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Real-time payment system growth surging worldwide: FIS Report

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Real-time payment system growth surging worldwide: FIS Report
  •  FIS identified 40 live real-time payments programs worldwide as part of its 2018 Flavors of Fast report, up from 25 in 2017 and nearly three times as many as 2014.
  • The report found five payments programs under development, plus another 16 expected to be live in the next 12-18 months.
  • The report’s Faster Payments Innovation Index highlighted real-time payments programs in China and India for their significant growth, and the United States, Australia and parts of Europe for their newly launched schemes.

 Deployments of real-time payment systems are surging worldwide, according to new research from FIS™ (NYSE: FIS), a global leader in financial services technology.

In its fifth annual Flavors of Fast report, FIS identified 40 active real-time payment programs around the world, up from 25 in 2017 and nearly three times as many as the company’s inaugural 2014 study. Further, the report identified five payments programs under development, and another 16 expected to be live in the next 12-18 months – double the number of programs on the radar in 2017.

“We live in a now world. Consumers are demanding more transparency, certainty and immediacy when moving their money, and they won’t settle for incremental innovation,” said Raja Gopalakrishnan, head of Global Payments, FIS. “Financial institutions are responding in growing numbers – modernising their payment infrastructures to provide real-time payment capabilities that demonstrate their value to customers.”

Overlay Services

The FIS research found that overlay services – chat, retail apps, instant loans and more – and open APIs (application program interfaces) provide innovations that encourage consumers and businesses to use real-time payments.

A number of mechanisms have already emerged in the UK that enable consumers to pay merchants for goods and services via a direct real-time bank transfer, along with use cases that extend beyond payments. For example, one initiative marketed as #YayDelay uses an algorithm to monitor real-time train delays and offer frustrated commuters with real-time promotions for a free (sponsored) gin and tonic.

“The growth of real-time payments programs around the world speaks to consumer demand and the rapid innovation that exists today,” said Gareth Lodge, senior analyst, Celent.  “Real time payments is a competitive differentiator for the bank that gets it right.”

“The wholesale reinvention of UK Faster Payments promises to deliver strong growth beyond the financial sector as many diverse industry sectors will benefit from a more open banking environment coupled with real-time payments.” Said Andrew Hewitt, senior payment solutions consultant, FIS Global.

“Overlay services will be a true game changer in this context, as consumers quickly become accustomed to the kind of user experiences for which instant payments are essential.  However, banks still need to ensure that there is resilience in in the system to ensure that the payment infrastructure runs smoothly,” Hewitt added.

Innovation Index

The 2018 Flavors of Fast report highlighted three particularly innovative real-time payments programs as part of its “Faster Payments Innovation Index.” The index, which rated programs on a scale of 1-5 (5 being highest), measured the comprehensiveness of real-time payments projects and how well they meet the needs of consumers and corporate customers.

  • India’s Immediate Payment Service (IMPS) took home the report’s only 5 rating for the second year in a row. The fastest growing immediate payment system in the world, IMPS daily transaction volume grew from about two million per day in 2017 to approximately 2.8 million per day this year. The project’s high rating was based on the system’s standard, published API, and strong participation from third-party vendors.
  • Australia’s New Payments Platform (NPP), which went live in Feb. 2018, received a 4+ rating. NPP enables real-time clearing and settlement 24 hours a day, seven days a week. It provides Australian businesses and consumers with a fast and versatile payments system for making their everyday payments.
  • Singapore received a 4+ rating for its Fast and Secure Transfers (FAST) service. Covering credit transfers, direct debits, bill payment, P2P, merchant payments, mobile and more, FAST allows customers from 20 of Singapore’s participating banks to move funds almost instantly 24 hours a day, seven days a week.
  • The UK’s Faster Payments System launched in 2008 and achieved a 4 rating. Operated by Faster Payments Scheme Ltd. with central bank settlement, it enables real-time, immediate and continuous settlement 24/7. It handles over 7 million transactions and transfers over GBP 4 billion every day.

Twelve other programs received 4+ or 4 ratings in this year’s index. That includes China, which now makes 25.9 million faster payment transfers every day – up from 12 million in 2017; Single Euro Payments Area (SEPA) Instant Credit Transfer Scheme, which expects to have 34 countries live with real-time payments by 2019; and the United States, which saw the launch of its first real-time payments system in late 2017.

The FIS report also calls out Germany and Hong Kong as two countries poised to make significant strides forward in implementation of real-time payments schemes.

To read the full 2018 Flavors of Fast report, including exclusive interviews with executives using real-time payments to benefit corporate treasury departments, and leaders of faster payment initiatives in the United States and Canada, visit fisglobal.com/flavors-of-fast.

Finance

Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds

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Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds 1

Tangerine Bank Ranks Highest in Overall Credit Card Customer Satisfaction for Second Consecutive Year

With 73% of credit card customers in Canada saying COVID-19 has negatively affected them financially and 24% who say they are unable to make monthly credit card payments, overall satisfaction with their primary credit card issuer remains relatively flat year over year at 764 (on a 1,000-point scale), according to the J.D. Power 2020 Canada Credit Card Satisfaction Study,SM released today.

“While credit card issuers in Canada are faring somewhat better than their U.S. counterparts in averting the negative effects of COVID-19 on customer satisfaction, they are not out of the woods,” says John Cabell, director of banking and payments intelligence at J.D. Power. “Credit card companies are falling behind in key areas related to the customer experience, especially in factors linked to financial sensitivity and customer support channels, which are crucial during the pandemic.”

According to the study, despite a one-point increase in overall satisfaction from 2019, credit card issuers have experienced a year-over-year decline in key performance indicators (KPIs) related to interactions with credit card customers, such as showing concern for customer needs; appreciating customer business; problem-free experiences; card activation; and reward redemption. As a result, satisfaction is down 12 points in assisted online experience and down 11 points for call centres.

More than half (55%) of cardholders acknowledge COVID-19 has changed their card usage habits, mainly by spending less. Understanding customers’ needs and addressing their changing priorities can help card issuers to mitigate future decline in satisfaction and elevate loyalty. The study shows that offering free or discounted services in response to COVID-19 are the actions driving a more positive impression of the issuer (39% and 35%, respectively), followed by gestures such as employee support (33%); waiving fees (32%); and community support (32%).

“The pandemic presents an opportunity for issuers to align their card services and benefits with customers’ evolving needs,” Cabell said. “Issuers can increase the perceived value of the card and strengthen loyalty. Offering discounted airline tickets or free airport lounge access is probably not as lucrative these days for cardholders as, for example, it would be to extend the duration of annual fees.”

Following are additional key findings of the 2020 study:

  • Satisfaction declines with household income: With 29% of cardholders earning less during the pandemic, many are looking for relief from their credit card company and are more critical of card issuers. In fact, credit card satisfaction among customers whose household income has declined due to the pandemic is lower than among those whose income remained unchanged. The largest gaps in satisfaction are in rewards (-12 points); benefits and services (-11); communication (-8); and customer interaction (-8).
  • Call centre woes: The pandemic has put a greater strain on call centres, which has negatively affected satisfaction. Caller wait times jumped to more than 12 minutes during the pandemic compared with less than 8 minutes prior to the pandemic. Also, caller satisfaction with the level of courtesy exhibited by call centre representatives declined significantly, which calls out the need for card issuers to restore best practices among their reps and identify better ways to manage customer support.
  • Cardholders are digitally savvy: Nearly two-thirds (64%) of cardholders solely rely on digital channels to manage their primary credit card activities, and those cardholders are more likely to say it is easy to understand information about their account and do business with their issuer than do cardholders who do not rely solely on digital channels. In fact, one of the bright spots in the study is improvements in customer satisfaction with mobile and online interaction of 8 points and 7 points, respectively, from 2019.

Study Rankings

Tangerine Bank ranks highest in overall customer satisfaction with a score of 825, which is 61 points higher than the industry average of 764. American Express (801) ranks second and Canadian Tire (793) ranks third.

The Canada Credit Card Satisfaction Study measures satisfaction of cardholders’ primary credit card issuer. The study measures performance in six factors critical to the customer experience (in alphabetical order): benefits and services; communication; credit card terms; customer interaction; key moments; and rewards. The study includes responses from 6,728 cardholders who used a major credit card in the past three months and was fielded in May-June 2020.

Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds 2

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The impact of the Accounts Payable risk landscape

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The impact of the Accounts Payable risk landscape 3

By David Thorley, Director of Customer Development, FISCAL Technologies

The current economic climate has never been so uncertain. Not since the 2008 financial crash has there been a period where organisations are mindful about how the markets will play out and the effect this will have on economies around the globe. As a result, organisations have become increasingly conscious about the way they spend money, but they have also become more aware about how they save money.

The Accounts Payable (AP) department aims to reduce the amount of money lost in an organisation, making sure all payments are completed on time and are done so correctly, but this is unfortunately not always the case. For example, half of large organisations have duplicated or misdirected a payment to suppliers. This roughly accounts for £3 million being directed to the wrong supplier and resulting in a long and lengthy process in getting this money reclaimed.[1] On top of this, 33% of organisations experience internal fraud every year, with an average loss of half a million.[2]

Therefore, it is clear that in almost every financial department things slip under the radar, but what are some of the risks in the AP department and how can they impact a company?

Lost opportunities reducing income

The capacity for AP resources to work on higher value activities is reduced due to error and query resolution, this can range from anything from chasing up suppliers to looking for a misplaced document. As a result, those within the department are limited to what they can do due to these mundane, repetitive tasks.

Ultimately, lengthy pre or post audit activity reduces the ability of the business to transact, limiting growth and reducing competitiveness, all of which can be avoided if the correct tools are in place.

Financial penalties

In some geographies and industries, errors and adverse findings in statutory audits can lead to financial penalties. These penalties can be anywhere from a few thousand pound to tens of millions. Just last year a leading consultancy was fined almost £20m for poor auditing. Payment Policy infringements can reduce an organisation’s ability to bid for certain types of contracts; critical infrastructures for example, which can have a significant impact on the way an organisation operates.

Restricted cashflow

Payment errors and fraud directly affects the bottom line, which can result in a major impact in the financial reporting. Often financial reporting is skewed resulting in liquidity and profits being reduced. In public sector organisations, these lost funds reduce the capital available for frontline services, which can not only impact the quality of service provided but could also affect the reputation.

Increased processing costs

Invoice exceptions prevent supplier invoices being processed automatically. AP staff spend an inordinate amount of time checking, correcting and managing invoice exceptions, which significantly increases processing costs and time. Given the current climate, this time and money could be put to better use, helping a company grow and expand.

Audit administration

Organisations making overpayments – paying duplicate or incorrect invoices – and fraud are a common problem. Together, these account for between 0.5% and 1.5% of the number of invoices processed, with the cost running into millions in many cases.[3]

As a result, whenever an audit is conducted, the AP team spends time finding and providing information and documents. The more issues that are found, the more time audits take to identify and recover lost cash.

Wasted time

AP teams will frequently need to check supplier records during their normal transaction processing. Large, unmanaged MSF hold numerous duplicates and no-longer-required records that create more payment errors and hours spent investigating and resolving queries.

Reputational damage

Whether a private or non-profit organisation, fraud, errors, compliance breaches or poor financial results all heighten the risk of reputational damage for the organisation generally and the finance director in particular. The reputational damage caused by a high profile incident of fraud can be significant, affecting the business’ credibility and even the share price.

The shockwave from fraud can be more damaging than the financial loss. After a fraud is discovered, considerable time will be taken up investigating every new potential risk of fraud. Whatever the outcome of the investigation, this is an unwelcome distraction for the managers concerned. But, more importantly, the effect on morale and belief in the leadership’s capabilities throughout the organisation – not just the finance team – will be harmed.

Managing these risks

AP assures the protection of cash within an organisation, identifying risks and resolving them. To do this effectively and efficiently it’s imperative AP departments have the correct tools in place to ensure they follow a simple process that allows them to save time and money, helping their organisation both in the short and long term

[1] (The Hackett Group, Key Issues Study 2020)

[2] Source: https://www.qsoftware.com/fraud-prevention-and-detection/erp-fraud-prevention-key-measures/

[3] https://www.cfo.com/payments/2020/03/metric-of-the-month-detect-and-prevent-duplicate-or-erroneous-payments/

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Regulating innovation: the biggest challenge in payments

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Regulating innovation: the biggest challenge in payments 4

By Fady Abdel-Nour, Global Head of M&A and Investments, PayU

Over the course of the last six months, the payments industry has been lauded as one of the most impressive in its agility responding to Covid-19. Consumers and merchants have flocked online and safety has been a significant driver of the move to digital as entire countries discourage the use of cash – but what of financial and data security?

As digital payments adoption accelerates, there’s no time to waste. The pressure is on for governments and regulators to not only ensure security keeps pace with new consumer demand, but to look ahead and clear the road for future innovation.

Acceleration in digital payments

At PayU, we operate in 20 markets across the globe. Since the start of the pandemic, every single one of these markets has seen a seismic shift in consumer habits. In Poland, for example, the number of new onboarded e-shops was three times higher between March and May than in previous months. And in Colombia, e-commerce activity was 282% higher than pre-lockdown levels. Some merchants across our markets saw year-on-year revenue growth of a staggering 500-1000% during April and May.

New merchants are seeing this potential, moving online to increase their customer base and keep economies ticking. But with great innovation comes corresponding regulations. How can regulators keep up?

Innovation vs. regulation: an incompatible duo?

New ideas and technologies are undeniably critical to ensure services keep up with consumer behaviour. However, for this to happen safely, there needs to be collaboration between our industry’s innovators and regulators. Progress requires us to challenge and expand existing boundaries, holding our shared goal in mind.

Important as this concept is, it is by no means revolutionary. The widely pedalled narrative that innovators and regulators are at loggerheads is, quite frankly, outdated. It is not true that innovation in financial services has to disrupt existing systems and infrastructure. We have already seen countless examples of regulators working with the fintech ecosystem to enable and support innovation.

Across the emerging markets that PayU operates in, innovation initiatives are in place to educate entrepreneurs on the regulatory environment in which they operate. In Brazil, the central bank has established a sandbox, the Laboratory of Financial and Technological Innovation, to help fintech startups work more closely with regulators and government and accelerate the development of their ideas. The aim is to create a more efficient financial system, increase financial inclusion and reduce the cost of credit through better regulation. As the country rolls out Open Banking, acknowledging fintech’s potential to drive better socio-economic inclusion is incredibly encouraging.

It would be remiss of me not to mention The Monetary Authority of Singapore (MAS) here. To date, it has excelled in driving positive change by ensuring new players and services can operate within regulatory constraints. If they are unable to do so, the MAS reviews its framework and, where appropriate, adjusts it to safely progress innovation rather than stifle it. In 2019, for example, it issued five new digital bank licenses. Later in the year, it launched the Sandbox Express to help create a faster option for testing innovative financial services in the market.

The open-minded and collaborative approach of these regulatory models marks the future of financial regulation to me. The world is changing quickly and the parameters that keep us secure have to adapt and morph more than ever before. The job is not simple, but it can boost innovation and build a safe and sustainable financial environment, where pioneers are empowered to set the pace for change.

Consumer demand is only one side of the (digital) coin

The other trend creating complexity for regulators is the move towards embedded finance and Big Tech’s involvement in this.

Fady Abdel-Nour

Fady Abdel-Nour

Broadly, embedded finance means that fintech services are expanding beyond the walls of banks and becoming part of other business models rather than a standalone entity. This is a challenge in itself, as regulators will need to be vigilant to ensure that payments, credit and other financial services remain secure and customers are protected.

Across Europe, the US, Latin America, Asia and Africa, governments have also been grappling with how to regulate Big Tech. Facebook, for example, has launched ‘Facebook Financial’ to pursue opportunities in digital payments and e-commerce. Similarly, regulators in Brazil and India have been trying to navigate WhatsApp’s attempts to establish its new payments feature in both markets. These features were suspended by Brazil’s central bank and have been in testing in India for over two years.

The good news is that regulators are paying attention. The pushback we’re seeing is not simply aversion to change, but industry experts exploring how these developments can keep consumer needs at the heart and enhance the current payment ecosystem. New business models and new players are important to keeping us all at the top of our game.

Regulating a changing financial ecosystem

We’re in a truly remarkable age, where the role of regulation is being tested again and again. I believe that regulators have a more vital role to play than ever. Covid-19 has been a powerful catalyst in the financial sector and there is some positive change to be harnessed from the disruption.

If navigated shrewdly, regulators will succeed in capitalising on new trends to retain their core purpose: to ensure the safety and security of the customer and support positive change. The whole industry will need to work together closely to build a regulatory framework that is fertile for innovation and allows us to realise the enormous potential of payments in this new decade. So, what are we waiting for?

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