IBFT: The “Fast Payment” of Pakistan

Well, yes, it is!

Though some experts argue that IBFT is not a “fast payment” method because the service uses advice messages to credit the receiving accounts. Others point out that banks don’t exchange funds in real-time and refer to the deferred or net-settlement method of 1Link.

Before answering these arguments, let’s have a closer look at the “fast payments.”

The “Fast Payment” Defined

The Committee on Payments and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS) has defined “fast payment” in the report, “Fast payments–Enhancing the speed and availability of retail payments,” published in November 2016. According to the committee, it’s the type of payment in which the transmission of the payment message and the availability of “final” funds to the payee occur in real-time or near real-time on as near to a 24-hour and seven-day (24/7) basis as possible.

In “fast payment” the transmission of the payment message and the availability of “final” funds to the payee occur in real-time or near real-time.

The definition sets two important rules. First, this method should make sure the final credit is posted to the payee with strong certainty, and second, it should happen rapidly. It’s not enough to send an alert for the payment not available for use right away.

According to the report, different countries or territories are using several terms to represent “fast payments,” for instance, “instant,” “immediate,” “real time” or “faster” payments, but they fall into the category of “fast payments,” as per above definition.

The characteristics of implementations, as the report mentions, may vary in particular jurisdictions. Sometimes, under five seconds is “fast” but in other cases, it can mean up to 20, or even 30 sec. Further, the report excludes many aspects of payment processing from the definition, for example, notification to the payee, immediate debit from the payer’s account, or what message type is used?

The “fast payment” is mainly concerned with the availability of funds with the end users. The methods of the banks or other PSPs to conduct their day-to-day operations, for example, clearing or reconciliation of transactions and the interbank settlement, depends on the design and capability of the country’s digital payments infrastructure.

When this report was last published, twelve CPMI countries had “fast payments” implemented in 15-years, from Electronic Banking System (EBS) of Korea 2001, including Immediate Payment Service (IMPS) of India in 2010 to SPEI of Mexico in 2015. These countries have enabled “fast payments” through online, IVR, mobile, branch, ATM and other channels. Interestingly, Sweden and Mexico are doing the real-time interbank settlement, and South Africa is on the deferred gross model; whereas, the rest of the countries are following the net-settlement model.

Another seven countries are in the list of proposed implementations, including Saudi Arabia’s Future Ready ACH (FR-ACH) and even Japan and the United States are among the candidates with proposed rollout dates.

What Is IBFT Then?

1Link launched the Interbank Funds Transfer (IBFT) service back in 2006. The service was the innovative idea of the cofounders of 1Link’s technology partner, TPS Worldwide.

The IBFT is an instant fund transfer service that guarantees delivery of the funds to the payee’s account.

Today, 28 banks (including MFS providers) across Pakistan are offering immediate funds transfer service through ATM, online, IVR, and mobile channels. By using this service, the account holders can instantly transfer funds to the millions of accounts of the participating banks.

The service is not just restricted to C2C, but C2B, B2B and other variants are also supported. It’s also playing a pivotal role in transfers of millions of dollars’ worth of home remittances directly to consumer accounts.

IBFT as The “Fast Payment”!

One of the CPMI’s member-implementations is branded as Faster Payments.

Faster Payments is a UK based banking initiative, launched in May 2008. The Faster Payment service tells its customers that while most of the banks (in the UK) accept this method of payment, the timescale can vary from “immediate” to up to two hours and even longer, if requested outside of the normal working hours. Even the service is called “faster” because it is faster than CHAPS (same day) and BACS (3 business days) services available as its alternatives.

Pakistan is processing “fast payments” since 2006, though the report doesn’t include IBFT in it’s list, as Pakistan is not a CPMI member country.

On the contrary, the IBFT is an instant fund transfer service that guarantees delivery of the funds to the payee’s account. To keep reconciliation simple, IBFT has been established as an irrevocable service. The transfer is preceded by account validation inquiry that returns the title of the beneficiary, and checks whether the account is ready to receive funds. This verification makes it easy for the initiator to know that the recipient is correct, with the peace of mind that funds are guaranteed to be delivered.

Pakistan is processing “fast payments” since 2006, though the report doesn’t include IBFT in its list, as Pakistan is not a CPMI member country.

Please share your thoughts and update if you’ve more information.

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Note: above image by “Stain_Marylight” is available on Pixabay under a CC0 Public Domain license.

4 thoughts on “IBFT: The “Fast Payment” of Pakistan”

  1. Nice article Faizan. I wish if some brief intro of 1Link was also there in the writeup for those who don’t know that 1Link is the interbank switch of Pakistan (instead of website link) for better understanding and avoid toggling between your blog & 1Link’s website. (my 2 cents).

    Like

  2. A positive insight into Pakistan’s payment landscape, since as compared to many other countries we’re getting our transfers much faster (I agree that as long as the beneficiary receives funds or a buyer gets goods against a payment transaction in near real-time, we can call that a Fast Payment, other steps like settlement, etc. can be executed as per banks’ agreed upon process).

    I would ask this though, are we ahead of the curve because we beat the rest of the world in developing relevant technology/ processes/ bank agreements, or was it a case of less intrusive regulations within the country?

    Liked by 1 person

    1. Thanks for your comments.

      I think it was more about the passion. Passion to create something new, something different. And having a supportive regulatory environment and capable, willing partners, I think, were a blessing in this case.

      Like

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