Before and after instant payments
How often have you got to the end of a project and wished you’d known something at the start? This is no bad thing because learning from one’s mistakes is one of life’s lessons — luxuries even. Yet in business, it’s a bit different. Projects have to be delivered on budget and on time. It isn’t always possible or desirable to make mistakes in order to learn.
At Tieto, we believe that there’s no substitute for knowledge and experience. We’ll help you learn from your mistakes. But our experience and proven methodologies also help you short-cut mistakes to learn from ours and other people’s. This is relevant to instant payments because participants almost need to know the end before they start the design. Output is a function of input. But clearly without having got to the end of an instant payments project, it’s hard to have those learnings you wish you’d known at the start.
In this blog I’ve pulled together some before-and-after-instant-payments advice.
Coverage — one of the most critical aspects of an instant payments project is to have maximum participation in the system. Participation from banks and non-banks alike helps to build critical mass and strengthens the network effect for both service providers and end-users. Some central banks go as far as mandating participation in the system to ensure maximum coverage from the outset.
Open — build an open-loop system to ensure interoperability between participants and across networks, e.g. bank, card and mobile money rails. We advise adhering to internationally-accepted, open payment standards (e.g. ISO 20022) to deliver cross-border interoperability, too. Open systems are more efficient and cost-effective than closed-loop ‘walled gardens’. They avoid duplication of effort by individual participants, which keeps costs down and optimises the services delivered to end-users.
Rules and governance — involve those with a vested interest in the success of the system in rule-writing and governance. This further drives participation, buy-in, interoperability and ultimately adoption. It also informs the design of the technical features and processes below.
Technical features — with an instant payments system, funds are available to the beneficiary in real-time or as close to real-time as possible. Base the system on irrevocable push payments, which are settled behind-the-scenes between participants at least once a day. This minimises costs, complexity, build time and the risk from failing participants.
Up-stream and down-stream processes — the technical features and build are important but also consider supporting processes. Back-end support functions, such as core banking, fraud prevention and sanctions screening, must operate 24/7/365. This is one of the biggest challenges for participants used to a batch system. Also, take the opportunity to build out new front-end applications that utilise real-time functionality, such as mobile and P2P applications.
Use cases — look beyond P2P and plan a possible roadmap of products from the outset. These include P2B in both the physical and remote environments, B2B and all types of P2G and B2G use cases. This influences how the system and integrations are designed. It also influences how participants map existing payment products to the new instant infrastructure, bundle and sell them. Plus how they develop new products.
Communication — last but certainly not least is communication. Central banks should involve all market participants in the instant payments process. They need to communicate with banks and bank associations, non-bank service providers and the public at large. Buy-in from participants and end-users is so important as it drives usage and behavioural change. Communication is a running theme throughout any instant payments project.
How Tieto can help
We have plenty of relevant instant payments experience. We are currently working with the Kenya Bankers Association, an industry body comprising 45 banks, on building out the first real-time interbank transaction platform in East Africa. This national project supports Kenya’s payments strategy to enhance both interoperability through shared technology infrastructure and financial inclusion.
Meanwhile in our native Finland, we designed and implemented Siirto, the country’s first real-time multi-bank platform for mobile payments. This was PSD2-compliant two years ahead of time and natively built for an open and API-driven age.
For more client references or to find out more about how Tieto could help you take advantage of the instant payments opportunity, please contact me Edgars Bremze, senior offering manager at Tieto or see our web page for more.