Faster payments are evolving at an unprecedented rate in the U.S. and around the world. Customer demand for real-time or near real-time payments is rising, making faster payment offerings more of a necessity than a choice for financial institutions. With the rate of change happening in the payments space, it can be hard to keep up.
We're here to help. In order to help you cut through the clutter, we've pulled together the latest trends and developments in the world of faster payments.
What follows are this month's highlights.
FASTER PAYMENTS IN THE U.S.
P2P Volume is ON THE RISE
NACHA-The Electronic Payments Association
NACHA-The Electronic Payments Association, in a July 25, 2018 news release, announced ACH Network volume jumped 6.2 percent in Q2. The percentage increase represents one of the highest growth rates since 2008, and according to NACHA, demonstrates widespread use and acceptance of Same Day ACH transactions.
Specifically, NACHA stated there were nearly 41 million Same Day ACH transactions, including 21 million credit and almost 20 million debit transactions in the second quarter of 2018. Compared to the same period in 2017, when there were only credit payments available, there were 11.9 million transactions. Overall, Same Day ACH payments volume in the second quarter of 2018 represents a 243 percent increase year-over-year.
And P2P via ACH continues to climb. In addition to faster, consumers want to be able to conveniently send one another money, as is evidenced by the explosion of P2P providers. In fact, there were 29.4 million P2P transactions over the ACH Network in Q2, a 24.1 percent increase year over year.
Zelle
Speaking of P2P, Zelle also saw significant growth in Q2. The company processed $28 billion worth of payments against $14 billion in payments for Venmo. Another indicator of Zelle's growth came earlier this month when Bank of America, when reporting its Q2 financials, revealed Zelle P2P transactions reached 35.1 million, up 142 percent year-over-year.
However, don't count Venmo out just yet. As noted by PYMNTS.com, Paypal hopes to spark more P2P growth through Venmo with the launch of its payment cards, specifically a MasterCard-branded debit card. The goal is to increase market share by enabling Venmo users to spend their balances in more places.
But not all P2P mobile payments services are rallying to the challenge. Snapcash, a P2P mobile payments service launched in 2017 through Square, plans to cash out of the mobile payments business and shut down the service on August 30.
The Fed's Inaugural FedPayments Improvement Community Forum
Meanwhile, the Federal Reserve continues to press forward toward its goal of faster, more efficient payments by 2020. Toward that end, the Fed is hosting its inaugural FedPayments Improvement Community Forum, October 3-4, 2018, in downtown Chicago.
As described on FedPaymentsImprovements.com:
The Forum is your opportunity to collaborate and provide feedback on the latest payment system improvement initiatives. Designed to encourage robust dialogue on a plethora of topics, the Forum will consist of workshop-style sessions that give you the ability to influence and guide the United States' journey toward a faster, safer, more efficient payment system. The Forum will begin at 12 p.m. CT on October 3 and will conclude by 5 p.m. CT on October 4. (Learn more or register here.)
But the U.S. isn't the only country experiencing rapid growth.
Faster Payments Around the World
SWIFT
SWIFT, in conjunction with 22 corporates and banks, recently announced plans to bring real-time payments tracking into corporate treasury applications. According to SWIFT's news release (July 25, 2018), they will begin testing an enhanced multi-bank standard to further improve the cross-border payments experience for multi-banked corporates, enabling faster payments and end-to-end real-time tracking. The standard allows corporate treasurers to initiate and track global payments innovation (gpi) payments to and from multiple banks in a single format.
That's not all that's new in the area of cross-border payments.
GIMAC AND TERRAPAY
According to a July 11, 2018 news release, GIMAC, the regional electronic money transfer platform of Central Africa and TerraPay, the world's first mobile payments switch have signed a strategic partnership agreement that will strengthen the remittances ecosystem in CEMAC region. The partnership will enable instant cross border money transfer to bank accounts and mobile wallets in the CEMAC zone, comprising of Cameroon, Republic of Congo, Gabon, Equatorial Guinea, Central African Republic and Chad.
While these new items are merely a sampling of global developments in the world of faster payments, they serve to illustrate how rapidly this arena is evolving.
A DECADE OF FASTER PAYMENTS IN THE U.K.-LOOKING BACK AND AHEAD
As rapid payments ramp up, now is a good time to consider the path ahead, both institutionally and as an industry. However, we have limited data to rely on.
Perhaps we can gain insights from the U.K., one of the first countries in the world to launch a 24/7 real-time payments system. A recently released white paper, A Decade of Faster Payments, examines the impact of real-time payments over the past ten years and predicts how the rate of growth could increase in the future.
The paper identified four key trends for the future, two of which are below:
- Payments are set to rise in volume and shrink in average value as costs fall, with permission-based machine-to-machine payments representing many daily transactions - particularly in business-to-business supply chains.
- Real-time payments and advances in access and security across payment systems will be critical factors in making these changes possible.
What lessons can we learn from the U.K.'s experience? Are there pitfalls to avoid
With a growing global economy and the necessity for systems around the world to communicate with each other, what's happening in the U.K. and abroad in the faster payments space matters for the future of payments industry.
To stay abreast of these and other new developments in the world of faster payments, visit NEACH's Pacing Payments website.