Three things the world can learn from the Faster Payments Service (FPS) in the UK

In the UK, the Faster Payments Service have been running for years. We’ve become accustomed to sending and receiving money faster than before, and the convenience of FPS has been felt by businesses and consumers alike.

Wednesday, August 16th, 2017

On the global stage, faster payments are now a hot topic. Australia has a scheme in progress, Singapore’s system is already live, and in the US, same-day ACH is set for full implementation in March 2018. Although these systems vary from country to country, they have a lot in common with FPS.
Therefore, the UK experience of faster payments could give new adopters some valuable insight. Here are three aspects of the FPS that are worth a close look.

Increased focus on validation of bank account data

Because faster payments are almost instant and irreversible, there’s an increased need to verify the authenticity of the receiving bank account. Some questions that need answering are:

  • Does the account exist?
  • Can it accept Faster Payments?
  • Is the account holder the person you wish to pay?

Anyone sending money can answer these questions by validating account data and verifying information from the recipient and their bank. Merchants and clients that rely on Faster Payments need to have an effective strategy with which to manage the verification process.

Customers love Faster Payments, but…

Since its inception, FPS has benefited its users in more ways than one. However, customers sometimes want to be protected from themselves. If they key in bank account details erroneously and send funds to the wrong merchant, for instance, the Faster Payments Service doesn’t allow them to recover the money instantly or easily. This often comes as an unwelcome shock to the sender.

If other countries implement such an irrevocable system, consumer education will need to be done to minimize errors.

When are sent funds applied to an account?

Electronic payments sent through the Faster Payments Service will get to a merchant’s bank on the same day, as long as both the sending and receiving banks are adherent to the scheme, and the payment amount is within the scheme limit. With the right payment processing company, however, a merchant can process faster payments, even when their bank isn’t partisan to the service.

FPS has also reduced transaction failures due to insufficient funds by incorporating a “retry” service, with failed payments being re-applied from 2 pm onwards (individual banks determine the actual timing after 2 pm). Such a move will be welcomed by customers who are not likely to become overdrawn, as well as merchants that are likely to receive payments on first application.

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