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Most payments are still today handled using paper-based paradigms and although electronised, mostly processed by batch systems. However, there are also some payment services based on modern real-time processes, but just within the same bank or service provider for example the web-payments of Finnish banks and PayPal. These are developed especially for e-commerce purposes.

Most other industries have moved to real-time and in-time deliveries. Parcel transportation and container companies know in real-time the position of every individual parcel or container. The Finnish libraries know in real-time the position of every book. It seems high time that banks would start to strive for the benefits of low-cost real-time and network technology.

There are major benefits for customers and banks in real-time processing of payments. The balances can be invested more efficiently both overnight and intraday. There would be no payments in transit, which result in better control of the payment process. Errors would be detected immediately, when it is much more efficient to correct them than based on delayed error reports some days later. The security will increase, when modern security features are used and the cover is secured before crediting. As all payments would be immediately processed, it would guarantee payment reception and immediate finality. The main processing efficiency would be gained by deep integration of event-driven business processes, between all concerned parties payers, payees and their banks. A network of basic Java-processes in a web of servers would provide the payment transportation service in the same way as transporting emails, SMS-messages and alike. The cost level of distributed network-based server technology is clearly lower than that of centralised batch-based mainframe technology.

The basic requirements of a real-time payment infrastructure are a common global definition of the payment network structure, participant interfaces and message standards, real-time account systems of the service providers, an interbank trunk network among the service providers, a general e-identification service, secure and protect hardware devices for the encryption and identification processing and a real-time settlement service among banks. In fact, this resembles very much the current email services, when the balances are added and the security level is improved. Customers would view their payment accounts much in the same way as they view currently their email accounts. Instead of emails they will see incoming and outgoing payments on their payment accounts. The account service providers would send individual messages directly between them in the same way as email service providers send emails.

Currently e-mails are accessed both via PCs and mobile phones. This will probably also be the case for real-time payments as the mobile phone contains all the necessary features for becoming an efficient payment platform for consumers. It can interface with the merchant terminals. Payees can accept the payment with simple clicks. The receipts can be stored in the memory of the phone. The balance of the account and the individual payments can be viewed on the screen. Modern phones contain also advanced security features. User-friendly m-payments will most probably be the fast track to real-time payments.

A coordinated and cooperative undertaking by all involved parties is needed in order to reach the new level of technology and efficiency.

author Harry Leinonen, Bank of Finland