United StatesChange Country

FX International Payments

2017 in Review: International Payments Gained Speed, But Not Simplicity

By Mike Faden

Thanks to new technology, payments became faster and increasingly mobile in many parts of the world in 2017 — though not necessarily less complex. Key developments included the continuing rollout of real-time payment services, including the launch of a U.S.-based system;1 explosive mobile payments growth in India, China and other countries; and the emergence of blockchain-based services for domestic and international payments.

Real Time Payments Services Spread to the U.S.

 

When it comes to real-time payments, the U.S. has lagged many other countries; one report identified 25 live real-time payments programs worldwide in 2017, up from 19 in 2016.2 That started to change in November 2017, with banks initiating the first live transactions to use a U.S. domestic real-time payments service developed by bank-owned provider The Clearing House. The service is said to be the first new core payments system in the U.S. in more than 40 years.3 Other banks are expected to start using the system in 2018, but one report suggests the technology won't become widespread until 2020.4

 

Traditional U.S. payments services became faster too: the ACH network began supporting same-day payments, and expanded the capability to include debit as well as credit transactions during the year.5 One U.S. Federal Reserve analysis estimated that for the first time, businesses are making more payments through ACH transfer than via check.6

 

In Europe, the first comprehensive international instant payment system went live in November. SEPA Instant Credit Transfer (generally abbreviated to SCT Inst) enables instant transfers in euros between participating countries within the Single Euro Payments Area (SEPA).7

 

Mobile Payments

 

Some countries have seen startling growth in mobile payments, although adoption in the U.S. has been slower. One 2017 estimate suggested that China has more than 520 million mobile payment users, representing more than one-third of the country's population and roughly 60 percent more than the entire population of the U.S.8,9,10 According to market-research firm iResearch, China's mobile payments value in 2Q17 alone was roughly $4 trillion, a 95 percent increase over the prior-year period.11

 

In India, mobile payments soared after the government's "demonetization" initiative temporarily removed large-denomination banknotes from circulation. According to the Times of India, government statistics predict an 80 percent rise in the total value of digital transactions in 2017-2018, with many of those transactions initiated from mobile devices.12 Allied Market Research predicts that global mobile payments transaction value will continue to grow at more than 33 percent a year through 2022.13

 

Open Banking APIs

 

The financial-services landscape is being reshaped by application programming interface (API) technology, which allows different financial-services organizations and applications to instantly communicate and share information. Factors driving the trend include regulatory and payment industry initiatives, as well as competition from financial-technology (fintech) providers.

 

The EU's Payment Services Directive 2 (PSD2), for example, directs banks to provide APIs that make customer data available to external applications, with customer consent. This may make it easier for customers to use third-party payment providers, and to manage financial information consolidated from several bank accounts.14

 

In the U.S., NACHA, an industry association focused on ACH payments, started working on standard APIs for use across the financial-service industry.15

 

Managing Fragmentation and Fraud

 

One perhaps inevitable result of the rise of new mobile and other digital payment methods is that companies involved in international trade face the challenge of dealing with a fragmented payment services landscape, with different payment services available in different countries. Experts say that businesses may consider multiple approaches to the problem, including working with global payment providers and accepting local payment methods in large markets.16

 

The proliferation of e-commerce together with faster payment methods has also increased fraud concerns, particularly since real-time payments are usually irrevocable. Despite those concerns, some payments services report that faster payments haven't resulted in a corresponding increase in fraud.17,18 In response to the growing threats, some businesses and payment services are using machine learning to identify potential fraud attempts and automate their responses.19

 

Blockchain Payments Take Off

 

Blockchain payments started to move into the mainstream of B2B and consumer payments, emerging in cross-border and domestic payment services from several payment providers, banks and other financial-services organizations. Experts say blockchain is seen as particularly promising for cross-border payments, because it promises to enable faster payments at lower cost, with better visibility, than traditional correspondent banking networks.20

 

Technology and financial-services companies are also working on building blockchain solutions for many other areas related to international trade and cross-border payments. They include trade finance, Know Your Customer (KYC) and Anti Money Laundering (AML) regulations.21,22 Several national banks are exploring the potential for national digital currencies that use blockchain technology.23,24

 

The

Takeaway:

2017 was a year of considerable payments innovation. Real-time payments services continued to proliferate globally, with a major system making its first appearance in the U.S. Mobile payments showed extraordinarily rapid growth in India, China and other countries. Blockchain-based international payment services moved from development to production, and many companies began exploring the potential for blockchain to transform other services related to international trade.

Mike Faden - The Author

The Author

Mike Faden

Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Partners.

Sources

1. “First New Core Payments System in the U.S. in more than 40 Years Initiates First Live Payments,” The Clearing House; https://www.theclearinghouse.org/press-room/in-the-news/20171114%20rtp%20first%20new%20core%20payments%20system
2. Flavors of Fast 2017, FIS; https://www.fisglobal.com/flavors-of-fast-2017
3. “First New Core Payments System in the U.S. in more than 40 Years Initiates First Live Payments,” The Clearing House; https://www.theclearinghouse.org/press-room/in-the-news/20171114%20rtp%20first%20new%20core%20payments%20system
4. “New Real-Time Payment System Could Help You Avoid Late Fees,” Consumer Reports; https://www.consumerreports.org/banks-credit-unions/new-real-time-payment-system-could-help-you-avoid-late-fees/
5. “2017: The Year of Faster Payments,” Association for Financial Professionals; https://www.afponline.org/trends-topics/topics/articles/Details/2017-the-year-of-faster-payments/
6. “Federal Reserve Payments Study highlights changes in consumer and business payment choice,” U.S. Federal Reserve; https://www.federalreserve.gov/newsevents/pressreleases/other20170630a.htm
7. “Sepa instant payments goes live,” Finextra; https://www.finextra.com/newsarticle/31345/sepa-instant-payments-goes-live
8. “Mobile payment users in China exceed 520m,” GBTIMES; https://gbtimes.com/mobile-payment-users-in-china-exceed-520m
9. “Demographics of China,” Wikipedia; https://en.wikipedia.org/wiki/Demographics_of_China
10. “QuickFacts,” U.S. Census Bureau; https://www.census.gov/quickfacts/fact/table/US/IPE120216
11. “GMV of China's Third-Party Mobile Payment Market Topped 27 Tn Yuan in Q2 2017,” iResearch; http://www.iresearchchina.com/content/details7_37999.html
12. “Demonetisation to power 80% rise in digital payments, may hit Rs 1,800 crore in 2017-18,” Times of India; https://timesofindia.indiatimes.com/business/india-business/demonetisation-to-power-80-rise-in-digital-payments-may-hit-rs-1800-crore-in-2017-18/articleshow/61500546.cms
13. “Mobile Payments Market by Mode of Transaction (SMS, NFC, and WAP), Types of Mobile Payment (Mobile Wallets/bank cards, and Mobile Money), and Application (Entertainment, Energy & Utilities, Healthcare, Retail, Hospitality & Transportation, and Others) - Global Opportunity Analysis and Industry Forecast, 2014-2022,” Allied Market Research; https://www.alliedmarketresearch.com/mobile-payments-market
14. “Payment Services Directive: frequently asked questions,” European Commission; http://europa.eu/rapid/press-release_MEMO-15-5793_en.htm?locale=en
15. “NACHA’s API Standardization Industry Group Names First Five APIs to Develop to Support Payments Industry Advancement,” NACHA; https://www.nacha.org/news/nachas-api-standardization-industry-group-names-first-five-apis-develop-support-payments
16. “11 Biggest Challenges of International Business in 2017,” Hult International Business School; http://www.hult.edu/news/international-business-challenges/#universal-payment-methods
17. Immediate Need for Fraud Prevention: Best practices for preventing fraud in a real-time world, ACI Worldwide; https://www.aciworldwide.com/-/media/files/collateral/trends/immediate-need-for-fraud-prevention.pdf
18. “No Fraud Spike With Same Day ACH, Says NACHA,” PYMNTS.COM; http://www.pymnts.com/news/faster-payments/2017/nacha-same-day-ach-faster-payments-bank-financial-institution-survey-fraud-use-adoption/
19. “Artificial Intelligence in Payments, Payments Views; http://pv.glenbrook.com/artificial-intelligence-in-payments/
20. “How Blockchain Could Disrupt Cross-Border Payments,” The Clearing House; https://www.theclearinghouse.org/research/2016/2016-q4-banking-perspectives/blockchain-cross-border-payments
21. How Blockchain Can Restore Trust In Trade, UPS; https://longitudes.ups.com/how-blockchain-can-restore-trust-in-trade/
22. “KYC and Blockchain, Finextra; https://www.finextra.com/blogposting/13903/kyc-and-blockchain
23. “China’s Central Bank Has Begun Cautiously Testing a Digital Currency,” MIT Technology Review; https://www.technologyreview.com/s/608088/chinas-central-bank-has-begun-cautiously-testing-a-digital-currency/
24. “Central Banks Can’t Ignore the Cryptocurrency Boom,” Bloomberg News; https://www.bloomberg.com/news/articles/2017-08-30/cryptocurrencies-are-new-barbarians-at-the-gate-of-central-banks

Related Articles

Pros and Cons of Bitcoin for International Payments
Emerging Trends In International Payment Solutions
Bitcoin and the Future of Blockchain in International Payments Systems

Make International Payments

Existing FX International Payments customers log in here