Faster faster

[Dave Birch] At the Intellect Financial Services group meeting, Paul Smee, the Chief Executive from the Payments Council, gave an excellent summary of Council's goals and objectives as well as making some suggestions for better co-operation between the technology industry and the financial sector, such as creating some kind of vendor forum. He said in passing that much of his focus over the last couple of years has been the Faster Payments Service (FPS). FPS is a little bit of a success story for the UK payments industry, so it's worth talking about.

banking and finance, cash and cashlessness, cheques and checks, SEPA and PSD

This reminded me that I went along to a typically excellent evening organised by the FS Club, in conjunction with Intellect, looking at specifically at FPS. I'm probably not a typical consumer, but FPS has delivered for me in its key use cases. In the last few days these have included:

• The Sunday afternoon phone call "I'm in Top Shop and I really need to get these great trousers that are on sale but I forgot to pay in the cheque I had can you send me £30 right away" so I dutifully open up Barclays in my browser and send £30 to his account, he then uses his debit card ten minutes later (note for foreign readers: Top Shop is like the Moonies, but for 15 year olds in the UK). #pass
• We're having some building work done on our house, so we're renting at the moment, which means I've been making so fairly large payments to builders, landlords, suppliers. I sent £10 to each of them and once they had confirmed by e-mail that it had arrived (because I learned my lesson on putting in incorrect account details, more on this later) then they were in my "system". So when the builders send what they call their "application" for interim payments, I send them by FPS immediately. #pass

Not bad. But there are a number of problems.

• When I send money to one of the suppliers, I have no idea whether the transfer will go via FPS or not. So I can't tell them whether the money will be there in 3 minutes or 3 days. #fail
• * If the Barclays home banking system would just colour code that would be fine. So when you click "OK" on a transfer, it comes back and says "Done" in red for an FPS transfer, blue for a BACS transfer.
• FPS was supposed to be the core of a new national mobile payment initiative but as far as I can see nothing has happened on this #fail

As the discussion at the FS Club opened up, there were one or two longer-term implications of the shift to FPS being discussed. Vocalink had commissioned a report from the accountants Price Waterhouse, which said that the potential revenues to banks from FPS a decade from now would be {INSERT RANDOM NUMBER HERE} and no-one would argue with the fact that the it represents a source of income. But there are areas where it could be doing a little better. An example of this is the mobile interface. If FPS is going to be part of the roadmap to getting rid of cheques, then it's clear that it will need a mobile phone interface that anyone with a bank account can use.

The Payments Council are studying mobile-based bank account to bank account transfers as we speak, guided by the focus given to mobile in the National Payments Plan published by the Payments Council

[From Digital Money Forum: Slightly faster payments]

This has been talked about for a while, but nothing much is happening as far as I can see. I hope this will be a focus for the Payments Council over the coming year.

Oh, and I really disagreed with a couple of the points that were made as well. Someone said that "when you give people a cheque they feel like they've been paid". I disagree: they feel like they've been given homework. And someone else said that FPS would make bank runs more likely because people could shift their money out of banks more quickly. This seems unlikely to me: surely if the system was melting down, someone (who's in charge -- the FSA? Bank of England?) can just turn it off.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

Comments

[twitter.com/dgwbirch]

"Mobile phone users are used to near instant responses from their devices"

Indeed, and this is one of the challenges. But I think that positioning mobile FPS as cheque replacement wouldn't preclude another (probably pre-paid) national mobile cash replacement scheme.

[simon cavill]

Hi Dave,
I feel that like many consumers the Faster Payments scheme is currently a real mess at present as not all UK banks are in the scheme and therefore its a bit of a lottery if your payment will clear rapidly or not.

Even if your bank does participate, some sort codes still don't work with the scheme (My Nationwide account does not qualify apparently).

And even if you get through these hoops, the transfer limits for faster payments with some banks are utterly ludicrous (£10 for Nationwide, £100 for the Cooperative bank etc).

Its a complete shambles that will only be rectified when the vast majority of UK consumers can use the service with sensible limits and its only then that some form of mobile payments scheme can be brought in on the back of it. After all, would you wait 3-5 days for an SMS to be delivered? Mobile phone users are used to near instant responses from their devices, so entering the UK payment lottery from your phone will be a rather pointless exercise for now...

Simon

PS. When will the UK catch up with Kenya?