In a world where corporate transactions take place around the clock, payment delays are no longer acceptable. How should banks and PSPs prepare for the New Access Model?
Since its introduction to the UK in 2008, the Faster Payments Service (FPS) has gained huge momentum.Customers are already seeing the benefits in reducing payment processing times, from three working days using the BACS system to as little as a couple of minutes.
Although the service has significantly reduced payment times, today’s digital savvy and ever-demanding customers expect ubiquitous access toa real-time payment service,regardless of who they bank with – something, which is a challenge for a number of smaller banks and non-traditional payment service providers (PSPs) in the UK.That’s where the New Access Model comes into play, by offering a new way to connect to the service and extending its reach to a number of new financial institutions in this space.
Over the last seven years, the FPS has handled over four billion payments and is currently responsible for processing around £100 millionworth of payments per month. And whilethese figures arealready an achievement, the market has been constrained by the fact that only 11 members connect to FPS directly.With only 2 of 11 participants offering Direct Corporate Access (DCA) to faster payments, corporates wishing to submit payments files by FPS are limited in their choice of banking.
In addition to the direct access members, 400 smaller banks and non-traditional PSPsaccess the platform indirectly through sponsor banks. The cost of being a direct member is unduly high for many of these players, who are also increasingly demanding a real-time 24/7 service. To deal with these issues, the Faster Payments Scheme is launching its New Access Model in December 2015, offering a new way to connect to the service.
The initiativegoes beyond the traditional models of direct and indirect access, by connecting to existing systems via a technical aggregation service.This will present a software accreditation programme aimed at the fintechvendor community, who in turn can facilitate direct connectivity to the FPS for a number of new challengers and PSPs. When complete, this will create a more level playing field for any bank or PSP that wishes to offer immediate real-time payments, where it can use an accredited vendor to provide the technical connectivity to access the scheme. Crucially, the new model means that users that previously had to use the bank-sponsored route can move fromnear real-time and same day payments to truly immediate, real-time payments.
Once the New Access Model is introduced,thosewho have previously accessed FPSvia a bank-sponsored indirect model willhave three options:
- Build anin-house solution.This could be both costly and time consuming,depending on the technical requirements and the nature of running 24/7 back-officeplatforms and operations that are required to achieve real-time payments.
- Outsource to an accredited bureau.With bureaus charging for each individual transaction, this method could also be expensive depending on the bank’s requirementsand isn’t a sustainable option in the long term.
- Utilise a hybrid model. Banks and PSPs could use readymade technical aggregation software that is accredited as part of the New Access Model. With most vendors offering aggregation services on a cost effective subscription basis,and some vendors even choosing to abandon additional charges for transactions, the hybrid model could result in a very quickreturn on investment for any new players entering the market.
Whichever route they opt for, time is running out for the banks and PSPs to make their choice. It’s an exciting time for the payments sector: come December, the UK will enter the next phase in the ongoing payments revolution.
Simeon Parker, Vice President, Alliances – AccessPay