The tendency around Instant Payments
Instant Payments (IP) are rapidly becoming the new normal when it comes to making payments. An increasing number of people are convinced of the value this payment method has. Sibos, an annual banking and finance conference, took place last September, where Instant Payments were quite the talk of the town. During a session the speaker asked the finance professionals where they stand with Instant Payments. Their response? The overwhelming majority said that their payments operators are either already working with Instant Payments or soon will be ready for this payment method. Not a single one of the finance professionals thought that there was no need for Instant Payments because the other payment options would allegedly be sufficient. There was a positive vibe around Instant Payments at Sibos 2019, that became very clear.
Domestic versus cross-border
However, this does not mean that we are there with Instant Payments. There is still a road ahead of us. Think of the differences between domestic and cross-border Instant Payments. Christof Hofmann, Global Head of Payments at Deutsche Bank said: “Everyone is a fan of domestic Instant Payments, the volumes are increasing, everyone embraces it. On a larger scale, with cross-border Instant Payments, there is still room for improvement, especially given the fragmentation in the market. However, this should not take away the happiness surrounding this payment method.” Another important challenge relates to fraud prevention. In a real-time environment it’s not easy to do all checks online so preparatory fraud prevention work must be carried out. Artificial Intelligence and Machine Learning can serve as useful tools. It’s obvious that not only the processing of Instant Payments, but also fraud prevention tools have to go through a transformative phase now. Marco Hughes, Global Liquidity & Cash Management at HSBC further adds: “But we shouldn’t forget that fraud was always there, we just had more time to deal with it in the past.”
Simple, intuitive and cheap
In South Africa, where more retail payments are processed by non-banks than banks, the payments landscape is quite different. According to Jan Pilbauer, Chief Payments and Innovation Officer at BankservAfrica, “The key objective for us is educating consumers and showing that Instant Payments are as simple, intuitive and cheap as cash.” Many of the traditional financial players have given their opinion on Instant Payments over the past few days, so it’s also interesting to hear how the big techs look at it. Jane Song, Senior Director at Ant Financial Services (part of Alibaba) says that at Alipay, they mainly respond to the wishes of the customer, “Today we see that users have less patience, a lack of security feeling and a desire to act quickly. They want immediate and fully transparent services anytime and anywhere.” She leaves in the middle whether Instant Payments fits this picture. According to Pilbauer, fragmentation has to be dealt with in order for Instant Payments to really become the new normal, “We must offer consumers a consistent experience. Now we see different brand names, experiences and pricing and that is not attracting people. With Visa and Mastercard, for example, you know what to expect anywhere in the world.” At a post office for example, people should know beforehand what they get and providers should not confuse them with technical details. “At a post office they ask you when you want to have the parcel delivered and not if it is to be sent by train, plane or carrier pigeon. Why are banks asking customers about the rails to be used for the payment? Banks need to work closely together to deliver a consistent user experience.”
Persuade the consumer
When asked how financial institutions can attract consumers to fully embrace Instant Payments, Song from Alipay is clear: “You have to persuade the consumer to do something new and if the user experience of a new payment method is clearly better, the people will shift very quickly. Don’t forget that people don’t make payments because of the payment itself, but because of something else. Receiving a product, for example. So, give consumers something they feel comfortable with and they will change quickly.” In this sense, there are opportunities not only for consumers, but also for corporates. Hughes of HSBC says: “I haven’t come across a corporate yet that doesn’t want Instant Payments. The benefits of flexibility and optimized cash management are obvious. Still, I can imagine that for some use cases batch payments are simply good enough. Also, we should realize that for corporates it’s not only about the payment, but also about the richness of the data that comes with it. Such rich data can be very valuable for reconciliation.” I think Hughes is right. Instant Payments is more than just payments. It’s about building extra functionalities, about data and about customer experience. I am a strong believer in Instant Payments and it was good to see that there were so many positive messages about this payment method at Sibos. If we can offer customers a convenient experience addressing obvious use cases, they too will soon be convinced of Instant Payments.
Tom Nijenhuis, Division Manager Corporate Affairs at equensWorldline