This year and next sees many regions adopting real-time payment schemes, adding to existing schemes in countries such as the UK, Switzerland and Japan. There’s SEPA CT Inst in the EU, the Clearing House Faster Payments Scheme in the USA and the New Payments Platform in Australia.
These countries already have P2P and e-wallet payment mechanisms, which are often called real-time payments. But there is a stricter definition for real-time payment schemes. So when is a real-time payment not a real-time payment?
What Is a Real-Time Payment Scheme?When talking about real-time payments it is useful to think of them as payments going directly via a defined real-time payments scheme. These schemes share these criteria:
- Are defined as a payments scheme and cover both clearing and settlement (only clearing needs to be in real-time, settlement can be periodic)
- Can be made 24/7 365
- Clearing completed within 1 minute
- Cannot be reversed by the scheme rules
- Confirm completion or rejection instantly
- Are open loop, payer and payee do not need an account at the same provider
- Operate for consumer-to-consumer, business-to-business, consumer-to-business and business-to-consumer payments.
- Can typically initiate higher-value transactions than other fast payment mechanisms — for example, the UK Faster Payment Scheme’s limit is £250,000, for SEPA CT Inst it’s €15,000 at launch and the Australian New Payments Platform looks likely to have no scheme upper limit.
Fast Payments That Aren’t Real-Time Payment SchemesThere are three categories of payment that see value transferred instantly, or at least very quickly but are NOT real-time payment schemes:
- Person-to-person payments, such as Venmo and Dwolla
- Facilitated payment mechanisms, such as Zelle
- E-wallet or mobile payments, such as AndroidPay, GooglePay and ApplePay
Why does this matter? The main advantage of a real-time payments scheme is that it is a direct payments infrastructure. Think of this infrastructure as the rails that payments run on. Scheme-based real-time payments provide the tracks AND the train that runs on it. Other types of payments are trains that run on these rails — and they may not use the fastest track.
The factors affecting account opening, customer management and fraud prevention are very different in each type of payment. By articulating the differences it becomes easier to form a strategy that takes account of the needs of each type of payment and look for solutions that can adapt to cover all that you interact with.