Real‑time payments, decoded
Real‑time or “instant” payments are credit transfers that clear and settle in seconds, 24/7/365, with irrevocable good funds landing in the payee’s account straight away. In the UK that’s mainly the Faster Payments Service (FPS) today, and the forthcoming New Payments Architecture (NPA) tomorrow. No more D+2 batch files, no more “the payment run goes at 4 pm”. Money moves at the speed of an email—and customers now notice when yours doesn’t.
Why founders and finance leads should care
- Cash‑flow is king. Instant settlement removes the one‑to‑three‑day limbo between sending and receiving funds, shrinking working‑capital buffers and freeing cash you can redeploy.
- Customer experience is the new battleground. Consumers who can pay friends in seconds on their phone expect the same from every business interaction. A clunky “it’ll arrive Monday” experience leaks trust.
- Risk profile flips. Real‑time rails reduce counter‑party and settlement risk—but raise the bar on fraud controls because funds disappear just as quickly. Confirmation of Payee (CoP) and enhanced data standards are becoming mandatory for that reason.
- Cost advantage. Clearing a Faster Payment typically costs pence, not the 20–40 basis points often buried in card interchange or SWIFT fees. At scale that’s meaningful margin.
Adoption is no longer a niche story
The UK processed 5.09 billion Faster Payments in 2024—up 13 % year‑on‑year and worth £4.24 trillion. Single immediate payments alone grew 15.8 % to 4.27 billion items.
To put that in context, Faster Payments already account for one in ten UK transactions and are forecast to hit 7.2 billion by 2033. In Q1 2024 the scheme cleared almost 1.2 billion payments, an 11 % uplift on the same quarter a year earlier. (Pay.UK)
Customers aren’t the only drivers: suppliers now ask to be paid via FPS to avoid card or acquirer fees, payroll platforms are experimenting with “on‑demand wages” funded instantly, and marketplaces like Etsy and Uber settle earnings in real time to keep sellers loyal.
The standardisation wave: ISO 20022 everywhere
CHAPS migrated to the ISO 20022 message standard in 2023. The Bank of England has deferred the mandate for enhanced ISO 20022 data (purpose codes and LEIs) from November 2024 to 1 May 2025, but it is coming—and any fintech planning to connect directly must be ready. (Bank of England)
ISO 20022 is not just “new pipes”. It carries structured fields that make automated reconciliation, cash‑flow forecasting and AML screening far easier. If your ledger and data lake still rely on free‑form references, budget time now to refactor.
Regulatory tail‑winds you can’t ignore
| Change | Who’s pushing it | What it means for you |
|---|---|---|
| Confirmation of Payee expansion | PSR Specific Direction 17 | Another 360 PSPs must join CoP by 31 Oct 2024, lifting coverage to 99 % of FPS and CHAPS payments. Integrate CoP calls into onboarding & payout flows or face scheme‑level non‑compliance. (Bottomline) |
| Authorised Push‑Payment (APP) fraud reimbursement | PSR | From 7 Oct 2024 firms will pick up the tab for most APP fraud. Strong name/IBAN checking and behavioural analytics are no longer optional. (Reuters) |
| New Payments Architecture | Pay.UK / PSR | Industry testing runs through 2025; regulator expects migration away from today’s FPS central infrastructure by 1 July 2026. If you build directly to FPS today, plan a migration path or a vendor strategy. (Bottomline) |
| EU Instant Payments Regulation (IPR) | European Parliament & Council | Adopted 13 Mar 2024. Forces PSPs offering euro credit transfers to also offer real‑time equivalents, price‑capped to regular SEPA fees, starting Jan 2025 (receiving) and Oct 2025 (sending) in the euro area. Cross‑border UK–EU flows will feel pressure to match the experience. (European Central Bank) |
Take‑away: regulators see instant, data‑rich and fraud‑resilient payments as a public good. Compliance windows are short; treating these milestones as “just another tech project” is risky.
The playbook: six pragmatic moves to stay ahead
- Map your payment flows by latency and value. Identify where moving to instant settlement changes working‑capital needs, supplier terms or customer satisfaction.
- Adopt ISO 20022 inside out. Even if your bank handles conversion at the edge, the biggest efficiency prize is internal—structured remittance, richer reconciliation and machine‑readable purpose codes.
- Embed Confirmation of Payee and name‑checking upfront. Don’t bolt it on at the payment screen; surface mismatches during onboarding and payout rule‑checks. It slashes failure rates and APP exposure.
- Upgrade anti‑fraud tooling for the T‑0 world. Machine‑learning models trained on batch card data won’t catch real‑time mule accounts. You’ll need velocity, behavioural biometrics and consortium intelligence.
- Negotiate real‑time rails with your banking partner—or become one. If you’re a money‑service business or large fintech, direct FPS/NPA access reduces variable cost but adds scheme compliance overhead. Smaller players can ride indirect access providers or Banking‑as‑a‑Service platforms.
- Stress‑test liquidity and treasury ops. Instant outflows can spike intraday balances. Automate sweeping between safeguarding, settlement and operational accounts and revisit your Bank of England settlement line or agency arrangements.
What’s genuinely new in 2025‑26?
- Liquidity‑optimised overlays. With NPA bringing richer data, expect overlay services—request‑to‑pay, recurring‑pull and bulk‑payment APIs—targeted at SMEs previously priced out of host‑to‑host solutions.
- Global reach. Interoperability pilots between TIPS (EU) and UK NPA are on the horizon. Cross‑border instant payments won’t need card networks, opening a new battlefield for remittance and multicurrency MSBs.
- Match‑funding bias. Venture debt and invoice finance providers increasingly favour businesses whose revenues arrive in real time; faster cash turns lower credit risk and pricing.
Blind spots to watch (yes, even if you’re smashing it)
- Tech‑debt vs. go‑to‑market debt. Racing ahead on features while deferring ISO 20022 and CoP readiness will bite when you’re forced into a big‑bang remediation.
- Fraud cost lag. Instant refunds under the new APP rules don’t appear on the P&L until after the fraud event. Build dashboards that surface provisional liabilities daily.
- Vendor concentration. Many indirect FPS gateways rely on the same handful of aggregator banks. Map your single‑points‑of‑failure before the next outage shows them to you.
How Monzo‑style thinking helps
Monzo for Business lives on the premise that clarity + control = confidence. Apply the same lens internally:
- Expose payment statuses in real time to ops and finance, not just to end‑users.
- Use webhooks to trigger ledger entries the second a Faster Payment settles—no E‑day‑1 reconciliations.
- Surface actionable data (e.g., unmatched payee names, out‑of‑hours liquidity dips) directly in Slack or Teams channels so the right person jumps in instantly.
Final word
Real‑time payments are no longer the playground of big clearing banks. They’re becoming the default plumbing of the UK—and soon the European—economy. Founders and CFOs who act now will unlock cheaper processing, happier customers and balance‑sheet agility. Those who wait will be dragged along by regulators on someone else’s timetable.
When money moves in seconds, competitive advantage does too. Let’s make sure it moves in your direction.
