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The Future Of Finance Is In Real Time


The Future Of Finance Is In Real Time

... Christoffer O. Hernæs/Techcrunch:

In a world of decreasing size and rapidly increasing technological development, the financial sector needs to keep up at the same pace. While physical supply chains have improved to keep track of the digital world, the financial supply chain has not kept pace.The race toward real-time financial services involves a wide array of stakeholders and possibilities, ranging from common standardization to re-engineering underlying processes and protocols through blockchain technology.

So far, much of the hype in fintech is concentrated around the front-end through P2P-payments like Venmo, Facebook Pay and Snapcash, as well as mobile payments like Apple Pay/Wallet and Android Pay. These solutions change the dynamics of the customer interface, but are mainly built on existing infrastructures (either the banks or the card networks). However, in a world where physical goods can be delivered within the same day, expectations for real-time payments are rising.

However, not only the process of debiting one bank account and crediting another will benefit from increased speed in the overall payment process. Real-time accounting and reporting could potentially reduce fraud and money laundering, as well as give companies better control of their liquidity.

Speed in payments is not only a competitive advantage for traditional value chains, but will also have a great impact on the Internet economy, where time to market is essential. For instance, the delay in payouts from Apple’s app store is as long as 60 days. This time delay could mean the difference between life and death for an app developer, and that money should probably be used to acquire new users as soon as possible, instead of being stored on an intermediary bank account.

For emerging markets, real-time payments would enable a smooth transition from a cash-based economy to a digital-payment world by potentially leapfrogging the process of establishing centralized clearing and settlement functions.

With the rise of the sharing economy, or more precisely stated, an on-demand economy, it is likely that a larger proportion of the future work force will be freelancers. A transition to real-time payments would allow workers to get paid as they go; upon completion of a task, payment would be made directly to a bank account, with all the required tax reporting requirements in place. This could be done weekly, or even daily.

Today, 18 countries has implemented real-time payments, with another 18-30 underway. This is mainly done by upgrading existing infrastructure. For this to work, both the national payment infrastructure and a central real-time system, as well as core banking systems, need to make the transition to real time.

This is a costly process, with large up-front investments and increased operating costs for 24/7/365 operations. There also is the issue of cross-border payments.

In a world where the banks are at risk of becoming a commodity, the ability to offer real-time financial services could strengthen the position of incumbents in an increasingly smaller world, where availability and speed are essential to stay ahead of the curve.


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