Mobile and online technologies have made rapid progress in the past decade as smartphones have become ubiquitous and high-speed internet has been rolled out across the world. Businesses and consumers have come to expect rapid access to information and want to conduct transactions in real, or near, real time.
Across Asia Pacific, initiatives are under way to implement faster, or immediate, payment systems. Generally, faster payment schemes enable customers to make electronic payments almost instantaneously, seven days a week, 24 hours a day. The payments are typically made via a phone or internet-enabled device and involve the transfer of money between accounts, to other people, to pay bills or to make regular standing order payments. Some initiatives are based on, or have taken inspiration from, the UK’s Faster Payments Service, which was launched in May 2008 and by November 2013 had processed its three billionth payment.
One such solution is Fast and Secure Transfers (FAST) a real-time payments initiative from the Monetary Authority of Singapore, built using ISO 20022, which went live in early 2014. Formerly referred to as Giro 3 (G3) payments, it serves both consumers and businesses, supporting both credit transfers and direct debits, and focuses on two principal areas: real-time payments (RTP, low-value real-time gross settlement) and bulk payments (automated clearing house).
RTP features include payer-to-beneficiary payment completion within five minutes (up to a maximum of SGD 50,000) and payment completion within 15 seconds between participating banks, which are obliged to be able to receive and credit payments on a 24-hour-a-day, seven-day-a-week basis. The Singapore ACH for bulk payments has also been improved to provide support for additional details that will facilitate payment identification and invoice reconciliation.
Direct debit authorisations are set-up and exchanged electronically, leveraging the scheme infrastructure and capabilities to support the adoption of a bulk payment, benefiting real-time debit transactions. This reduces the turnaround time required to set up an authorisation from the existing 12 to 15 working days to five working days or fewer, depending on the readiness of billing organisations’ banks and the billing organisations themselves. The system is frequently being updated and, in April this year, its functionality was enhanced to include individual debit requests as well as the existing ‘push credit’ capability that exists in the UK Faster Payments Service.
India is undergoing significant changes and improvements to its clearing infrastructure as the country looks to move away from cash, towards electronic payments. Work is therefore being done to improve the various systems that operate in the country including building an up-to-date RTGS with higher processing capabilities.
Aside from this, one of the main developments over recent years has been the Interbank Mobile Payment Service (IMPS, now called the Immediate Payment Service). It is a mobile remittance solution created in 2010 by the National Payments Corporation of India. It offers an instant, 24-hour-a-day, seven-day-a-week inter-bank electronic fund transfer service through mobile phones. Customers can use mobile handsets or tablets as a channel for accessing their bank accounts. Payments are transferred in a secure way and confirmation is immediately issued.
The IMPS platform processes person-to-person, person-to-account and person-to-merchant remittances. Transactions can be initiated from mobile phones, internet-enabled devices and from ATMs.
Applications of IMPS include the purchase of goods from stores via users’ mobile devices and online purchases via internet-enabled devices. IMPS offers multiple modes of funds transfers for mobile purchases, including a mobile application, SMS and a national, unified unstructured supplementary services data platform. Funds also can be transferred over the internet via accounts registered to IMPS or other accounts, using the Indian Financial System Code. The ATM network is also hosting IMPS payments, enabling funds to be transferred.
A challenge for promoters of IMPS is the patchy nature of mobile coverage across India. The Indian mobile network is relatively slow and is also unreliable. At this stage, IMPS is dependent on a mobile device and on users having bank accounts. According to the Reserve Bank of India (RBI), as of December 2013 (the most recent figures available), IMPS payments represented only about 1% of India’s total payments volumes, with only 1.93 million payments made via the scheme in that month, compared with more than 60 million payments cleared via the National Electronic Funds Transfer (NEFT).
Faster payments are also on the agenda in Australia with a project underway to modernise the country’s payments system, which to date has been based on bilateral clearing arrangements. The New Payments Platform (NPP) is a modern infrastructure for Australia’s low value payments that will provide businesses and consumers with a fast, versatile, data-rich payments system for making their everyday payments.
The NPP will comprise a basic infrastructure, which all financial institutions, and through them businesses and consumers, connect to. This will enable payments to be made quickly between financial institutions and their customers’ accounts. The system will enable funds to be accessible almost as soon as payment is received – even when the payer and payee have accounts at different financial institutions.
In December 2014, 12 leading authorised deposit-taking institutions committed funding for the build and operation of the NPP the project moved into phase three – design, build and test. SWIFT were appointed to design, build and operate the basic infrastructure following a highly competitive global tender process and the project is due for completion in the second-half of 2017.
And let us not overlook China
Payments and settlement systems in China are changing with the imminent arrival of the Chinese International Payment System (CIPS), which is due to be launched later this year. The proposed payment infrastructure has four key elements, each of which should help to make trading renminbi (RMB) in and out of China more efficient. First and foremost, the new system will provide a RMB clearing and settlement network that’s fully integrated with the onshore financial system, thereby enabling cross-border RMB clearing among both onshore and offshore participants. Secondly, the system will be multilingual and apply international reporting standards. Thirdly, it will be able to handle payments across a total of 17 different time zones across every continent simultaneously. And finally, it will run on ISO 20022 XML standards, which will allow for optimal mapping between SWIFT message formats and the various CNAPS message formats.
CIPS will not facilitate funds transfer; rather, it sends payment orders, which must be settled by correspondent accounts that the institutions have with each other. Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with one (or more) so as to enjoy those particular business features.
However, it was reported in July 2015 that CIPS would be ‘watered down’ initially and used only for cross-border yuan trade deals rather than including capital-related transactions, which would delay billions of dollars’ worth of transactions, including securities purchases and foreign direct investment, that would have gone through the system. This was a second setback in the plan to provide a unified network for settling deals in yuan after technical problems delayed its launch, and that other measures to open up China’s financial infrastructure have been dented by the recent Chinese stock market crash.
At the time of the announcement, commentators said CIPS would now offer, at best, a complementary network for settling trade-related deals in the Chinese currency to a current patchwork of Chinese clearing banks around the world. Once the PBoC manages to get the new system in place and fully functioning without any hiccups, however, there is every reason to believe it will mark the start of a new era for the RMB.