Regulatory initiatives are the key driver behind the increased adoption of real-time retail payments systems (RT-RPS), according to a new SWIFT research paper.
A market analysis report showed that 73 percent of RT-RPS adoption was regulatory driven, while 27 percent was due to commercial considerations and competition.
Regulatory mandates have required greater consumer protection, reduced credit risk, transparency, financial inclusion and fostering competition in payments.
Banks’ commercial needs have also played a part, both in responding to customers’ expectations and to competitive threats from new entrants.
SWIFT’s paper, The Global Adoption of Real-Time Retail Payments Systems, analyses the RT-RPS key drivers and trends, and identifies the different approaches, barriers to entry and critical success factors.
There are 18 countries currently live with RT-RPS, 12 countries exploring, planning and building, and an additional block of 17 countries exploring though a pan-eurozone initiative.
The paper highlights the variety of different adoption speeds, showing although RT-RPS has strong growth, countries are adopting a variety of approaches, which has had an effect on the rate of progress.
A number of countries have undergone rapid adoption, as a result of the lead role that regulators have played in encouraging the market to migrate, coupled with the use of relatively new technology and supplemented with attractive pricing or incentives.
Other countries are on a slower adoption path, where the regulators did not play a prominent role and or banks showed little interest.
The remaining systems are on an adoption path, between the two extremes, characterised by active regulatory participation but where the systems were launched more than a decade ago and use older technology systems.
SWIFT has adopted the ISO 20022 message standards for a simplified system and communication. It is seen to improve payments efficiency and create a common, level playing field. It is structured so messages can carry more data fields and carry ‘richer’ information with the payment such as remittances. The standard also supports non-Latin characters, which is important for Asian markets.
Juliette Kennel, head of market infrastructures at SWIFT, commented: “The emergence of real-time payment services is having a transformational impact on underlying payment systems.”
“Real-time is a growing trend led by consumer expectations, supported by regulatory reform. Different countries have implemented real-time retail payment systems in different ways, ranging from simply adapting current legacy infrastructures to deal with real time, up to building brand new innovative systems, as we are seeing in Australia.”
“Legacy and new models will need to co-exist both at a domestic and cross-border level, so, for banks, interoperability will be key. The industry is going to have to come up with ways to enable banks to offer real-time capabilities while keeping costs in check. Collaboration and innovation is going to be key.”
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