The Evolution and Challenges of Real-Time Payments Integration

Blog· 4min August 22, 2023

In today's dynamic world of financial services, the move towards integrating real-time payment schemes is both a necessity and a challenge. Across the globe, there are myriad schemes in varying stages of maturity and adoption. For financial institutions keen on operating seamlessly across these platforms, understanding their nuances is paramount.

The Illusion of Standardisation

Even as message content standardisation has emerged as a trend, it's not a magic bullet. While there's a semblance of unity in terms of messaging, the reality beneath is far from homogeneous. Payment schemes, particularly in the real-time space, are largely local activities, differing on several dimensions.

Different technical connectivity requirements, from cloud-based solutions to local data centres, further contribute to this complexity. These varying requirements don't merely pose infrastructure challenges; they lead to differences in the very way payment schemes operate. Some might support transaction reversals, others might allow for recalls, and yet others might do neither. Such diversity influences the operational level, with each scheme transacting differently.

These differences translate into distinct operational variations for banks, especially when they have to manage exception processes. Contrary to a generalised view, these operations are highly localised. For a financial institution looking to operate across different geographies, understanding these local nuances becomes imperative.

Bridging the Technical Gap with Payments as a Service

One solution that's begun to show promise in addressing these challenges is the concept of Payments as a Service. With the increasing dynamism of regulatory schemes and the rapid evolution of technology, the need for an adaptable solution has never been greater.

A primary advantage of a platform-based solution is the shift towards a single API integration. This means that when institutions integrate with one payment scheme, there's a high degree of reuse when connecting to subsequent ones. The onus of harmonising differences between these schemes falls on the technology provider, making integration smoother for banks and financial institutions.

Moreover, a significant chunk of the maintenance overhead, be it security, resiliency, or even changes in the underlying scheme requirements, gets transferred to the platform provider. Such an arrangement offers financial institutions a buffer from sudden changes, allowing them to focus on their core competencies and not constantly juggle with technical adjustments.

The Role of Payments as a Service in a Global Context

The main friction in global financial operations arises when institutions have to deal with diverse technology stacks and unique operational processes in each geography. Payments as a Service platforms act as a bridge, offering a consistent approach irrespective of the institution's underlying tech infrastructure. 

One can view this not just as a means of connecting different technology stacks but as a way to unify diverse operations. This reduces complexities for financial institutions operating across different markets, thereby streamlining their global payment operations.

The Road to Interoperability and the Power of Scale

With tens of real-time payment schemes cropping up around the world, all at varying stages of maturity, the eventual goal for many is achieving interoperability. Though most payment activity remains local, the allure of achieving scale in cross-border corridors is enticing.

While the underlying driving force in all markets remains a fundamental change in consumer expectations, the goalpost keeps shifting. Today's consumer expects transactions to be completed in mere seconds.

However, creating genuine, real-time, traceable, cross-border flows becomes feasible only once scale is achieved. The evolution of technical platforms enables this, and the rise of Payments as a Service solutions is a testament to this shift.

Interestingly, achieving this doesn't necessarily depend on central infrastructures figuring out how to interlink. Instead, platform technology can simulate these use-cases by leveraging local payment schemes. This approach can achieve results faster than waiting for central infrastructures to connect directly.

Resilience and Scale: The Cornerstones of Modern Payment Platforms

In the ever-evolving payments landscape, resilience and scalability have become the bedrock of success. Any institution aiming to process transactions in the billions needs to have these foundational aspects in place.

Platforms like Payments as a Service come into their own in such scenarios. By distributing the responsibility of managing scale across various institutions, these platforms ensure that growth rates remain manageable. Ultimately, this ensures that even as transaction volumes increase, the system remains robust and functional.

In conclusion, as the global financial landscape continues to evolve, solutions that offer flexibility, resilience, and scale will remain at the forefront, guiding institutions through the complexities of integration and ensuring smooth operations irrespective of geographical boundaries.

Written by

Mike Walters
Mike Walters Chief Executive Officer

Mike was appointed CEO in October 2023, having joined Form3 as CPO and co-founder in 2016. During his roles as CPO he was responsible for strategy, product development, product management as well as strategic initiatives, playing a key role in the business’ funding activities and key client relationships.

Prior to Form3, Mike held senior Product roles within Barclays:
As Product Director for Barclaycard Payment Acceptance (card acquiring) he was a member of the Executive Committee and responsible for P&L, product management, strategy development, vendor selection and management, digital transformation and M&A.
As Head of UK Corporate Payments for Barclays Corporate Bank, Mike held product management responsibility for all payment, receipting and reporting products delivered to Barclays corporate clients – this included defining the Barclays Corporate Bank mobile payments strategy and initiating, building and scaling multi-award winning mobile payment solutions. Earlier in his career he managed client relationship teams responsible globally for the North American Financial Institutions and FTSE 250 sectors providing him with significant product and enterprise client experience domestically and internationally.