With all the news stories surrounding Fintech disruption, emerging regulation, the development of new Payment Systems and ever-glossier consumer interfaces, it is easy to overlook the question of what it is that end-users actually need from their payment systems. To that end, the 2015 UK Payment Statistics published by Payments UK (downloadable here) makes particularly interesting reading given the UK already has a well-established Faster Payments platform alongside other payment systems.
For those not familiar with the UK Payment Systems, the four principal systems used by consumers and businesses alike are:
- Bacs: Direct Credits and Direct Debits which operate on a three day processing cycle.
- CHAPS: Same day High Value Payments which settle in real time across the Bank of England’s Real Time Gross Settlement System (RTGS).
- Cheque & Credit Clearing (C&CCC): Used for the clearance of cheques and and credits over a six day clearing and settlement cycle.
- Faster Payments (FPS): 24×7 processing of both timed and immediate payments up to £250K. Normally cleared within 2 hours.
Between these systems, a total of 7.8 billion payments were made in the UK during 2015, which represents growth of 4% over 2014. In value terms, these added up to £74.5 trillion. The breakdown per system was as follows:
|System||Volume (millions)||Volume Share||Change from 2014||Value (£billion)||Value Share||Change from 2014|
Separately, the UK ATM Scheme Operator LINK reported that 2015 represented a record year in terms of the amount of money (£128 bn) that had been withdrawn from its network of ATMs, the total number of withdrawals made and the number of ATMs in use. They note that the value withdrawn under-represents the total value of cash withdrawn via ATMs since it did not include figures for money withdrawn by the customers of Banks using their own ATMs.
The next table shows the breakdown of volume (millions) by payment type in 2015 with and the delta from the previous year.
|Single Immediate Payments||730||+20|
|Forward Dated Payments||170||+7|
|Retail & Commercial (MT103)||29||+2|
|Wholesale Financial (MT202)||8||+5|
So, what facts and inferences can be taken from these statistics:
- Real time/“immediate” payments only represent 10% of all payments made across the four principal UK Payment Systems. The remaining 90% are timed or forward-dated in one way or another. Even within FPS, over 40% of its volume is for timed as opposed to immediate payments.
- Of particular note, (and notwithstanding the fall in cheque volume), the total volume growth of timed and forward dated payments in 2015 (@ 197m) is greater than the corresponding growth in real-time/“immediate” payments (@ 122m).
- The volume increase in timed payments highlights that this remains a key payment mechanism for businesses and consumers alike. Most business payments just need to be paid on a given day and that is pre-ordained through their invoice processing and accounting systems. Most consumers probably do not mind what time of the day their monthly TV subscriptions are paid; they just want to know it will definitely be paid on the day it is due. Similarly, employees will want comfort that they will be definitely paid on the day their wages are due but may be less concerned about the time the money is paid into their account on that day.
- It is likely that part of FPS’ growth in “Single Immediate” Payments is from the downturn in UK cheque usage. The remainder is likely to be organic growth. A key question is whether this growth will continue unabated and whether it will also take payment volume from the “timed” market.
- The reduction in paper based cheque/credit volume is mirrored in other countries. However, with over 430 million items being processed in 2015, its significance (particularly to small businesses, charities and those who either do not wish or cannot access newer technology) is still very relevant.
- The growth in ATM volume and value also highlights that this payment medium still remains of importance to the wider population, notwithstanding the rise in other consumer-facing payment mechanisms such as contactless cards and Mobile Payments.
The statistics around timed payments would appear to raise a key question. With just 10% of the current UK payment market in the Real-Time/ “Immediate” space, is there sufficient future traction available to warrant and support the continued widespread investment being made in the area of “instant payments” and consumer payment interfaces?
As more and more countries look to implement “Instant Payment” solutions, the experience of the UK eight years on since its own Faster Payments payment system was launched also highlights that the requirement for timed/future dated payment solutions to be able to co-exist alongside real-time “instant payment” mechanisms remains a real world necessity. It would seem that, unless technology can find a way of innovatively amalgamating the world of timed and real-time payments (and the differing processing needs these payment types require), there may need to be a two track payments environment for the foreseeable future.