Despite being seen as far behind Europe and China, the US payments industry is now advancing rapidly, said Anish Kapoor, CEO of AccessPay told GTNews in an exclusive interview.
Cheques have long been a staple part of the American payments industry. In 2004, 81% of US business made payments by cheque, according to a joint AFP and JP Morgan survey. This figure fell to 51% in 2016.
“Big corporates still make payments using cheques but I think of all of the main US banks would now admit that they no longer have the capacity to process them and will have to move to electronic payments,” said Kapoor, in an interview following AccessPay’s recent roundtable, ‘PSD2 and Open Banking. Big threat or big opportunity?’
“This is just starting in the US, but it was happening in the UK maybe five to seven years ago.
“We are seeing plenty of demand from US banks and corporates to ‘re-tool’ them so that they can initiate electronic payments,” he said.
It is the markets with very strong regulators, such as Europe and the Far East where they have the power to move markets forward, that are the most advanced, according to Kapoor.
But US companies are now starting to move quite aggressively into real-time payments too.
In mid-November, the American bank-owned ACH The Clearing House announced it was launching its real-time payments system to help usher the US payments industry into the 21st century.
It is really built to be a “very forward-looking futuristic way of making payments,” said Higgins.
“The fabric of that system allows for innovative overlay services. It is definitely on the cutting edge of payments.
“They are moving down the innovation road quite quickly,” he added.
Do corporates really want real-time payments?
There is plenty of hype in the payments industry about the benefits of real-time payments for treasury teams.
However Higgins argued that, in corporations, real-time is less useful than in the consumer space. This is because most organisations plan their payroll, supplier payments and when they will move money between corporate accounts, in advance.
As this is pre-planned, corporates “don’t really mind if it takes three hours for that transaction to happen,” said Higgins.
However, he argued that treasurers need a real-time overview of their accounts to gain complete transparency to ensure they are managing their accounts properly.
Blockchain can’t handle the volume of fiat payments
AccessPay is “absolutely” interested in blockchain technology, but it is not the company’s primary focus at the moment, said Kapoor.
He argued that while we will see fiat currencies increasingly put on blockchain (for example, the Russian CryptoRuble), “it is still some years off”.
“If fiat currencies (pound, dollars and euros for example) are put on blockchain, central banks are going to lose an element of control over monetary policy. They’re not ready to do that,” Kapoor argued.
“If you look at the kind of values that are exchanged and the kind of volumes that are exchanged in fiat currency,
Blockchain technology “simply cannot handle” the size of the values exchanged daily in fiat currencies, Kapoor added.
“Some of the better blockchain fabrics may be exchanging a hundred transactions a second, for example. But, Visa alone makes something like fifty thousand transactions a second,” said Kapoor.
“[Blockchain] is not scalable for fiat currency right now. But that is not to say that it’s not coming further down the line,” he argued.
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