There is less than one month to go (27th May) until banks start offering Faster Payments (FP), allowing customers to make near real-time payments 24 hours a day 365 days a year.

The Faster Payments scheme, which includes standing orders, is the banking industry’s response to Government concern that the UK did not have a low cost, quick and efficient electronic payment mechanism. This is a big step forward and will be welcomed by the consumer, yet presents a combination of opportunities, challenges and risks for the banks.

Ian Foottit, payments strategy director at Deloitte, said: “On the plus side, Faster Payments does provide innovative retail banks with a real opportunity to think about customer friendly new services for the consumer. For example, offering emergency payments triggered by mobile phone alerts if a customer is in danger of missing the ‘pay by’ date on a bill could allow one bank to differentiate itself from its competitors.”

However, there is likely to be a considerable cost to banks in terms of cannibalisation of existing CHAPS revenues, and there will undoubtedly be risk issues, as banks will have to approve payments within a matter of seconds of receiving requests for funds. 

Stephen Ley, a partner in Deloitte’s Enterprise Risk Services practice specialising in payments and retail banking said:  “The Faster Payment system will be a challenge for banks which could lead to increased risk of fraud as it will be harder for banks to detect and block fraud in the time window available. The existing process relies, in part, on banks having sufficient time to detect suspicious transactions. 

“Faster Payments can bring significant benefit to customers, businesses and banks as long as the risks are managed. The banks which successfully manage these risks will gain significant operational and strategic benefits.

“A number of banks have opted to issue card readers which work with their customers’ debit card to create a more secure authentication and authorisation process. With over 20 million customers regularly using internet banking, increasing online safety is clearly a priority.”

Businesses will welcome the introduction of FP as it will enable them to reduce the charges they incur on payments below £10,000 by moving from CHAPS, the UK’s Real-time gross settlement (RTGS) system, to FP. Currently the only way to make a same-day payment is via CHAPS, which is significantly more expensive than the three day Bacs payments system.

The introduction of new services based on FP may, in time, also be used by merchants and others in preference to credit card and debit card transactions.

The implementation of FP has not been without its challenges and the ‘live date’ has already been deferred by six months to allow banks to ensure their systems are ready on day one.  For some banks, having a real time customer balance across many channels including, ATM, phone, branch and internet, has required significant work, but for all the banks addressing the new security threats of an almost immediate and non-cancellable payment system is a challenge.

When Faster Payments goes live transactions will be limited to £10,000 for immediate payments and £100,000 for standing orders, although some banks may choose lower limits.  In time it is expected that these limits will be increased.

Deloitte's payment processing and screening experts.
 

Ends

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.