CARDS vs ACH in the new immediate, open payments world Richard Ransom Bottomline Technologies
A B O U T B O T T O M L I N E T E C H N O L O G I E S Simple Easy and consistent access to parties, types, and channels Faster decision making about payments and cash management Higher efficiency by reducing labor-intensive processes Smart Single solutions overlay siloed systems to automate payments Intelligent integration with core business systems Automated any-to-any payments Secure Always-on, behavioralbased analytics to reduce fraud. Built-in business-class security continually manages risk Predictive analytics enable better decisions Corporate and bank customers worldwide rely on Bottomline for DOMESTIC & INTERNATIONAL PAYMENTS EFFICIENT CASH MANAGEMENT ENTITLEMENTS & RIGHTS MANAGMENT FRAUD DETECTION, BEHAVIORAL ANALYTICS AND REGULATORY COMPLIANCE KEEPING AHEAD OF PAYMENT REGULATIONS, TRENDS & PROTOCOLS 2
Y O U R P R E S E N T E R 20 Years in payments ACH, Immediate Payments, RTGS, SWIFT Commercial Solution Manager Bottomline Universal Aggregator Global Messaging Networks Customer Infrastructure Secure Connectivity Payment Message Management Transformation Payment Management Universal Aggregator Efficient, global multi bank connectivity Liquidity Management Payment Fraud Detection Standards compliance Sanctions Screening Exception Management Reconciliation Secure Connectivity Immediate Payment Infrastructures Domestic ACH Domestic RTGS Central Banks Settlement Banks KEEPING Bank AHEAD Host to OF Host PAYMENT systems REGULATIONS, Plus TRENDS & PROTOCOLS 3
THE NEW WORLD
Payments Landscape Changes UK, Europe March 2017 First APIs introduced for Open Banking (non-personal data) Work continues on Account Information and Payment Initiation January 2018 Open Banking Payment Initiation and Account Information APIs available, using existing FPS rails initially PDS2 Comes into force 2022 2023 Old UK Payment Infrastructures Bacs, FPS, withdrawn. All payments push payments, New rails December 2017 SEPA Instant Credit Transfer 1 st Payment UK Payment scheme companies merged in preparation for UK ACH changes 2019 2020 PSD2 Payment Initiation and Account Information APIs available UK New Payment Architecture launched including new props: Request to Pay (RTP), Enhanced Data.
What do we mean by immediate / real-time / fast instant? Service Available 24 hours / 365 days Funds available immediately Immediate confirmation to payer
Open Banking and Payment Services Directive (PSD)2 Requirement to allow API access to bank accounts by regulated Third Parties Read Viewing AIS balances & transactions Write PISP Payment Initiation Driven By Region Legally Enforceable Scope Read and Write Access has to be available Third Party Processor requirements Open Banking UK Government -Competition and Markets Authority (CMA) UK Largest 9 UK Banks* January 2018 Regulated as PI (Write) Registered with regulator (Read) PSD2 European Commission European Union (EU) and European Economic Area (EEA) All Account Servicing PSPs in EU and EEA May 2019 (despite Brexit, UK likely to still be in EU at this point) Regulated as PI (Write) Registered with regulator (Read) Standard API Yes No (some collaboration) Delivery overseen by Overlap CMA and Bank of England through separate Implementation Entity Open Banking utilising Read/Write, API principles of PSD2 European Banking Authority
WHY ARE CARDS INTERESTING TO THE ACH / REAL TIME WORLD?
Mastercard buy VocaLink
WHAT COULD HAPPEN?
Being a Payment Initiation Service Provider PISP must be authorised by customer to initiate payments on their behalf Service provided as payment option for merchants PISP establishes secure link between merchant and customer s e-banking platform Provides balance at point of payment initiation Shift from pull card payments (requested by beneficiary) to push January 13 th 2017 Who could be a PISP?
Potential Impact on Established Models Enter the PISP Cardholder Merchant Customer Merchant PISP Issuer Acquirer Customer's Bank Acquirer Scheme Scheme Disintermediated Lower card revenues
Potential Impact on Established Models Merchant PISP Cardholder Merchant Customer Merchant is PISP Issuer Acquirer Customer's Bank Acquirer Scheme Scheme Disintermediated Lower card revenues
Potential Impact on Established Models Acquirer is PISP Cardholder Merchant Customer Merchant Issuer Acquirer Customer's Bank Acquirer is PISP Scheme Scheme
WHAT COULD THE NEW WORLD LOOK LIKE?
What is the predicted impact? 750bn in annual retail expenditure is set to switch to Instant Payments across Europe by end 2027 Single-transaction card payments will drop from a 40% online market share to 11% in the next 10 years. Source: Ovum Instant Payments will grow in e- commerce, reaching 338bn of online expenditure by the end of 2027.
What is the predicted impact?
What is the predicted impact?
OPEN BANKING vs CARDS
Consumers only trust banks
Consumers only trust banks
Immediate Payments easily competes with all card payments? Immediate Payments not suited to POS too slow No chargeback protection with Immediate payments Why doesn t my debit card transaction show on my statement immediately? Pay by Bank / Zapp not setting the world on fire Customer doesn t care about my costs of processing transactions
SO
Opinion from my world Acquirers will become PISPs increase choice, keep the volume Retailers of scale will become PISPs but they won t become banks Financial Technology Providers become PISPs may lack trust Immediate will eventually make its way to POS Large bank investments in Immediate Payments globally betting on change Real, real-time used to be the preserve of the biggest banks new access models change this
ANY QUESTIONS?