How real-time are payments?

Banks and customers often have a different answer to this question – and that's the problem. It may be argued that the customers, seeing only the front-end service, believe that their payments are processed in real-time with immediate transaction confirmations and approvals. But is that really what happens behind the scenes? asks Sruti Rao

Banks and customers often have a different answer to this question – and that’s the problem. It could be argued that the customers, seeing only the front-end service, believe that their payments are processed in real-time with immediate transaction confirmations and approvals. But is that really what happens behind the scenes? asks Sruti Rao

Payment providers acknowledge that in actual fact, there is still a lag in the real-time capability of payment processing, because of lags and inefficiencies in the banks’ systems.

The lengthy protocols and procedures that have to be adhered to – whether they are because of internal policies or regulatory impositions – unfortunately still bring time lags in internal processing systems for banks.

According to payments provider ACI, the current system has room for further efficiency with the adoption of real-time payments. Paul Henaghan, managing director of Asia Pacific and Japan at ACI, says existing processes in banks use appropriate screening and streamlining operations, but that does not necessarily mean that ultimate process efficiency is reached. He says that could potentially make them fall short in front of competition.

In line with the current jargon of customer-centricity, speed and convenience are of a paramount priority. With the innovative payment options of peer-to-peer lending and mobile payments, and internet giants making a mark in this space, there is a need to update the internal capabilities of banks for them to keep up with these changes.

In the age of the omni-channel, building an ecosystem where payments can be made across channels seamlessly with no hassle and lag-time on the customer is a challenge, and yet still a necessity for the future of payments. ACI argue that real-time payments have to be adopted for banks to remain competitive in their service capability.

Simplifying the payments mechanism for the customer has been happening with an increasing rate of success over the years, but the fact that it doesn’t mesh with the internal processes of the bank is concerning. We often hear about innovative payments – but innovative processes? Not often a topic of conversation.

The potential for real-time payment systems is certainly there and it will be interesting to see how receptive banks in the region are to this concept.