Faster Payments bring benefits to banks

Service brings commercial opportunities for banks, but the industry has learnt from IT issues, says research

The Faster Payments service helped reduce use of cheques

Banks are already able to identify the commercial and operational benefits from the Faster Payments (FP) service and, according to research, have also learnt from the IT complexities surrounding the roll-out.

The clearing and settlement service was launched in May 2008 to enable same-day processing of internet and telephone banking transactions for UK customers instead of the previous three-day timescale.

According to the study, two-thirds of banks taking part in the payment service said FP could deliver new revenue and provides a strong business case for similar schemes to be rolled out in other countries.

“As one of the founding members of the service, we are reaping the benefits of seizing the commercial advantages of Faster Payments early on,” said HSBC senior payment industry commercialisation manager Mike Banyard.

“From the outset, far from regarding FP as a compliance issue, we have embraced the real-time technology as a way of introducing new and improved services to our customers and unlocking new revenue opportunities,” he said.

The implementation of FP has also provided the industry with invaluable insights into the IT complexities associated with real-time payment infrastructures.

According to the research, banks with old legacy and batch-based systems struggle to implement and operate FP when compared to their counterparts which have already invested in modern real-time accounting systems.

However, systems such as FP provide the banks that are behind the IT curve with a "much-needed incentive" to revamp the architecture supporting their banking transaction platforms to cope with the new market demands.

The research adds that banks with the appropriate real-time payments structure should also consider charging customers for the service

“It is clear that real-time payments bring banks back into alignment with their customers needs and, crucially, provides a platform on which they can develop more value-added services for customers,” says the study.

Other benefits provided by FP highlighted in the research include reduction in the use of cheques and cash volumes, and greater flexibility of the service to integrate with existing business processes.

Despite the new fixed costs in IT that banks had to take on board due to the implementation of FP, some of those interviewed by the study said revenues are already exceeding costs and are predicting an early return on the investment.

The study carried out by VocaLink in association with PricewaterhouseCoopers
polled six of the FP’s participant banks, the Office of Fair Trading, UK Payments – formerly UK payments association Apacs – and the Payments Council.