Paul Thomalla, ACI Worldwide: "Real-time changes everything"

Real-time commerce and immediate payments are hot topics in the industry. What is the driver behind the need for this payment type?

Real-time is a commercial reality today. Consumers expect to be able to shop and make payments in real-time and retailers and technology vendors are responding with new solutions and services. Banks and other payment providers need to underpin real-time commerce with the ability to make secure, real-time payments anywhere in the world.

There is now an unstoppable drive towards any-to-any payments, which will enable consumers, merchants, banks and other organisations to connect directly with one another using any payment type, any channel, any network and any currency.

What is the state of immediate payments initiatives around the world and what are the implications for banks, as well as for the alternative payment providers?

The UK Faster Payments scheme was launched in 2008 -and ACI currently delivers gateway services to the majority of its members. Since then, similar schemes have been introduced in a number of other European countries, as well as in Australia and Singapore. In fact, Japan had a version of immediate payments in the 1970s.

The UK scheme is now being opened up to more members, and many more European countries, and the US, are introducing schemes or assessing their options. The European Union is also active, taking steps to try and ensure the interoperability of schemes developed in individual European countries. Although the great majority of payments are domestic today, it’s going to be increasingly important that the schemes work together to enable immediate payments to be made across borders.

How significant is this for the banking and payments industry?

Real-time commerce and immediate payments have huge significance for banks and other payment providers. The initial push for immediate payments came from regulators seeking to promote economic growth and enhance services to consumers – but now many of the banks themselves are driving this change. More and more, banks are recognising the opportunities that an immediate payments infrastructure provides, giving them greater flexibility and enabling delivery of the innovative new payment services that consumers are demanding.

It’s not just about enabling speed and innovation today, though – ultimately, the impact could be much more far-reaching. As immediate payments scheme limits are raised, so more and more payments – both consumer and, increasingly, corporate payments – will travel across the immediate payments rails. Ultimately, this will raise questions for other payment types and channels. What does this mean, for example, for the future of SWIFT, for correspondent banking, or for money transfer organisations? Why do we need cards? What’s the role for direct debits in a world where we can pay our bills at our own convenience, using immediate payments? Immediate payments has the capacity to change fundamentally the role and remit of banks, and all those involved in making or receiving payments.

How is the consumer affected by immediate payments initiatives around the globe?

Immediate payments initiatives enable consumers to make payments faster (in seconds, minutes or hours, rather than in days) and more cheaply. Payments can be timed to suit the consumer, speeding up transactions and enabling faster delivery of goods and services.

As immediate payments schemes are rolled out more widely, some of the risks inherent in such schemes – for example, the risk that a consumer will make a mistake and need to recall a payment – will need to be addressed. This is essential to ensure that schemes retain the confidence of consumers and are seen as a safe and reliable method of making payments.

Do you think that a global, fully connected payments market is a feasible project in the near future?

It has to be the goal and yes, it’s feasible though I’m not sure how soon. One critical issue will be the interoperability of schemes around the world. ISO 20022 is widely seen as the standard to govern immediate payments and ensure this interoperability, but experience suggests that we will need to work hard to ensure that the standard remains a standard, common to all. If ISO 20022 is implemented in very different ways around the world, it will fail to deliver what it promised.

In practical terms, the pressure from PSD2 and demand for real-time means that countries will probably move quickly, rather than waiting for everyone to agree. I think we will then ‘hub and spoke’ these networks together, using ISO 20022 as the framework standard to enable this. This approach will allow for the subtle differences in business practices that exist around the world.

What payments strategy should merchants adopt when expanding their business across borders?

Merchants may struggle with the pace of change in payments, but the benefits are such that those expanding into new markets need to offer the payment methods demanded by consumers in those markets. Increasingly, they need to adopt an omni-channel payments strategy that provides the consumer with a consistent experience, regardless of how and where a payment is made. The strategy needs to be underpinned by strong payment security and fraud prevention capabilities, adapted to the specific security and fraud profiles of each country or market segment. Crucially, merchants need a flexible payments infrastructure that supports the roll-out of new products and services across countries, and that can accommodate new payment methods as they are introduced - an infrastructure that conforms to the nexo standards for card payments and to ISO20022, to maximise value today and into the future.

About Paul Thomalla

Paul Thomalla is a senior executive with global responsibility for developing and maintaining ACI’s relationships with key industry stakeholders, including customers, industry analysts, consultants, partners and regulators. He is a leading spokesperson for ACI and a regular speaker at industry events, where he represents ACI’s perspectives on the trends and issues affecting banks, merchants and other players in the global payments market.

About ACI Worldwide

ACI Worldwide, the Universal Payments company, powers electronic payments and banking for more than 5,600 financial institutions, retailers, billers and processors around the world. ACI software processes USD 13 trillion each day in payments and securities transactions for more than 300 of the leading global retailers, and 21 of the world’s 25 largest banks.