The world isn’t moving toward Instant Payments – it already has
I was recently preparing a presentation for an Instant Payments client of ours, and one of the boilerplate slides that I’ve been using for years shows “Instant Payments Around the Globe”. It was last updated in July 2017, and I realised just how out of date it already is.
Of the 19 countries we listed as “Planning or Implementing”, half have gone live over the past year. The list includes some substantial regions and countries, for example: The whole of the Euro zone with SCT Inst (November 2017); the US with TCH (also November 2017); and Australia (February 2018). Our message, that the world is moving towards Instant Payments, is also outdated, in the sense that much of the world has already made the move.
These changes are clearly reflected in the InstaPay Tracker– a tool sponsored by Icon Solutions which tracks live and planned schemes around the world. The Tracker illustrates that there are already 45 live Instant Payment schemes around the world – and still 11 more to come.
Digging into the detail
Of course, the big picture conceals a lot of finer grained detail. The fact that Instant Payments is available in a country by no means guarantees that all PSPs in that country already offer Instant Payments. In some countries such as Spain the adoption is near to universal (86 PSPs on board at launch), while others like Germany moving more slowly. The picture in the US is more complex; with some quasi-real time payment systems such as Venmo and Zelle already established, and the Fed’s recently published ‘Call to Action’ on Faster Payments giving guidance but no solution, banks are hesitant to commit to the new TCH rails, and are looking for a strong business case to justify the investment.
Driving innovation in use cases
Not only has the geographical coverage moved on, it’s also good to see some innovative thinking around the use cases for Instant Payments. The view of Instant Payments as a replacement for card payments (covered in our commissioned report with Ovum) in many areas is gaining traction – for example, the Hungarian National Bank set 5 second SLA on their domestic Instant Payments scheme specifically to make it more usable in Point of Sale interactions. Particularly when combined with Open Banking / PSD2 payment initiation, Instant Payments offers a formidable challenge to the card schemes. Other scenarios include “end to end” instant payments, where the beneficiary credits my account on their books as soon as I make the payment, instead of waiting until their bank sends them a file detailing all the payments at the end of the day.
As well as the speed of Instant Payments, its use (in most countries) of ISO 20022 standards enables ‘rich data’ – data that can be delivered to banks in real-time which can be harnessed to deliver innovative new products and services to benefit customers and provide them with greater control of their financial lives. With Instant Payments underpinning the API economy, there will be even more pressure to accelerate the process and make the transition.
Forget the ‘new normal’
As for the overworked phrase ‘Instant Payments is the new normal’, the UK payments community has really taken it to heart. It’s 10 years since Faster Payments was launched, and a replacement system is in the pipeline. It is built on a foundation of ISO20022 credit transfers – primarily single payments, though batches are still supported. Debit functionality is provided via a layer of overlay services providing value-added services such as Request to Pay, and enabling non-bank organisations to access the infrastructure.
So, a great 12 months for Instant Payments, also a great 10 years, and there’s clearly more excitement and innovation on the horizon. I’m taking part in a panel at EBAday 2018 discussing European Instant Payments – review, implications, outlook. There will be plenty to talk about, I look forward to seeing you there!