With the potential to reach nearly another one billion people, instant payments are at the heart of a new global payments landscape. But what is driving interest, and can these new payments meet the immediate needs of today’s consumers, merchants and corporates?
Today, consumers expect and currently perceive instant or near real-time payments at a point of sale in a shop, online or on their smartphone when they make a payment. Individuals expect to be able to make a payment anywhere and at any time, and to pay for and receive their purchases as fast as possible. As for suppliers, they want the certainty of payment before they release their goods and services.
In Europe instant payments – also known as real time or faster payments– are defined by the Euro Retail Payments Board (ERPB) as electronic retail payment solutions. The service is available 24/7/365 and the funds become available in the payee’s account immediately (within a few seconds) of the payment being initiated by the payer.
Around 35 countries have implemented or are developing instant payments schemes, meaning instant payments are rapidly becoming the new standard. Each country develops its own real-time payments system with their own brand names such as Faster Payments in the UK, FAST in Singapore, NPP in Australia, Swish in Sweden, etc.
Real-time payments can benefit financial institutions, merchants and consumers by:
- Offering enhanced visibility of payments
- Enabling better cash management
- Improving a merchant’s liquidity resulting in better day-to-day operations management
- Quicker order to cash, especially for small merchants who may be used to waiting days for their settlement
Payment service providers are already preparing commercial solutions whereby merchants will be able to take advantage of the new SCT Inst payment scheme. By using immediate payments rather than traditional card payments, merchants will receive their funds faster, enjoy reduced processing fees, benefit from improved security and have no charge backs.
Instant payments can be viewed as a step forward for the banking world. In parallel with these developments there is also a global move to the introduction of Open Banking. When these two are combined there is scope for major disruption of the way we pay making payments happen more quickly, very much more securely and importantly, at a lower cost to the user.