The future of instant payments in a real-time digital economy
Brian Jamieson, CEO of London-based treasury and payments specialist Centtrip, talks about what the future looks like for instant payments in real-time digital economy.
In a world where messages can be sent instantly to anyone anywhere, it should be possible to move money as freely and as quickly. Instant payments are set to drive the most significant transformation in the global payments landscape since the introduction of today’s electronic payment mechanisms.
FinTechs like Centtrip have joined the wider efforts by institutions such as central banks and governments in Europe and beyond to make the financial lightspeed a reality across the industry, including for payments.
In June 2017, the Eurosystem introduced a new service to increase the speed of Euro payments across the European Union from one business day currently to real time, around the clock. The European Central Bank (ECB) also developed a new service, TARGET instant payment settlement (TIPS), to help citizens and firms make instant retail payments and money transfers across Europe. In November, pan-European payment infrastructure solutions specialist EBA CLEARING launched another around-the-clock payment system that allows for instant Euro-denominated payments across Europe.
In September 2018, Japan became the first major economy to launch MoneyTap, a domestic payments system using blockchain technology, to offer free real-time money transfers via a mobile app.
Instant is the goal
For both the old guard and the new kids on the block, the key questions to ask when developing a superfast payment system are: Does it work? Is it safe? Can it be faster than other existing methods?
Answering these questions is crucial. Instant payments are a must in today’s modern economy. There are many cross border payment solutions in the market place. At Centripp, we have aimed to answer our customer’s needs by launching CenttripNow, which allows our customers to transfer funds to other Centtrip accounts within a secure environment, in 15 currencies, instantly.
CenttripNow is a natural extension of our own banking and technological capabilities We have been providing account-to-card instant transfers since 2014. We then applied the same thinking to introduce account-to-account transfers, enabling our customers to send and receive funds instantly 24/7.
Typically, to transfer funds in foreign currencies would require companies to hold multiple bank accounts and potentially even in different banks. We have removed the need for this for our customers.
But we recognise that Centtrip customers do not just pay Centtrip customers, so how do we effect quicker payments outside of our eco-system?
Won’t go it alone
Introducing instant payments is in everyone’s best interest. However, changing the way the system currently works will be difficult, especially considering the scope and the global scale of the task at hand. It is not just the case of one party paying another. It is everybody paying everybody in different parts of the world, using different banks.
FinTech companies bring fresh ideas and are part of the solution. For example, Ripple is looking at a blockchain-type solution, while well-established and trusted entity SWIFT is betting on its latest gpi system to obtain the reach and ubiquity necessary for efficient instant payments in the Eurozone. How these different solutions interact (or not) is an important next step when analysing how the cross-border instant payments space will look like in the future.
Banks also play a big role. Although still dealing with legacy-driven processes, they are committed to trying to make payments better. To put it simply, everyone across the financial landscape from high-street banks to FinTechs, to central banks and governments has a stake in this.
Customers expect to receive their purchases as fast as possible. Suppliers wish to get paid as soon as they release their goods and services. The benefits are huge, and so is the opportunity.
The opportunity is in making things better and more efficient for everyone – individuals, SMEs and institutional Goliaths. And all the while keeping costs down.
Even for the most innovative of corporates, the sheer volume of people, geographies and processes they deal with can slow them down and makes working with agile, enthusiastic start-ups and established FinTechs hugely appealing.
But no one company is going to suddenly dominate the entire payments network. We all play our part in it. We will be able to do that by taking advantage of great initiatives that create greater opportunities for banks, companies and financial institutions to come together to improve things that benefit consumers.
Key change driver
Technology has long been the driver of innovation and transformation in the provision of financial services. Relying on ledgers for accounting is a distant memory as the likes of Sage have empowered companies to manage their finances better and reduce costs substantially.
The days of visiting the bank to make payments and withdraw cash are long gone, and online banking and mobile apps have reduced the use of ATMs and bank cards.
Technology gets better and smarter with each generation. Its reach is equally growing as it touches every aspect of our business and personal life. And it will be at the heart of driving better financial services, including insurance, credit, foreign exchange, card transactions, cardless transactions, wallet transactions and, of course, payments.