Retail Payments System
In today’s world, where people are connected instantly to one another via the different communication tools that technology offers, speed and efficiency have become the norm. Immediacy has become a de facto state of our daily lives requiring us to come up with solutions to continuously strive to achieve it. The case in the payments industry is no exception. During past centuries, cash has been considered as one of the most convenient payment instruments that ensures the transfer of funds immediately. However, cash has its challenges and drawbacks. For instance, it is an expensive instrument due to the costs associated with printing, storing and circulation.
Accordingly, countries around the globe have been working towards achieving cashless societies by implementing different systems and payment schemes to serve this goal, and up until recently, money transferred electronically was only available to the beneficiary - whether it was a merchant or an individual - after a delay of one or several days. Hence, in recent years, several initiatives have been developed to allow money transferred electronically to be made available instantaneously to the beneficiary.
Across the world, immediate payments (also called urgent payments, or faster payments, or real-time retail payments) have been gaining a great momentum. This new rising trend is unstoppable because it is backed up with the increasingly growing customer demand for easy, fast, convenient, secure, and always available payment services. This demand fits with what technology can deliver in our current days.
PS-RPS is a nationwide real-time retail payments system designed to operate on 24x7x365 basis in order to serve and fulfill the demands of end-consumers and provide them with high flexibility and promptness. Customers using PS-RPS will be able to exchange bank money face-to-face, as easily as they used to exchange banknotes and they will be able to send money anywhere in the country at electronic speed, even when the banks are closed.
With the prevalence and growing ubiquity of smart devices along with the rise of new technological trends such as the Internet of Things (IoT), the payment options and channels offered to end-consumers have widened drastically. Consumers are able to choose from a multitude of payment initiation channels being it their smart devices or any other internet connected device, including their personal computers. For reasons of convenience, it is expected that smart phones will be the most extensively used payment access device to the new generation of retail payment systems to which PS-RPS belongs.
PS-RPS supports all smart devices payment initiation channels and applications and enables consumers to initiate different types of payments such as Person-to-Person (P2P), Business-to-Business (B2B), Person-to-Business (P2B), Business-to-Person (B2P) and governmental payments. Typical payments are single credit transfers. However, PS-RPS offers a new arrangement for direct debits, which does not require pre-arranged mandates and thus offers to customers a better control on the balance of their bank accounts.
PS-RPS distinguishes settlement between customers which is immediate and at any point in time, including nighttime, weekends and bank holidays, and settlement between banks which takes place, typically in an RTGS system, when the central bank is open.
The design of the settlement engine in PS-RPS is flexible and configurable, allowing the payment administrator to choose from a multitude of options. PS-RPS is designed to allow multiple settlement cycles during the day and to cover the entire 24 hours. The settlement cycles can be triggered based on either one of the following two factors, whichever is satisfied first:
- A configurable time duration
- An amount threshold equivalent to the different liquidity reserves of the banks (i.e. debit caps)
PS-RPS utilizes the Deferred Net Settlement (DNS) approach for interbank settlement. Once each settlement cycle is completed, the system generates the net positions of the participating banks and communicates them to the central bank for final settlement in the RTGS system. In the meantime, the next settlement cycle would have been started already.
The DNS approach designed in PS-RPS complies with the Principles for Financial Markets Infrastructure published by the Committee on Payments and Market Infrastructures (CPMI). Those principles are set as a global standard to support financial stability around the world. Following those principles, the DNS approach requires the banks to have full collateralization of their debit caps.
The most obvious benefits of this new trend are reaped by end-consumers and businesses. Besides the evident advantages of being able to send and receive payments on 24x7x365 basis and having immediate access to the funds, immediate payments give the power to the end-consumers and businesses to have better control of their financial situations and their spending. They can simply choose who to pay and when to pay them, from wherever they wish to be. Businesses will benefit from the improved cash flow due to the immediate transfer of funds and, more specifically, merchants will receive the immediate assurance that they have been paid before they deliver goods or services.
On the banks side, PS-RPS provides the opportunity early on to compete with new players such as PayPal, Apple, or Google. Providing immediate payment services will help enhancing the consumer engagement with the offered services from the banks, hence, opening new prospects with profitable returns. Immediate payments can help banks with the development of new innovative products and digital payment options for the end-consumers.
For public authorities, the rationale behind immediate payments is extremely strong. Immediate payments improve the efficiency of the economy as a whole and foster innovation. It will also help fighting against the financing of illegal activities. In developing countries, PS-RPS can facilitate financial inclusion because it does not require extensive networks of banks and physical telecommunication lines to operate.