UK Government: Faster Payment Service Needs to Be Faster

The U.K. risks falling behind other nations unless it can create an alternative to its Faster Payment Service.

That’s according to a new government-commissioned review on competitiveness in the country’s payment industry, the focus of a Wednesday (Nov. 22) Financial Times (FT) report.

According to the FT, that review calls the Faster Payment Service “clunky” and says the payment sector should use open banking technology to develop new routes between customers’ bank accounts and retailers that would go around card intermediaries and challenge the dominance of the Visa and Mastercard.

“When we talk and listen to merchants and retailers, they say things like, we feel trapped because we have to take card payments,” said former Nationwide CEO Joe Garner, who led the review, adding that offering retailers the ability to charge without using a card network would create a “healthier” market, especially as the use of cash was falling.

Meanwhile, the review calls on the payment industry to employ open banking technology to bypass the standard means of moving money, which requires customers to enter sort codes and account numbers, modeling similar programs in Brazil, Sweden and India.

The review notes that Faster Payment Service takes an average of 70 to 80 seconds to process a transaction, while the systems counterparts in the above-mentioned countries allow transfers in under 30 seconds.

Per the FT, PayUK, which operates the Faster Payment Service, said it welcomed the review and that digital payments innovation was “vital for businesses and consumers,” which is why it is working on a new payment architecture.

Meanwhile, PYMNTS on Wednesday examined the soaring use of real-time payments, as The Clearing House’s RTP® Network, America’s flagship real-time payment system, now serves 65% of all demand deposit accounts in the country. 

Experts predict that the transaction volume for real-time payments in the U.S. will reach a staggering 8.9 billion by 2026, a huge increase from 1.8 billion last year.

The introduction of the FedNow® Service, backed by the U.S. Federal Reserve, has the potential to shake up the payments scene and is expected to deliver healthy competition to the real-time payments industry. Since its debut six years ago, the RTP network has dominated the industry. 

“However, FedNow is raising awareness about real-time payments in the U.S. and is likely to attract banks and credit unions,” PYMNTS wrote. “Financial institutions will have the choice to stick with the RTP network, join the FedNow Service, or use both systems simultaneously, providing more options for consumers.” 

And as noted in “Comparing and Contrasting FedNow and the RTP® Network,” a report by PYMNTS Intelligence and TCH, 100% of treasurers who use real-time rails say that instant payment access has improved their businesses’ payment processes, and the launch of FedNow will offer even more options for these payments.

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