The interoperability of domestic payment systems around the world is critical for the next stage of the real-time-payments (RTP) revolution – and it’s already happening in our region.
Projects like the one seen in Thailand and Singapore, which links two domestic RTP networks across borders, are a sign a “nexus” of different but interoperable systems that effectively provides an “internet of payments” can be a reality, according to Balaji Natarajan, Head of Payments & Cash Management Product Asia at ANZ Institutional.
“Some of the advanced [regional payment networks] are moving to the next phase of evolution, which is connecting cross-border payments with real-time payment mechanisms,” he said - using bank “rails” for payments that are faster and cheaper than non-traditional alternatives.
“My belief is we are set for good times in terms of our ability to organise and settle real-time payments across countries,” he said.
Natarajan made the comments on a podcast with Carolyn Young, Head of Domestic Payments & Receivables, and Luke Perkins, Head of Global Cross Border Products at ANZ Institutional. You can listen to an edited version of the conversation below.
Perkins said the seeds of the evolution are being planted as domestic capabilities are increased around the world.
“The beneficial part is a lot of [regions] - albeit domestically focussed and solving local needs as a priority over anything else - have built [RTP networks] in such a way that interoperability across geographies isn't going to be too far out of reach,” he said. “I think that's a very real opportunity.”
Perkins said broad cross-border interoperability of RTP networks would do wonders for trade and e-commerce, as well tourism and education.
“Once we get into a post-COVID world, when we can get back on planes and visit family and friends… it's going to be a whole different world,” he said. “I actually think it's pretty exciting, to be honest.”
Young said while Australia has lagged many other regions when it came to RTP, it allowed the country time to view best-in-class approaches.
“The benefit of seeing the progression in other markets meant it took that step to [ISO 2022 standards] straight away as part of introducing RTP,” she said. “And so and that gives us a really good platform to create that standardisation, the opportunity to interact with other markets without necessarily creating a new level of protocol.”
Perkins said COVID-19 had accelerated “the need for digital access, remote access [and] expediency,” around the world, including when it comes to payments.
Australia’s RTPN - the New Payments Platform – had been instrumental in the organised response to the pandemic, Young said.
“[Australia’s] government has leveraged those rails to make government-to-citizen payments for relief and support during times of restrictions and lockdowns,” she said – not just for consumers, “but also businesses [that] need support and are not able to operate in their normal way.”
Young said the pandemic had made businesses realise the needs to move away from face-to-face interactions and towards “contactless, online scenarios”.
“Faster payments give them the opportunity to do that,” she said. “And [ANZ’s] customers, as corporates and large institutional businesses, are really starting to see the opportunity to accelerate their intent around digitisation by using real time payments as a way to catalyse that and shift their experience.”
“In reality, the industry and the banks, are trying to maintain their capability, and develop more capability, so they can do that - and extend that reach to beyond individuals and beyond consumers into the business space.”
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Perkins said while the concepts around interoperability and centralisation were exciting, he understood questions around attainability, practicality and complexity.
“If we think about our customers - ANZ services anyone who wants to send a single payment a year to a bespoke beneficiary in a bespoke geography, [all the way up to] an institutional corporate sending thousands of transactions.”
“For me is one of the challenges that… need to be worked through.”
But the biggest barrier Perkins sees is time.
“We're talking about hundreds of countries adopting many, many different layers of customer need, and demand, and payment capability, and investment, and all those things that come with it,” he said.
“The reality is we might end up with some bespoke networks along the path, but we should always make sure we're keeping an eye on the holistic view.”
Natarajan agrees on timing – and warned not all countries would develop at the same pace, making ultimate interoperability more difficult.
“I think the transition might happen faster in some countries,” he said.
Young said that would be evident within markets, let alone across markets.
“I think there'll be pockets that will be really quite seamless and there’ll be motivation from both ends of the market to make that work,” she said. “There will always be varying levels of abilities.”
Equally, Young insists, circumstances can force change quite quickly – as many have seen with their own eyes through the pandemic.
“If there's a catalyst, like a crisis or disruption, it's really going to push a lot of what traditionally has been a bank-driven activity along,” she said. “I think there'll be an aspect of survival needing to create this.”
“We'll see some leaders that will take it to the next level, and everyone else will have FOMO.”
Natarajan said that two-paced development created a new role for banks, which could provide “the bridges which allow that interoperability”.
“Those kind of asymmetries are good opportunities for our banks to step in and help customers want to transition from one side to the other,” he said.
For Perkins, the ultimate outcome – complete interoperability – is, given enough time, inevitable.
“It'll happen,” he said. “I think that the types of conversations that we're seeing happening are the exactly the right ones.”
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