The definitive source of global instant payments intelligence

Editor - BLOG

Pricing Strategies for Instant Payments

28/10/2016

You can find a multitude of pricing strategies in place today for instant payment schemes around the world. These have come about for a variety of reasons including: pre-established pricing practices, the level of competition being faced and long-term strategic objectives.

Some countries view instant payments as being a premium product and therefore charge accordingly, others view it as being a commoditised product and therefore attracting low value or even being offered for free. A pricing strategy forms a key element of the business plan for implementing real-time payment processing. Some banks take a traditional ROI based approach, whereas others think more strategically about how to be a customer-centric business. At Sibos 2016 we heard from the Norwegian banks that they will soon be introducing an instant payments scheme as this was now a customer expectation and ignoring it would have opened the door to new Fintech competitors.

Prices charged often vary dependent on the categorisation of the customer. Corporates and businesses can expect to be charged higher prices than individual consumers. The value of the transaction may also be a factor in the price charged. In some countries high value transactions will be charged more than low value retail payment transactions. With the vast majority of payments continuing to be conducted within a single country the pricing from different geographies is currently unlikely to be an influencer. When regional instant payment schemes, such as the European SCTInst scheme, are launched this approach may need to change.

If merchant payments are to be processed across the instant payment networks then prices need to be competitive against merchant service fees for card-based transactions that include Visa/Mastercard interchange rates and scheme fees.

With the increased focus on instant payments globally we can expect to see more attention being paid to pricing strategies. For new schemes this should be given high priority as it far trickier to raise prices once initial market prices have become established.

For further discussion and examples on different pricing strategies that are currently in place I encourage you to read the excellent Dovetail Systems 2016 Value of Instant report.

Author: Art Division