The future of payments: real-time, instant payout for merchants

Thursday 30 May 2024 07:56 CET | Editor: Estera Sava | Interview

Mai Le, co-founder and CEO of SAPI, explores the impact of real-time payments on the industry and how instant payouts benefit SME merchants.


What are the most notable recent advancements in real-time payments, and what is their impact on the payment industry?

In recent years, real-time payments have rapidly transformed the payment industry for the better. A notable advancement is the widespread adoption of the ISO 20022 standard, which enhances data richness and interoperability across global payment systems, supports efficient cross-border transactions, and improves transparency and traceability. The Faster Payments Service in the UK enables instant bank transfers 24/7, significantly reducing payment delays for consumers and businesses. Similarly, The Clearing House's Real-Time Payments network in the US accelerates real-time capabilities for financial institutions, further promoting the real-time shift. Additionally, the Federal Reserve introduced the FedNow Service, offering instant payment capabilities and fostering faster liquidity.

The European Commission's 2023 legislative proposal for instant payments in EUR, which amends the 2012 SEPA regulation, is also noteworthy. It mandates EU payment service providers (PSPs) to offer instant payment versions of their services, making instant payments the default choice for EUR transactions. This initiative aims to drive the uptake of instant payments by making them affordable and transparent, promoting widespread adoption across the EU.

These real-time payment advancements enhance business liquidity management, reduce cash flow uncertainties, and improve financial planning. For consumers, instant payments increase satisfaction and trust in financial services. Real-time payments also support the growth of digital economies by facilitating ecommerce and on-demand services that leverage quick and reliable real-time payment mechanisms.

What advantages do real-time/instant payouts offer to SME businesses and merchants that use payment companies' services?

One of the most substantial benefits for merchants is the improvement in cash flow. Real-time payouts ensure merchants receive funds within hours, significantly enhancing their ability to reinvest in operations, manage expenses, and seize growth opportunities. Traditional payment methods involve payout delays of three to 18 days. With 57% of UK small businesses experiencing financial constraints due to cash flow difficulties, instant access to capital is crucial and much needed.

Instant payouts also enhance financial predictability and stability for SMEs by providing consistent cash inflows, reducing the risk of cash shortages and economic strain, particularly during peak seasons or unexpected expenses. In 2022, SMEs accounted for 99% of the UK’s private-sector businesses but generated only 7% of total turnover. This significant imbalance underscores how underserved SMEs are by traditional financial services, leading to more liquidity struggles than larger corporations. Indeed, 22% of SMEs reported negative impacts from a lack of access to funding.

For PSPs, offering real-time payments can improve merchant acquisition and boost the satisfaction and loyalty of existing merchants. SME merchants appreciate the prompt access to funds, which helps them manage their operations more efficiently. By providing instant payouts, PSPs can differentiate themselves in a competitive market, attracting more merchants and fostering long-term relationships. This competitive edge can also lead to increased transaction volumes and revenue.

How can payment companies cater to merchants' needs regarding instant payouts? What role does collaboration play for payment companies, considering the increasingly competitive landscape?

Despite high demand from merchants, the rollout of instant payout services is often hampered by the heterogeneous nature of the payment landscape across countries, the settlement frictions in many payment methods, and the complexity of the payout process. To address these challenges, payment companies are partnering with SAPI. Its Instant Payout (IPO) is designed to be compatible with various payment systems and methods across multiple countries, ensuring immediate liquidity for merchants.

The IPO process involves SAPI advancing funds on credit for authorised but unsettled payments, with repayments made at the end of the original settlement period. This ensures same-day payouts for merchants regardless of methods and location, including weekends and holidays, eliminating settlement delays.

A key aspect of SAPI's IPO solution is its technology-first approach. Interactions with SAPI are API-driven and fully automated, enabling an optimised integration with existing systems. This automation ensures that the process is efficient, reduces the risk of human error, and allows for real-time processing and updates. The API-driven model also provides a scalable solution that can handle high volumes of transactions, making it ideal for payment companies looking to scale their offerings globally.

As the demand for instant financial transactions grows, PSPs recognise the benefits of collaboration with others in the ecosystem, which enables them to enhance the payout infrastructure in a low-risk manner. By partnering with SAPI, payment companies can pool technological and financial resources, prompting the development of systems that can handle high payout volumes. This collaboration helps payment companies meet the immediate needs of their merchants and positions them as leaders in the rapidly evolving real-time payment industry.

While cross-border business comes with multiple complexities, how do you see instant payouts alleviating these for merchants and payment companies alike?

Instant payouts significantly simplify cross-border transactions for merchants by reducing transaction times, improving cash flows, and enhancing operational efficiency. Traditional cross-border payments can take days, but instant payouts ensure funds are available within hours, avoiding delays and cash flow challenges. They also mitigate risks from currency fluctuations, allowing businesses to manage finances better with real-time rates.

Additionally, instant payouts reduce the dependency on settlement processes, intermediary banks, and complex correspondent banking networks, often sources of hidden fees and delays. Only 23% of smaller businesses say that current cross-border payment solutions are ‘very or extremely satisfactory’. By introducing new payout options, businesses can reduce costs and enhance the speed, predictability, and reliability of their transactions.

SAPI's solution, which pays out on credit, helps PSPs offer a cross-border instant payout experience. This approach is compatible with various payment systems across multiple countries, ensuring immediate liquidity for merchants. By integrating API-driven solutions and advancing transactions on credit, SAPI IPO allows merchants to receive funds quickly, regardless of geographical boundaries or settlement networks. This unified approach helps PSPs stay competitive in the real-time payment trend and meet the expectations of a globalised market, while also navigating regulatory requirements and scaling complexities more effectively.

About Mai Le

Mai Le is the co-founder and CEO of SAPI, a UK-based, pan-European company specialising in providing liquidity-as-a-service and payment-linked credit products. Mai previously worked at Goldman Sachs, gaining extensive experience in engineering financial products and executing complex credit strategies. Her career also includes roles in risk management and financial technology innovation, enhancing her expertise in developing solutions for payment companies. At SAPI, Mai focuses on improving liquidity management for payment companies and merchants across the UK and Europe.

About SAPI

SAPI  provides liquidity-as-a-service and payment-linked credit products, exclusively designed for payment companies. Headquartered in London, SAPI collaborates with payment service providers (PSPs) and merchant service providers (MSPs) across the UK and Europe, enabling them to offer merchants liquidity solutions tailored to payment flows. SAPI, short for Securities API, employs an API-first approach, with fully automated solutions that integrate with existing payment systems. This scalable approach supports high transaction volumes globally, making SAPI a player in the future of instant financial transactions.

Free Headlines in your E-mail

Every day we send out a free e-mail with the most important headlines of the last 24 hours.

Subscribe now

Keywords: payments , paytech, fintech, ISO 20022, ecommerce, instant payments, real-time payments, cross-border payments, SEPA, PSP, payout, SMEs, merchants, SME lending, payment methods, API, automation
Categories: Payments & Commerce
Companies: SAPI
Countries: World
This article is part of category

Payments & Commerce


Discover all the Company news on SAPI and other articles related to SAPI in The Paypers News, Reports, and insights on the payments and fintech industry: