Voice of the Industry

Instant Payments holds the key to competitive advantage

Thursday 7 April 2022 07:47 CET | Editor: Oana Ifrim | Voice of the industry

Frédéric Viard, Bottomline: Achieving the “new normal” of Instant Payments will require planning, investment, and tenacity - but the reward is undoubtedly worth it

The pace of change in payments globally has never been so dramatic and exciting. Europe, Switzerland, and the UK are no exceptions, especially when it comes to instant payments. With the promise of a new targeted legislative initiative from the EU Commission to accelerate the roll-out of instant payments in Europe set for the second half of 2022, instant payments and their benefits will become table-stakes. 

All the more reason to took a ‘temperature check’ on how adoption has developed in the last six months since our last webinar 4 Ways To Maximise Instant Payments In Europe from September 2021. Therefore, please find the key insights from Leveraging Instant Payments in Europe: How To Stay Competitive held on the 15th of March.  

Instant Payments Adoption – UK & Europe

How advanced are you in your Instant Payments strategy?

A. We are already ‘live’ with our instant payment solutions = 32% (32% in Sept 2021)
B. Completed our plans and we are looking to start implementation = 20% (13% in Sept 2021)
C. Just started planning = 28% (32% in Sept 2021)
D. Not started = 20% (16% in Sept 2021)

Let’s look at the positives first.  Although the same percentage of banks & FIs are already live with instant payments (32%) as in our last poll conducted in September, those that have completed planning and are now implementing instant payments jumped from 13% to 20%. This would suggest optimism around the new EU Commission initiative surrounding instant payments. More importantly, it also suggests confidence and belief around creating the business case for leveraging real-time rails as part of a bank’s modernization strategy to create new revenue streams. This positive view was supported by all the panelists from Solarisbank AG, Banking Circle, EBA Clearing and myself at Bottomline where the descriptor of instant payments as the ‘new normal’ was widely agreed.  

Barriers to the adoption of instant payments 

However, with so much at stake and also considering that polls showed that 28% have just started planning and 20% haven’t even started, there is no room for complacency. The need to be proactive in helping UK, Swiss & European FIs solve pain-points and achieve speed-to-market to reduce any risk of attrition from their corporate customers can’t be ignored.  

What are your company’s greatest barriers to adoption of Instant Payments?  

A. Lack of IT resources & prioritisation in an already busy roadmap = 44% (34% in Sept 2021) Ranked 1st in Competitive Banking Benchmarking Survey in July 2021
B. Lack of internal business case buy-in = 23% (22% in Sept 2021) Ranked 4th in Competitive Banking Benchmarking Survey in July 2021
C. Legacy Infrastructure = 19% (29% in Sept 2021) Ranked 2nd in Competitive Banking Benchmarking Survey in July 2021

D. Cost & hassle of implementing a new payment rail = 14% (15% in Sept 2021) Ranked 3rd in Competitive Banking Benchmarking Survey in July 2021

Lack of IT resource & prioritisation in an already busy roadmap & Legacy infrastructure – Are they the same? 

According to our poll, the key blocker revolves around the lack of IT resources and issues of prioritisation in an already busy roadmap. Although this response has risen to 44% in March from 34% in September, it remains the number one pain point that was listed in July 2021. Additionally, if you add in the percentage who stated legacy infrastructure as the main barrier to adoption in response C (19%), you find that this comes to the same percentage for both March & September (63%) and that in July 2021 they were ranked Number 1 & Number 2 respectively.  This would suggest that respondents often see them as interchangeable.  However, I suspect that both answers were influenced by the poll being held slap-bang-in-the middle of the ISO testing window and preparations for SWIFT CBPR+ and many similar instant payments schema deadlines in November 2022. 

Also, COVID-19 and the acceleration of digital payments adoption that resulted from the pandemic caught them off guard. However, I am confident that once banks & FIs fully understand that by solving for ISO, (in the Connectivity stage, but preferably Market-Ready or ISO Native), they automatically modernise their systems, improving operational efficiency, and implementing the rails used by most instant payment systems that this pain-point will become less of an issue. 

Internal buy-in for business case 

The second barrier expressed was the lack of a business case buy-in. This rather contradicts the views expressed by our panel and those that have already adopted or completed their plans for implementation above. So, where is the disconnect? 

The issue is that not all banks and FIs have the same volume and values of transactions as others, as well as a different customer base. For instance, Riccardo Colnaghi, Head of Business Development at Solarisbank, believes the argument for internal prioritisation for banks with a similar business model to his (a technology company with a German banking license) will get easier in time as corporates continue to demand instant payments. This is supported by Katja Heyder, Head of User Relations, from EBA Clearing sharing the results from the Euro Banking Association’s Request to Pay Corporate Survey where close to 100% of respondents supported offering a Europe-wide uniform mode of operation for Request to Pay and other digital overlays which are central to instant payments.  

This shows that corporates have expectations from their banks & FIs to provide Instant Payments that they can leverage for Alternative Payment Methods and so if they aren’t offered then then they will potentially look to another banking provider which does. 

Yet, panelist Michael Boel, Head of Local Clearing at Banking Circle, is also right when he describes the false starts many banks have had with instant payments either due to the complex payment schemes or the daunting prospect of accommodating payments 24/7/365. Instant payments, after all, are a completely new way of thinking and operating. 

The Bottomline: 

Firstly, if the EU Commission does issue regulations regarding instant payments toward the end of this year, you don’t want to be in a situation where you’re playing catch-up. That alone should move instant payments up the priority ladder. Secondly, instant payments represent a revenue opportunity that will only grow as banks find new ways to leverage it. Thirdly, instant payments are a springboard for digital transformation and is quite simply ‘table-stakes’ - If you don’t offer it to end customers and corporates then they might rethink their relationships with your financial institution. 

Watch Leveraging Instant Payments in Europe: How To Stay Competitive on-demand for further insights. 

About Frédéric Viard

Frédéric Viard is Head of Product – Instant Payments, Securities and Data, Analytics & Insights. With over 20 years of experience in the financial messaging market, Fréderic drives Bottomline’s product road-map to help banks & FIs achieve wider reach, speed-to-market, industry compliance, greater security and improved risk management.  

About Bottomline 

Bottomline delivers a single SaaS platform for payments, securities and messaging that helps financial institutions and corporates to achieve lower costs, wider reach, speed-to-market, industry compliance, greater security, and improved risk management. 

Payment & Cash Aggregator • Financial Messaging & Connectivity Aggregator • Securities Aggregator • Fraud & Financial Crime Management • Data, Insight & Analytics 

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Keywords: instant payments, digital payments, Request to Pay, banks, financial institutions, corporates
Categories: Banking & Fintech
Companies: Bottomline Technologies
Countries: World
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