All aboard the real-time express
Bottomline Technologies is helping to supercharge transactions by offering an alternative plug-in to national and international payment rails. General Manager and Director of Payments Ed Adshead-Grant speculates on where this fast-moving journey could end
Real-time everything is the destination for Ed Adshead-Grant. That’s because instant transactions have the power to not just transform payments but challenge the way companies do business. Think real-time payroll, real-time access to liquidity positions and the impact that could have on corporate decision-making.
The general manager and director of payments for payment specialist Bottomline Technologies waved its Real Time Payments Express Service out of the station this summer by launching a partnership with the UK’s Starling Bank. The new 24/7 service will allow smaller banks not directly linked to the country’s Faster Payments system, as well as corporates, to send, receive and track payments in real time to any UK bank account.
As a business-to-business (B2B) player, Bottomline is focussed on providing a cheaper and simpler route to payments infrastructures like Faster Payments, by subscribing to a Cloud-based application programming interface (API).
By buying into Bottomline’s services, customers can ride rails that ensure compliance with the plethora of regulations that surround payment systems. The regulatory and infrastructure cost burden is shared between Bottomline’s customers, so they don’t need to employ that expertise in-house. The service also has a bundle of features attached to it, such as a tracker to trace where the money is at any given time.
Bottomline already supports CHAPS, SWIFT, Bacs, Visa B2B Connect, Direct Access Faster Payments, Paym, CASS and various others through its Universal Aggregator, which will now be further boosted by the Real Time Payments Express Service.
We asked Adshead-Grant to lift the lid on instant payments and tell us how he sees our real-time future.
The Fintech Magazine: Faster Payments has been around since May 2008 but only a handful of banks have joined each year. The payments may be close to instant, but why has adoption been so slow?
Ed Adshead-Grant: These are critical national infrastructures, so there’s been a conservative approach to it. There’s been a desire to ensure that it’s resilient and it’s working at five-nines availability, so people are happy the payments are going where they should be, on time, every time.
It’s taken time to develop, but still, in the UK we’ve been pretty much first in achieving real-time payments.
In terms of access to real-time payments, there wasn’t that much movement for a number of years because it was left to the core banks to sponsor real-time solutions. So, the industry came up with a new access model and Bottomline got involved in bringing new entrants to the real-time settlement scheme, which was an alternative to being sponsored by a larger bank.
TFM: Why would a small bank or corporate choose Bottomline as a gateway to Faster Payments over a big bank?
EAG: In the early years, these businesses were sponsored by a core bank that had established access to Faster Payments, but they were held back by the time it took to get up and running. Demands of the sponsoring bank’s schedule perhaps didn’t fit the smaller bank’s needs, so they were beholden to the timetable of the sponsoring bank. These players wanted to have direct access to Faster Payments, so we came up with a direct access model that gives them more control over the service levels, the outages and what they can do, via a sponsoring bank.
A story I like to tell is when we first switched on one of our customers for direct access to real-time payments. The previous month, their outage through a sponsoring bank had been 50 hours of downtime. That moved to just 36 seconds in the subsequent month. The call centre staff who had been taking calls from customers about outages actually cheered when those metrics were revealed.
TFM: You’ve launched the Real Time Payments Express Service in partnership with Starling. What are the advantages of this software-as-a-service model?
EAG: It’s a subscription and transaction model, a pay-as-you-go way of consuming technical services. The cost economics are much lower – the biggest costs being around compliance. With a lot of our work now in servicing financial services and payments, we’ve taken on the compliance burden that was historically in house. That’s all been future-proofed for the customer. Running software through the Cloud also enables us to move quicker.Much of the positive feedback we get from our customers is around the extra services we provide. The real-time access is the core feature, but beyond that we have a series of fraud and sanctions-checking solutions that we offer, and cash management wraparound services that give control to the users of our solution. We’ve found that our bundle of features has been very successful for nurturing long-term partnerships in payment solutions.
TFM: How do you predict the real-time payments market will change?
EAG: Most obviously, the transaction amount limits will increase. Over time, the limit went up to £100,000; it’s now at £250,000. In the Netherlands, they’ve just launched real-time payments with no cap at all. The belief is, you have all of your front-end controls and checks in the system before you hit the button for the payment, which is at the end of the process. So, I think those amounts are going to go up, and it’ll probably challenge the CHAPS network, in terms of which one you would use. Bottomline’s role is to provide access to these solutions so that businesses can pay and get paid by using what’s available on the market.
TFM: Looking beyond the mechanics of payments, how will real time change the financial system?
EAG: With the introduction of ‘real time everywhere’, you can start to challenge the way people have been operating.
I like to put the words ‘real-time’ in front of all the different products and solution sets. So, you might be doing real-time payroll. What does that mean to a business? Could you be paying people on a daily or hourly basis? What does that mean for liquidity management?
For cash flows? Or it may be real-time disbursements. Once you’ve plugged into real-time networks, you could be paying out insurance claims or loans in real time.
That raises a question around whether batch payments will be needed in future. My personal view is that batch will move towards APIs and real-time flows.
Another opportunity is real-time cash management. Any treasurer in the world would love to have, at their fingertips, their cash positions globally. With the real-time nature of payments and some of the supporting systems, you start to move to real-time cash management.
What real time also does is link with the open banking paradigm that’s coming through, because real time and open banking to me are hand-in-glove. With open banking you now have real-time access to data that’s previously been in secure bank data vaults. That then triggers a real-time payment, so it comes together in terms of value propositions.
TFM: Do you see banks embracing open banking to innovate new products?
EAG: I see banks in two camps, there are those that are doing the compliance only, and others which are looking to take advantage of what is a fundamental change in the model.
So, a lot of business documents used to be dumb; an invoice was dumb. Now it becomes smart. In the digital world, with real-time payments and open banking, invoices can be linked with payments in the same file. It will help reconciliation processes by providing visibility of what’s happening. And that can improve the back office of companies trying to process payments and invoices together.
TFM: What are some of the use cases you’re seeing in the field when it comes to open banking?
EAG: We’re having interesting conversations with retailers which take payments from their customers using cards that now charge a percentage fee. We can redirect those payments under open banking, so the customer pays direct from their bank account, with significant cost savings for an organisation.
Cards are under pressure in particular from the airline industry, and there’s a very public use case with the International Air Transport Association, which is looking to redirect consumer payments away from card rails onto banking rails. They’re looking at loyalty points, airline points, air miles and so on, which might just encourage customer behaviour to change.