In an era of digital transformation, Faster Payments are reshaping how money moves. They enable real-time payments that are fast, secure, and available at any time. But what is Faster Payment, how does it work, who is involved, and which systems operate globally?
Key Takeaways
What are Faster Payments?
Faster Payments are electronic bank-to-bank transactions that are completed within seconds. They operate independently of banking hours, weekends, or public holidays and allow instant crediting of funds to the recipient’s account.
Why are Faster Payments important?
Faster Payments revolutionise the payment landscape by providing real-time availability of funds, improved liquidity management, and higher customer satisfaction. In the digital age, they form the foundation of modern banking services, automated workflows, and Open Banking models.
How do Faster Payments work?
- A payment is initiated by the sender, authorised in real time, and routed through a central payment scheme infrastructure to the recipient’s bank. The receiving bank credits the account instantly, allowing the recipient to access the funds immediately.
Which Faster Payment Systems exist?
- Global examples include the UK Faster Payments System (FPS), FedNow in the United States, RT1 and TIPS based on SEPA Instant Credit Transfer (SCT Inst) in Europe, UPI in India, and Pix in Brazil.
Who is involved?
- Key participants include banks, payment service providers (PSPs), clearing and settlement institutions, infrastructure providers, and regulators ensuring security, availability, and governance.
What are the challenges?
- Real-time payments require 24/7 system availability, advanced fraud detection, real-time liquidity management, and interoperability between national and regional payment systems.
What is Faster Payment: Definition, Function, and Global Examples
The term Faster Payments refers to payment systems that process transactions almost instantly, typically within less than ten seconds. Unlike traditional systems such as BACS in the UK or EBA STEP2 in Europe, transactions are not processed in batches at fixed times but are cleared and settled individually and immediately.
For example, while a BACS transfer can take up to three business days, a Faster Payment is executed almost instantly. Faster Payments are therefore considered instant payments, even though terminology may vary by region.
At its core, Faster Payment means that once a customer initiates a payment via online banking or mobile banking, a fully digital end-to-end process begins, from authorisation to settlement, completed within seconds.
How does Faster Payment work?
Faster Payments enable real-time transactions through a structured and secure process.
Payment Initiation
The process starts when the customer enters payment details via online banking or a mobile banking app. The transaction is authorised using a PIN, biometrics, or two-factor authentication.
Authorisation and Transmission
The sending bank validates the transaction in real time. Once approved, it is transmitted to the clearing infrastructure (e.g. FedNow or TIPS) and processed using the ISO 20022 messaging standard.
Acceptance by the Receiving Bank
The receiving bank performs real-time checks and confirms receipt of the payment message.
Confirmation and Settlement
The funds are credited to the recipient’s account immediately. Confirmation is provided within seconds, and the transaction becomes final and irrevocable, allowing instant access to the funds.
Comparison
Types of Faster Payments
- Faster Payments support various payment use cases, increasing flexibility and efficiency in financial transactions.
- One-Off Instant Payments: Single payments executed and confirmed within seconds. Ideal for e-commerce, peer-to-peer payments, or urgent transfers.
- Scheduled Payments: Payments planned in advance and executed automatically on a future date, while still using real-time infrastructure.
- Standing Orders: Recurring payments such as rent, subscriptions, or insurance premiums can be processed reliably via Faster Payments instead of traditional Direct Debit models.
- Direct Corporate Access: Some systems, such as the UK Faster Payments System, offer Direct Corporate Access (DCA), enabling businesses to connect directly to the payment network –beneficial for treasury, ERP, and accounting systems.
What makes Faster Payments successful worldwide?
Faster Payments can be categorised into different types depending on how and when payments are executed.
User-Centric Design
Faster Payments are designed for speed, simplicity, and transparency. Customers receive immediate feedback on whether payments have been successfully processed.
24/7 Availability
Unlike traditional payment methods, Faster Payments are available around the clock, 365 days a year – a key success factor.
Instant Confirmation
Both sender and recipient receive confirmation of payment receipt within seconds, creating a crucial element of trust.
Security and Trust
Real-time payments rely on multi-layer authentication, fraud monitoring, and regulatory standards such as PSD2 and PSD3 in the EU to ensure the highest level of security.
Global Faster and Instant Payment Systems compared
Worldwide, various Faster and Instant Payment systems enable real-time payments but differ in reach, technology, and regulation.
Faster Payments in the United Kingdom
The UK Faster Payments System (FPS) was introduced in 2008 and is considered a pioneer. It enables payments of up to £1 million between UK banks within seconds. More than 30 banks and FinTechs participate.
UPI in India
The Unified Payments Interface (UPI) has revolutionised payments in India. Consumers and merchants can execute real-time payments via QR codes and mobile apps, without relying on card networks.
Pix in Brazil
Brazil’s Pix system is a success model for financial inclusion. It connects millions of private customers and small businesses through mobile banking and QR codes—in real time, free of charge, and government regulated.
FedNow in the United States
In 2023, the Federal Reserve launched FedNow, a nationwide real-time payment system for banks in the United States. It enables transfers within seconds between financial institutions and competes with private networks such as TCH RTP (The Clearing House Real-Time Payments).
TIPS in Europe
The European Central Bank’s TARGET Instant Payment Settlement (TIPS) system enables pan-European real-time payments in euros. It is based on the SEPA Instant Credit Transfer (SCT Inst) standard and allows settlement within ten seconds.
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Who operates Faster Payment Systems and how are they structured?
Faster Payment systems are operated by banks, central banks, and technology providers and follow clearly defined rules to ensure security, stability, and fast processing.
Role of
Central Banks
Central banks such as the Bank of England, the ECB, or the Federal Reserve often provide the technical or regulatory infrastructure as well as central bank money for irrevocable settlement, ensuring stability and trust.
Participation of
Non-Banks
FinTechs and payment service providers (PSPs) can also participate via interfaces or sponsor banks – an important driver of innovation and competition.
Technical
Infrastructure
Faster Payments typically rely on API-based architectures, ISO 20022 messaging standards, and highly available networks. These systems must operate 24/7/365 and enable processing within seconds.
Rules and
Governance
Each system is governed by clearly defined scheme rules, including SLA timeframes, fraud prevention, liquidity reserves, and compliance requirements. Governance structures such as those of Pay.UK or the European Payments Council (EPC) ensure stable operations.
The Future of Faster Payments and Technological Developments
Faster Payments continue to evolve and are increasingly linked with digital wallets, APIs, and cross-border payments to drive innovation and efficiency in the payment ecosystem.
Integration with Digital Wallets
Connecting Faster Payments with wallet solutions such as Apple Pay or Google Pay enables seamless real-time payments across banks and platforms.
Cross-Border Payments
The next stage of development involves cross-border and multi-currency real-time payments, driven by G20 initiatives and interlinking projects between TIPS, FedNow, and UPI.
API Enablement
Open Banking APIs connect banks, FinTechs, and enterprises directly to real-time systems, enabling new business models – from automated cash management to machine-to-machine payments.
Connection to CBDCs
With the emergence of Central Bank Digital Currencies (CBDCs), the boundaries between money and data continue to blur. Faster Payments could serve as the backbone of future digital currency ecosystems.
Conclusion
Faster Payments are more than just fast transfers. They represent a fundamental shift toward a digital, interconnected, and continuously available payment ecosystem.
For banks, FinTechs, payment service providers, and enterprises across all industries, this creates new opportunities for innovation, API-based services, and customer-centric payment experiences.
Unifits supports banks, PSPs, and clearing houses in efficiently testing, integrating, and operating real-time payment systems in a compliant manner – from ISO 20022 message validation to automated end-to-end testing.
Solutions for Financial Market Infrastructure
Central Infrastructures and their participants need an industry-wide solution that ensures structured, scalable testing from day one – minimizing risk and accelerating readiness across the ecosystem.
Solutions for banks
Unifits ensure continuous ISO 20022 compliance, streamlines payment testing, and enhances quality while reducing time, complexity, and effort for banks.