It’s estimated that, by 2025, instant payments will have a 17.4% share of global payments – Europe and outlying territory banks and corporates will ignore it at their peril.
When it comes to instant payments in Europe, some things are simple: primarily, it’s hard to argue that the future isn’t instant with 70.3 billion transactions processed globally in 2020, a 41% increase over 2019.
But like anything else in global finance these days, ‘it’s complicated’. Instant payments in Europe are a tangle of payment schemes, access models, and legacy architecture that must be improved. As the format heads toward a 23.6% growth clip over the next five years, the conversation now turns toward optimising growth to better serve customers, rather than slowing its progress to keep apace. To that end, Bottomline recently convened a panel discussion with several key players on the European banking scene to identify ‘four ways to maximise instant payments in Europe’.
The conversation started with number 1) learning from the past, namely, what’s come from the various payment schemes that have been implemented for instant payments so far, such as SEPA, SEPA Instant Credit Transfer (SCT Inst), and the newer more accessible instant payment settlement service (TIPS).
In Bottomline’s webinar 4 Steps to Maximise Instant Payments in Europe, David Renault, team leader at SEPA from EBA Clearing, informed the audience that the end goal since the beginning has been to better serve customers. He reflected back to 17 November 2017 when the SCT Inst scheme was launched. Some may look at the past four years as a time of regulation, he noted, but he sees it as a time of banking and customer benefit.
‘I’m really looking at what will be the value for the customers’, Renault said. ‘What can we bring to the customers in terms of other services? What is the additional value we can use through our experience to really position banks to capture new customer segments? The driver to success is to have the technology to be able to revisit your architecture and ensure that we will have a new revenue stream.’
New revenue streams will be a key metric in maximising innovative technology and it is essential to 2) overcoming the barriers to adoption. Recent Bottomline research shows that 39% of respondents listed internal prioritisation and legacy infrastructure as the top two obstacles to adopting instant payments.
Source: Bottomline’s Global Payments & Banking Benchmarking Report Sept 2021 (307 banks & FIs globally of time of printing)
Legacy infrastructure, the panelists said, is job one. As Jean-Phillipe Joliveau, Senior Marketing Advisor at SIA suggested, it is an extremely difficult issue because it has technical, organisational, and regulatory issues. In his words, ‘Maybe some companies have very skilled people on staff but they’re not suited to instant payment technology. You need a specific kind of expertise. But if a company wants to stay independent, it means they will need to have these skilled people and these people will need to be trained. And I think it would be difficult to do that, so outsourcing is something that we've had to take advantage of instead of starting from scratch’.
Third, all of this takes a strong internal business case, but making the case for instant payments being a top priority is important to get the initiative started, as well as to make sure it has enough capital and personnel to keep it running in order to catch that 26.3% run rate.
innovation;
compliance;
impactful use cases;
effective competition with existing payment methods;
operational costs.
Bottomline’s Frederic Viard, product director for instant payments, explained that the business case for instant payments is really to remain competitive and viable. It is being presented in combination with services that will futureproof banking from ISO 20022 to SWIFT features to GPI to new cross-border efficiencies. And don’t forget the green energy that will run finance: data.
‘The user behaviour can be analysed in a different way because you have so many new touchpoints’, Viard said. ‘So, we create a universe of data that banks can use to better provide the services to find the customers they want and in turn increase the user experience for those they already have.’
The last discussion point came down to using the new technology as a springboard for digital payments transformation, including digital overlays such as request to pay (RtP). As Viard alluded to, instant payments development opens the door to several digital banking solutions and new customer experience enhancements that serve the customer first.
‘You also need to build on top of the foundation to create customer facing applications’, SEPA’s Renault noted. ‘Most of the time the clearing and settlement infrastructure is invisible to the end user. Therefore, you need to create new payment solutions on top of these. Request to pay, we believe, is something that will transform pull payments (e.g. a merchant can send a request to the payer, and as a response get paid instantly). In this instance, you can imagine a number of offerings and services that will be used now and in the future; services that utilise the instant payment as the payment method.’
To find out more, watch the webinar-on-demand here.
About Vitus Rotzer
Vitus Rotzer is the Director for EMEA (excl.UK and Nordics) for Financial Messaging at Bottomline. Vitus is leading the strategy in EMEA to expand Bottomline’s business across Europe, with a special focus on the DACH region. Vitus is a versatile senior executive with strong leadership, management, and business development skills. He has over 20 years’ experience in financial services and software technology within leading and international companies, encompassing sales management and senior executive roles.
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