IBM Helps Banks Provide Real-time Payments for their Customers

A few minutes ago IBM reported that they have been working on a system to help commercial banks offer real-time payments and make their services more appealing to consumers. Dubbed the IBM Financial Transaction Manager (FTM), the system piggy backs on the immediate payment networks that are now being built across the world in Europe, the US and Asia. It will support new payment systems such as The Clearing House (TCH) and the Instant Payment scheme that is being developed for European countries.

Once rolled out, these networks will allow banks to process payments on a real-time basis. Things like payroll and insurance reimbursements will happen in seconds instead of the current longer timelines.

The system, in combination with IBM Safer Payments, will help banks get more accurate and efficient with fraud analysis as well, and it will do this in real-time as payments are processed. That’s a major shift from where fraud detection is typically after the fact or, in most cases, delays the transaction, and IBM says that this is one of the requirements of a “cognitive bank.”

The system uses IBM’s cognitive computing expertise to implement and monitor the real-time nature of payments and well as their safety.

Commenting on the announcement, Global Industry General Manager IBM Banking and Financial Services said:

“For banks to stay relevant they must be prepared to engage in real-time where and when it’s convenient for the customer, on their device of choice, and using the latest and most accessible systems. With today’s announcement, IBM is helping financial institutions prepare for immediate payments and innovate with the latest APIs and mobile services while protecting the security and privacy of sensitive customer data.”

When implemented on a large scale, this system will make real-time payments a real possibility, speeding up the much longer timelines prevalent today around payments and settlements.

IBM is also working on blockchain technology with several entities, the most recent being a pilot project done in collaboration with UnionPay China. The demo shows how bonus points that various banks offer their customers for credit and debit card usage can be exchanged or consolidated and used for a single redemption. Once the system has been reviewed and implemented by UnionPay China, consumers will be able to exchange their points from one bank for that of another even if they don’t have an account with the second bank.

The implications of such a system are huge; bonus points are typically wasted because a consumer has a few points in each card account but can’t combine them. With IBM’s blockchain solution, customers will be able to collect all their points from different banks and put it together for a single, larger redemption at retail outlets. This will make loyalty programs more efficient, but also more meaningful to customers. The demo itself was a big success, and it validates blockchain technology in a tremendous way.

Blockchain is essentially a shared ledger that works on a permission-based model. As such, it reduced settlement times, dispute resolution times and acts as a transparent log for transactions between multiple parties.

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