UK Faster Payments: A Model for U.S. banks to Follow in Their Journey to Real-Time?

Real-time payments are transforming the financial landscape, offering faster, more efficient transactions and an improved customer experience. In recent years, banks and financial institutions have joined the UK Faster Payments scheme and the US RTP network to stay competitive in this evolving market. In this article, we'll discuss the experiences and insights shared by banking professionals as they navigate the challenges and opportunities of implementing real-time payments.

JP Morgan's experience in joining the UK Faster Payments scheme highlights that while the technical aspect of implementing real-time payments is essential, it is just the beginning. Meeting service level agreements (SLAs) and ensuring payments are processed correctly are critical. However, it is equally important to consider the downstream systems that need to be integrated, especially when dealing with legacy platforms.

As banks focus on payment processing, reporting can easily be overlooked. Nevertheless, accurate and timely reporting is crucial for both banks and their clients to make informed decisions. Emphasizing reporting during the planning stage can help ensure a smoother implementation process.

With real-time payments processing thousands or even millions of transactions in a matter of seconds, system stability is paramount. The consequences of a system failure or glitch can be far-reaching, so banks must ensure their platforms can handle the load and recover quickly in the event of an issue. Automation of recovery processes is essential, as relying on manual intervention can be slow and inefficient.

Implementing real-time payments also requires a shift in mindset among operations, client service, and implementation teams. Ensuring these teams understand the differences between real-time payments and traditional wire transfers, as well as the need for 24/7 support, is critical for successful implementation and adoption.

Miriam, a banking professional, notes that with the upcoming launch of FedNow, many US banks are considering implementing both send and receive functionality right away. This is in contrast to the cautious approach taken in the past, where banks would start with receive-only functionality. The US has not mandated the adoption of real-time payments, but this could change as more banks embrace the technology.

In contrast to the US, the UK Faster Payments scheme required banks to adopt both send and receive functionality from the outset. This has resulted in 99.9% of bank accounts being reachable through the Faster Payments scheme, ensuring a more equitable and accessible system for all.

Both the UK and US have introduced Request for Pay schemes, offering potential benefits and use cases for consumers and businesses. However, adoption has been slow, with many banks taking a "wait and see" approach to determine if the service will be useful for their customers.

The move to real-time payments presents significant challenges and opportunities for banks and financial institutions. Technology, infrastructure, reporting, resiliency, and team preparation are all crucial factors for success. As the industry continues to evolve, the experiences shared by professionals in the UK and US can serve as valuable lessons for banks looking to implement real-time payments and enhance their offerings to customers.