2 PAYMENT METHOD PROFILES: PAY BY BANK
2.4 Pay by Bank Introduction
Pay by bank payment methods, including bank transfers and real-time payments, have varying adoption globally. Several countries see these payment methods dominating the scene, including the Netherlands and Thailand. In the Netherlands account-to-account payments make up 67% of ecommerce transaction value, mostly through the bank transfer service, iDeal. Account-to-account payments in Thailand make up 41% of POS transaction value, with their real-time payment, PromptPay, leading the way. Brief History Bank Transfer The transfer of money between banks ran concurrent with the development of telegraph and communication providers such as the Western Union in 1851. 397 The telegraph allowed for messages to be passed between institutions and consumers alike. Patrons would pay at one telegraph office and provide the recipient’s information. That office would send instructions to another office in another location where the recipient could pick up that amount of money. A similar format involving instructions on how to move funds between banks was also “wired” via telegraph. In 1858, two military vessels connected an underwater cable between Europe and North America that allowed the two continents to communicate via telegraph. 398 In the United Kingdom and Europe, Telex systems that allowed for international message transfer services became operational in the early 20th century. 399 Taking advantage of telecommunication networks, codes would be transmitted to open lines of communication between banks and patrons transferring money. These codes served as authentication mechanisms but were not standardized. As time passed and technology developed, wire transfers gave way to electronic fund transfers (EFTs). 400 Cash and checks were popular payment choices during the transition into the early parts of the 20th century. Verifying counterfeit bills and forged signatures grew to become both costly and timely, especially across borders domestically and abroad. 401 Legislation such as the Federal Reserve Act granted U.S. reserve banks the ability to clear checks at par to alleviate cost pressures on local banks having to transact in other geographies through independent clearing houses. xiv The U.S. Federal Reserve initially established the Automated Clearing House to replace paper checks. The system first emerged in the 1970s due to advancement in communication technology that supported computerized automated messages over telephone lines. 402 In that same time frame globally, banks created the Society for Worldwide Interbank Financial Telecommunications (SWIFT). 403 404 SWIFT is a network that enabled a standardized way to transmit wire instructions through the use of standardized codes that were accepted by 239 banks initially and more than 500 banks by the time the first message was sent using the network to update legacy Telex systems. 405 406 The SWIFT system required account numbers, addresses, routing codes, bank identification codes, government identification, and specific documentation to verify fund transactions. 407 ACH payments initiated on the internet or by phone became available in 2001 with the predominant 408 use case being bill payment in the US. 409 Internationally, the EU adopted the Single European Payments Area (SEPA) and launched their Credit Transfer Scheme in January 2008 and their direct debit scheme in 2009 as the culmination of the SEPA vision set out in 2000. 410 xiv Checking out a brief history of checks | Plaid.com
113
Powered by FlippingBook