A Masterpiece in the Making for FinTechs?

Could real-time payments become a reality for FinTechs?

Last week we witnessed the integration of TransferWise into the Faster Payments Service (FPS), the UK real-time payments platform, as a technical partner to Raphaels Bank: a newly formed relationship from which TransferWise’s end-users will benefit directly.

Payment service providers (PSPs) are increasingly feeling the pressure to deliver real-time platforms and TransferWise is the first FinTech to gain direct access to the FPS via a technical partnership. What does this recent news signal for the UK’s real-time payments landscape?

The canvas is primed …

The FinTech and payments industry is ever-expanding and the real-time payments market is expected to almost treble in size over the next 5 years. The FPS, the world-leading instant payments system, was initially launched back in 2008 in response to regulatory pressures to open up competition, improve efficiency and drive growth.

The FPS has been gaining momentum in recent years and in December 2014 it issued a whitepaper detailing its “Vision for a New Access Model”. With the new access model now in the final stages of delivery, the FPS has been levelling the playing field and priming the canvas for PSPs of all shapes and sizes that want to offer immediate/real-time payments via FPS – TransferWise being one of these.

Real-time payments: a FinTech reality?

The integration of TransferWise into the FPS via a technical partnership with Raphaels Bank means that both the FinTech unicorn and their customers will be the first to benefit directly from the FPS. As such, UK customers will be able to make transfers outside of regular banking hours (including overnight and weekends). For TransferWise, their integration to FPS means its payments are no longer reliant on the banking infrastructure and at risk of potential delays caused by a third party policy.

Raphaels Bank is the 12th direct participant of the FPS and the first new bank to connect to the FPS scheme since its launch. Upon joining the scheme, the bank has expressed its key aim to enable access to real-time payments for PSPs by acting as a sponsor. The bank hopes that more of its counterparts will offer sponsored access and it will also be encouraging FinTechs to ‘shop around’ for the best partnership deal.

The access options for PSPs are outlined in a recent paper published by Raphaels Bank and they present the case for offering access via the direct agency model. Although it has not been fully exploited in the past, it is argued that this model could give PSPs greater control, allowing members to capitalise on outsourced settlements and ultimately to provide FinTechs with the full functionality of the FPS. This could pave the way forward for collaboration between banks and FinTechs to help turn the FPS’ UK real-time payments vision into a reality!

A masterpiece, not sure… a colourful horizon, definitely!

With three more PSPs, including the challenger start-up bank Starling, set to join before the end of 2016, the Faster Payments palette is certainly expected to become more vibrant and colourful. A real-time payments masterpiece may be a little while off, but the canvas is primed for PSPs in a burgeoning FinTech landscape underpinned by competition and innovation. The opportunity exists for FinTechs to leverage FPS access in a new light and we will keep an eye on the changing landscape, the artists in contention (i.e. scheme joiners) and their chosen mediums (i.e. access and partnership deals)!