US looks to learn from other markets on faster payments
The UK Faster Payments experience is providing some guidance for the US Federal Reserve’s efforts to move beyond its slow ACH system, but it should take a different approach, according to a speaker at the Nacha Payments 2015 conference in New Orleans this week.
“Don’t do what we did,” Jerry Norton, head of strategy for UK Financial Services at CGI Consulting, said. “That’s the trouble about being first.”
The UK system was built using the ISO 8583 standard, which was meant for cards, rather than ISO 20022 or XML. There were some good reasons for the choice at the time, said Norton, but it isn’t interoperable with other payment systems. The US appears to be heading for ISO 20022.
Faster Payments in the UK was heavily bundled with other services, while the Australians are pulling apart their offering and creating a core piece for clearing, which doesn’t offer competitive advantages, Norton added. That leaves everything else outside, providing opportunity for overlay services that could be provided by banks or nonfinancial companies.
“Unbundling is absolutely critical if you are trying to build something that is future proof. The UK has one of everything — high value CHAPS, BACS and Faster Payments and they don’t share any infrastructure so the cost is three times what it would be if you started from scratch and built components that could be reused.”
Doug Kreviazuk, vice president of the Canadian Payments Association, has been meeting with the Fed to discuss payments systems. Changes are very complex because of the number of stakeholders involved, he said.
“Every jurisdiction is feeling the same pressure – focused on user convenience, greater opportunities for innovation in the marketplace, increasing access for new entrants and promotion of innovation. Central banks around the world are active and flexing their muscles for public policy,” he said.