Real-time Payments: Different questions, funnily enough, get different answers.
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6 April 2014Gareth Lodge
Bob recently posted some views on the same day ACH - as always, great points, well made. Somehow, in Twittersphere, some of the comments got attributed to me, and from that some of those have got re-interpreted as me being anti real-time payments. As my daughters would say, whatever! That's not the point of this blog. What really struck me was the fact that some saw Bob and I as having different opinions. I would say that I don't believe we do (at least not in the majority of the issues), but that we were addressing different questions, and, unsurprisingly, end up with different answers. To crudely paraphrase Bob's post, he quite rightly points out that the business case, based on today's business, doesn't stack up. Secondly, he points out that consumers don't really want real-time payments - how many of us wake up with the urge to make a payment?! Let's pose a different question, the one I've been primarily discussing. If you were starting with a blank piece of paper, would you replicate what we have, or would you build something better and faster? A no brainer. Second question. The current system is roughly 25 years old - do we think that the same system will still be good enough in another 25 years? The answer is again obviously no. No-one in the industry who's close to this thinks that this isn't going to happen. The questions we're really asking are when, what is the trigger, how quick and how soon (i.e. incremental improvements or big bang)? Interestingly, there seems to be less discussion on how, with ACH seeming to be the default. Whilst I'm not suggesting that ACH isn't an option or even where the majority of other systems have developed worldwide, it's interesting in that there are already real-time systems in the market, running primarily on card backbones. The answers to those questions are still much for debate. And who gets to answer them even less so. One noticeable difference compared to some countries is the governance of payments in the US. I believe - and please correct me if I'm wrong - that there is no single body who could regulate and dictate such a change. Equally, there is no body managing the future direction of the payments industry. Which, considering that in revenue terms, the US payments is bigger than both the US hotel and US airline industry *combined*, is both remarkable and perhaps something of a risk to the industry. As the US faces more regulation in the same way as many other regions around the world already have, a joined up, united front would seem an absolute need. We may not all agree when we need real-time, but I'd be curious to know whether we agree on the need for an overarching payments body to protect our interests going forward. This blog is written on the eve of Nacha Payments, and the real-time topic is already dominating the discussions before the event has even started. The Nacha announcement has been met with a wide range of responses, but with more than a few suggesting that Nacha has both over stated their position, and that the solution misses the point. The week is shaping up to be very interesting.