Instant Payments, Global platforms choices, accelerating scams: Action essential

Having two real time systems in the UK – CHAPS and Faster Payments - is a bonus. The task is to see how they can work together against the growing demand for instant payments regardless of amount and currency worldwide. Can a combination of these platforms become a highly valued asset in global instant payments?

In 2023 EU will be mandating the use of instant payments across Europe. The reason: Economics. The largest real time markets – India, China, Thailand, Brazil and South Korea - added $131 billion in GDP output.

The market for instant payments is expected to at least double in the next few years. Worldwide Real time/Instant payments are expected to grow 250% by 2026.  India has added135 million users in less than two years. Instant payments account for 11% of all EU payments with a number of the 30 EU countries yet to offer this SEPA service and the goal is to double this number.

Most countries, in all likelihood, will require a two-phase approach based on value of payments. CHAPS-like platform for high value payments is for the daily settlement of trading markets, above £1million. For payments below this amount a Faster Payments-like platform for consumers, SMEs and Corporates are needed. A combination of the two could work for electronic assets.

UK consumer market does use CHAPS for property purchase and sale. At this time, instant money, (electronic cash) and property (electronic asset) are swapped instantaneously. This technique used worldwide in equity and bond markets are known as DVP (delivery versus payment).

CHAPS deals with the sophisticated, large market movements, average payments £2 million for established clients. While Faster Payments are open to anyone with a bank account, generate average payments of £800. The volume growth is with Faster Payments, 38% increase since 2020 to 2021 against 14% for CHAPS. Faster Payments is steadily increasing the maximum allowed payment amount and currently permits £1 million and should the next increase be £2 million it would equal the average CHAPS payment amount. 

Both Chaps and Faster Payments suffer from account to account fraud. Faster Payments are by far the most open to fraud approaching: £1 billion a year with 100,000 victims. The Payment System Regulator (PSR) is mandating true verification of the actual account owner (Confirmation of Payee [CoP]) for Direct and Indirect bank participants. CoP in the UK will rise from less than 20 to 300 banks/Payment Service Providers by 2024. 

Also mandated, reimbursement for scams to be paid 100% and in 48 hours to consumers and SMEs by the banks (split 50/50 between Payer and Payee Banks). Corporates above £5 million/year in revenue will be responsible for their own fraud prevention. This mandate doubles the current amount being refunded to customers.

Given the rise of new forms of electronic assets – fungible CBDC (digital fiat currency) and non-fungible art (NFTs) people will need a real time and secure environment for their new wealth including ewallets, far greater security, and regulations. The electronic assets, them selves need not move, only ownership needs to be legally transferred. 

No doubt, Faster Payment is the go-to for platform for these new electronic assets. Millions of people and businesses are already using them across the Internet and instant payment is already established as the cryptocurrency seller’s favourite payment of choice. 

Unfortunately, fraudsters’ first choice is also instant payments. Scams are increasing in velocity in volume and variety.  Given the new mandatory regulations: banks should see how much the bank account fraud is costing them today, double it, find working, ready to go, inexpensive technology, simple to install and act promptly.