Partner Article

How real-time payment systems are driving changes in consumer behaviour

Transferring money instantly to friends and family members is now replacing cash and other traditional payment methods. While the latest figures from the Payments Council show cheque volumes fell by 13% in the year to November 2013, in the same period Faster Payments transactions grew by 20%. The technology that VocaLink developed in 2008 for the UK has now processed over three billion transactions, making it the largest real-time payment system in the world that operates 24/7/365.

We are now seeing a far more interesting phenomenon: the widespread adoption of Faster Payments for individual transfers of money between accounts by individuals and businesses. These ‘single immediate payments’ grew by 33% in the year to November 2013 and they now account for just over half the volume and value flowing through the service. Looking forward, a major source of growth in single number immediate payments will be increases in the number of users of remote banking services, especially mobile banking. Examples include deposits and savings accounts or payment of credit card bills.

The benefits of real-time account transfers and the associated digital payments initiation services to consumers are largely non-financial as most consumers do not pay for making payments today. Nevertheless, a number of emerging propositions are highly desirable and consumers are prepared to pay a premium for them. These services are secure, easy and, above all, convenient. The immediacy of the system fits perfectly into today’s lifestyle, where ‘on demand’ is critical. For example the Zapp proposition, which VocaLink is providing the technology for, enables a seamless purchase experience, allowing greater choice and even enables consumers to check their balances before a purchase is made.

With the right products being made available by the banks, consumers are put firmly back in control of their spending. They can check funds availability, pay who they want, when they want and from wherever they are, all from their bank account, from a single mobile device. There is no need for cards, a cheque book, or to a certain extent cash.

A survey of 10,000 consumers VocaLink carried out in February 2013 identified that 35% would be more likely to use an alternative payment solution if it were offered by their bank and 63% of people familiar with mobile payments would trust a solution offered by their bank. The clear view that has been expressed is it is the banks that are trusted and expected to deliver these services.

The key hurdle for many banks and regulators however is how to make a successful move from a heritage environment to a new system – a manoeuvre that must be negotiated strategically, cost-effectively and with experts on board to help navigate this significant business change.

Understanding how a real-time system can benefit the key stakeholders and what the commercial benefits are will be crucial to the business case. Real-time payments will be the backbone to successful innovation for banks and the adoption of this capability is a natural step in their evolution as they look to stand their ground against new and non-traditional entrants.

For more information please see immediatepayments.vocalink.com or please click here to download an e-booklet on the ’Global move to real-time payment systems’.

This was posted in Bdaily's Members' News section by Pat Patel, IPS Product Manager, VocaLink .