Why Faster Payments Need Flexible Technologies

You can test all you want, but for payments innovators, the true test only comes when a solution is released out into the real world. For the U.K.’s Faster Payments initiative, there have already been some changes made to the service that looks to support real-time transacting.

For instance, last summer, changes to the Faster Payments Service made it easier for smaller banks to enter the network. Initially, smaller banks would have to partner with a larger FI to gain access to the Faster Payments Service, and that meant working with a competitor. But last June, the U.K. announced it would allow so-called “aggregators” to provide a gateway service for these smaller banks that want to land on the Faster Payments network.

One of the handful of these aggregators is B2B payments company Bottomline Technologies, which is now working with transaction processing firm NCR Corporation. Bottomline will integrate NCR’s payment processing platform, Authentic, onto its Faster Payments solution, giving smaller banks an easier way to wield this technology for their own clients.

NCR Marketing Director Andy Brown told PYMNTS that the evolution of faster and real-time payments in the U.K. is all about flexibility.

For instance, changing the rules to allow these aggregators to support smaller banks’ use of the Faster Payments Service helps these challenger banks to stay competitive. But, he said, NCR’s Authentic platform and the collaboration with Bottomline are both created with the understanding that the journey of faster payments adoption in the U.K. will continue to change shape.

Authentic, he explained, is a platform built to handle real-time payments, originally developed for card transactions — though NCR had to consider change when creating it.

“It was created to be transaction-agnostic,” Brown explained. “It was designed in a way that could handle any type of transaction.” One organization in the U.S., for instance, is using Authentic for real-time check transactions; working with Bottomline and using it for transactions over the Faster Payments Service is yet another way the platform will be put to use.

Brown added that the technology can scale to meet shifting demand in transaction volume. At present, the platform can support 10,000 transactions every second, which, he noted, is far beyond the typical volume networks handle, which is about 3,000 transactions per second.

But there are other ways Authentic, and NCR and Bottomline’s collaboration, must be ready for change.

“One area is the move to using new types of messaging formatting,” Brown explained, adding that these payment infrastructures should be ready to adopt the ISO 20022 messaging standard that is spreading across global networks. “The other thing that’s going on,” he continued, “is this drive by all sorts of organizations to expose services through APIs.”

Key to this trend is FinTechs looking to access bank information — for instance, a company that would need to access a consumer’s bank account data — meaning these networks must be ready to handle the technologies through which banks share that information.

“A lot of banks are changing so that they actually publish a programmatic interface that allows a FinTech to formally come in and get a hold of account balance information and account profiles and historical data, or even to execute payment transactions,” Brown said. The PSD2 directive in the EU, for instance, requires banks to cooperate with FinTechs in this way, while other jurisdictions see banks voluntarily doing so. The key is to enable FinTechs to provide their unique service using bank data without stepping on banks’ competitive toes. Payment networks must be ready to support these data-sharing initiatives, Brown noted.

In a broader sense, Brown said these payment networks will need to work with banks to cut down silos and reduce the cost of transacting, all in the effort to promote the widespread rollout and adoption of real-time payments.

“We see a lot of organizations and countries trying to get a lot more [adoption of] electronic payments and having real-time, interbank payment technology like Faster Payments,” he said. “To move a lot more transactions away from paper or cash and based in an electronic form.”

All of these efforts, he added, mean FinTech and payment innovators that provide faster and real-time payment solutions have to be agile and flexible enough to scale alongside demand, collaborate with other FinTechs and banks and adjust their services according to market trends and new technologies that surface. Working with Bottomline, said Brown, is one way NCR is adjusting its support of the Faster Payments Service, a move he said will help smaller banks join the real-time payments migration and, as a result, broaden access to real-time payment services for small bank clients like SMEs.

It means, he added, that “banks can offer real-time, immediate services, so small businesses can get paid much more quickly because they’re not waiting for a multi-day process to go through a clearing cycle.” And, he said, broadened use of the Faster Payments Service gives these smaller banks a competitive edge.

“The smaller banks can offer interesting, differentiated services to those SMEs out on the market,” Brown said, “and actually grow the range of services available to them, because they’ve got access to these sorts of technologies.”