Realtime payments have been a hot topic in payments world for the last two decades. It’s because even if the current RTGS systems allow the funds to be transferred between parties they do not finalize the transaction in realtime which is a critical need in todays world as the daily life is becoming faster and payment relations need immidiate results in order to continue the business.
The first known instant payment system ( they all more or less refer to the same thing: instant payment system, realtime payment system, immediate payment system, faster payment system) is launched in South Korea in 2001. Since than a lot of country all around the world have developed and started operating realtime payment systems.
As a result of the technological changes and digitalisation cash usage is diminishing gradually. This trend is not only valid for Turkey it is global fact and there are countries where cashless transactions have reached and passed the ratio of the cash based transactions. It is needless to say that Covid 19 pandemic became a catalysor to this trend.
Digital payments require immediate confirmations by its nature. It is achieved in card payments since there is a special setup and arrangements for this goal. Although the financial money movement takes place with a 1 or 2 days latency the merchant or the peer knows that the payment is guaranteed and continues the business. But when it comes to account based ACH payments there is a gap between the order given for a payment to take place and movements of funds between the payer and the payee. This gap can be tolerable for some type of business relations but on the other hand it is not an efficient way for some other businesses.
Account based realtime payments is a solution given to those businesses and people who need this functionality for their daily life. It is 24/7/365. If the payer and the payee are within the same network (say have accounts at the same bank or payment institution) immediate and uninterrupted payment is always possible. But when they are customers of different entities there is need for a central authority to process and settle the payments between the payer and the payee’s agents. Here we see the realtime payment systems coming into the picture.
Turkey used to be credit card dominant market but we see that debit card usage is gaining market share gradually and constantly. That means that cardholders are now willing to pay from their checking account rather than the credit account.
There is no difference between an account to account payment and payment with a debit card from a cardholders perspective (Only difference that is worth to mention could be the chargeback protection given by the card schemes) In both cases payment is done from the balance of the checking account. The ease of using card as a means of payment is always higher . So, if you make Account to Account Payments as easy as card payments people will choose it. Of course only infrastructure is not sufficient there must be systems and products designed to use that channel as payment method.
The Central Bank of the Repoublic of Turkey has announced (CBRT) that a new retail payment system called Instant and Continuous Transfer of Funds (FAST) is becoming functionable by 8th of January 2020 after a pilot phase and with 50 TRY as a starting limit which will be increased to 1.000 TRY gradually according to the usage.
Together with FAST a proxy payment solution called Easy Addressing System (KOLAS) is also being launched. With this system telephone numbers, ID numbers, or e-mail addresses can be used as proxies instead of long and hard to remember IBAN. Infrastructure is hosted by BKM.
In a proxy payment system standardized IBAN is being used in background and customers does not need to remember or type long numbers as they use unique proxies that are special to them and can not be owned by anybody else.