2013 was £795 (US$1,302), which was £21 ($34)more than a year prior.

The benefits of real-time payment systems are not isolated tofinancial institutions and their customers. Around the world, thesesystems have benefited a wide range of industry participantsincluding small businesses, large firms, government agencies, andthird-party payment service providers. Basic transactions are notthe only potential function of these systems. VocaLink, theoperator of the U.K.’s Faster Payments system, has ensured that thesystem remains cutting edge by promising new services like Zapp, amobile payment solution for consumers that runs on the FasterPayments system, which is due to be launched in 2014 and has a goalof 20 million users by2017.

Despite the high cost of implementing real-time payment systems,they have great promise and are an effective means of meetingincreasing consumer and business demands for greater speed andconvenience with payments. Whether a system is implemented in theU.S. or not, real-time payment systems have a globalopportunity.

For more information on real-time payment systems and theirinternational potential as well as a more detailed look at theU.K.’s Faster Payments system, see Mercator Advisory Group’sresearch report, Real-Time Payment Systems: A Global Opportunity,released in December 2013.

Follow Tristan on Twitter @THugoWebb.