April 18, 2016

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Global Cross Border Real Time payments

Evolution of Payments market

Payments market has evolved to the core right from barter system to Coins, Notes, paper based, telegraphic/wire transfers, plastic cards and will continue to evolve with ongoing innovation like Real Time Payments, Cryptocurrency etc.

Pain points in traditional Cross border Correspondent banks routing

Routing cross border payments using traditional correspondent is just not fit for purpose for the below mentioned reasons

  • No one wants to spend $40 to move $50. Parties involved in a payment cycle (as illustrated below) take away their share of fees resulting the end customer ends up bearing more transfer fees.
  • Too slow and need to wait for at least three days to get funds
  • Lack of technological support
  • Varied payment structures in practice

Current state of Real or near time retail payments system (RT-RPS)

18 countries have implemented their RT-RPS either to settle in real time or near real time. Additionally, 12 countries including United States of America (USA) are exploring/planning/building their RT-RPS and 17 countries are looking for a pan-European initiative. Except UK, most of the countries followed/following the ISO 20022 standards.

Kudos to the technology which supports in implementing the regulatory initiatives, stimulates competition among payment system providers which drives financial institutions to innovate / embrace new products to attract new customers and extend customer base.

Having said that, not all countries have their RT-RPS in place and considering the current bank’s IT landscape achieving a Global cross border payments facilitating real time payments couldn’t be envisaged in near future unless banks start making use of the alternative payment protocol wherein transactions are being recorded using distributed ledger system, to name a few Ripple, Bitcoin, etc.

Distributed Ledger Technologies – A way forward

Earthport, an Internet payment infrastructure provider is now using the Ripple protocol as part of a new solution that yields insight into the problems major banks are facing in bringing their tech out of the lab and to the market.

More in news

  • D+H Partners with Ripple to Deliver Innovative Payments Capabilities and to Create Foundation for Future Disruptive Payment Innovation
  • RBS Trials Ripple Tech For Automated Interbank Transfers
  • Two of Australia's "big four banks," Westpac Banking Corporation and the Australia and New Zealand Bank Group (ANZ), are trialing Ripple payments for faster and lower-cost cross-border payments