The U.K.’s Faster Payments Service (FPS) has been very successful.
The ability to send money from one account to another account instantly is actually quite transformational, but I still think that the full impact has yet to be felt. As we move into 2018 and the world of the newly-published Open Banking Standard, PSD2 and APIs then we will see instant payments built in to the applications that support our everyday lives. This morning when I caught the bus to work the cost of the bus ticket was charged to one of my credit cards, which meant that the bus company had to store my card information and that I had to remember the three digit code on the back of the card to complete the purchase. In the future, I will tell the bus company I want a ticket and put my thumb on the home button of my iPhone and that will be that. The money will be sent from my bank account to the bus company’s bank account with no delays, intermediaries or additional friction. As I said before, there will be a push for push.
Since it is such a big deal, it is of course important who has access to the instant payments networks. The government is very keen to see more competition in the retail payments space and for this reason it wants to facilitate access to core payment systems, such as FPS. The opening up of access has already started. You might remember that last year, access was opened up to a new kind of aggregated access layer under the “New Access Model”.
“The New Access Model, first published in December 2014, sets out proposals to enable technology vendors to offer technical access to Payment Service Providers (PSPs) by adding to their existing accounting platform technology, or providing a managed solution to either a single or multiple PSPs.”
This new model gave technology companies with experience in payments the ability to create systems to connect directly to FPS and then offer this connection to other players. These new offerings, including VocaLink’s PayPort service, are a terrific step forward and they make it very easy for new entrants to get up and running. Earlier this year, in fact, PayPort made access for new entrants even easier through their partnership with Raphael’s Bank.
“As a member of the Faster Payments Scheme, Raphaels Bank will be able to provide other payment service providers with access to the UK’s core payments infrastructure through VocaLink’s PayPort service.”
So now, new entrants who sign for agency access with Raphaels can use PayPort to launch their services. But access may well be opened up even further. There are plenty of non-bank players out there who want to have access to the infrastructure and the UK’s Emerging Payments Association recently presented a report to arguing that, under the appropriate licence conditions, non-banks should be allowed access to instant payments infrastructure through the use of a new kind of limited pre-funded settlement account at the Bank of England. In essence, a Facebook or a Google would be allowed accounts that they would load up with a few million quid in the morning and then use throughout the day. Under this kind of option you would be able to send money from your bank account to a friend on Facebook messenger in a jiffy. Facebook and other tech players could use PayPort to connect to FPS, giving them integration and all the services they need at the drop of hat.
“Tech firms are in talks with the Bank of England to secure settlement accounts, a privilege only currently on offer the banks. The accounts would help give the finance technology (fintech) firms access to the payments system, the infrastructure which currently underlies much of Britain’s financial services industry.”
Why am I highlighting this? Well, the interpersonal services that deliver instant payments at the moment (such as PayM, which has more than three million registered users) are just a toe in the water! Imagine what some of these new tech players will be to do with those services when they integrate them with social media, mobile apps, retail platforms, public services and other organisations and businesses. I’m looking forward to some real innovation in this space and opening up access under the right conditions will energise the whole sector and I’m going to be writing some more about this tomorrow.