If U.S. Goes Solo with Faster Payments, Other Countries Will Need Help

Swift, the global financial messaging provider, is unlikely to bid for control of the U.S. real-time payments systems. But there will be other countries needing aid with the development of faster payment technology.

While Swift's work building Australia's real-time payments platform will prepare it to expand the infrastructure to other countries, Juliette Kennel, head of market infrastructures at Swift, said the company is under the impression that there won't be a competition between providers to build the U.S. system. Kennel spoke to a group of journalists during a lunch meeting at the Swift Business Forum in London last week.

Last year, Kennel said Swift was following the discussion in the States led by The Federal Reserve and The Clearing House and investigating how its development in Australia could apply. But during the forum, Kennel provided an update on her perspective. She said, The Clearing House would likely be upgrading its system to solve for real-time payments. The Clearing House is the only private-sector ACH operator in the U.S. It processes about 50% of the commercial ACH volume.

This impression is a bit different from VocaLink's. VocaLink is the bank- and building society-owned organization that runs the Faster Payments System (as well as a couple other payment rails) in the U.K. While a trans-Atlantic partnership is a long shot, VocaLink CEO David Yates said the company is trying to persuade the U.S. to let VocaLink manage the product. Since VocaLink has built a real-time platform before, it could shave a substantial amount of time and expense off the project.

Elie Lasker, senior market manager at Swift, thinks the U.S. may work on several different real-time payments projects simultaneously. After mentioning the scale of the U.S. financial services market, he said not all systems in the U.S. will be real-time all the time, but that these systems will need to be interoperable.

Managing interoperability is something Swift is well-positioned for, said Kennel. "When people say real-time payments is a new area for us...I don't think so," she said. Real-time payments is basically about sending messages; "this is our turf."

Changing batch processing systems to support real-time payments is not an easy task. The technology for settling transactions individually and making fraud decisions in seconds affects most of a bank's legacy systems. These updates often take longer than planned.

The Australian New Payments Platform (NPP), which Swift—in partnership with Fiserv—plans to launch in 2017 is the continent's second go at a real-time system. About five years ago, the MAMBO real-time payments initiative in Australia was scrapped because of rising technology costs.

The U.K.'s Faster Payments System took nearly a decade to get up and running. But VocaLink, because of its experience in the U.K., was able to get Singapore's Immediate Payment Service deployed in under a year and a half.

Even if Swift doesn't help the U.S. with real-time payments, there are plenty of other markets to target.

"There's been a ground swell to real-time payments, or a real-time everything world," said Arun Aggarwal, managing director for the U.K. and Ireland at Swift.

Across the globe, 18 countries already have a real-time payments system and 12 countries are considering one, plus the European Central Bank has been analyzing a pan-European system that connects the 17 Eurozone countries, said Kennel. "Real-time payments...is not a boring subject anymore."