Research reveals lower cost of Instant Payments implementation is opening the market for small and mid-sized bank

21 November 2016

  •  Average five year cumulative costs for small and medium-sized banks as low as €500,000
  • By year five, maintenance fees can make up over 50% of total costs
  • Modular, highly configurable systems remove barriers to entry and lowers costs

London, UK, 21 November 2016 – A new study by Lipis Advisors, experts in real-time payments, has found that the cost of migrating to Instant Payments infrastructure for small and medium sized banks is far lower and more controllable than previously thought. This revelation suggests that smaller banks are actually better positioned to respond to regulatory and consumer pressures for Instant Payments, and that real time banking doesn’t need to be the preserve of large, well-funded banks.

The research provides the first insights into the real world experiences, costs and challenges of global banks and processors when implementing Instant Payment solutions and shatters some of the myths surrounding Instant Payment implementations across the globe. With banks struggling to make a business case for the transition to Instant Payments according to the research, the study provides a case for change.

The research, “Implementing Instant Payments: Insights from Early Adopters”, reveals that choice of vendor is critical, with smaller banks relying far more upon their solutions provider for their specific expertise and guidance. Larger more established providers typically charged smaller banks around 20% per annum of implementation costs in annual maintenance fees.

Surprisingly, testing and integration costs were reported to make up 60% of the initial cost of implementation. Hardware, software licencing costs and transaction volumes were not sizeable contributors to cumulative costs over a five-year period. This suggests smaller banks may be missing out on the commercial opportunities that Instant Payments provide because of fears around these costs. Instead maintenance fees, comprising of software updates, ongoing license fees and regular enhancements, were found to be the biggest expense over the period.

Even when this is taken into account, the five-year cumulative cost for the largest projects were reported to be less than €5m on average. By using modular solutions, where individual elements are combined with a core system in a targeted approach to focus specifically on Instant Payments, the cumulative cost over five years could be as low as €500,000.

“Through discussion with executives we found that using a targeted approach to implement Instant Payments capabilities is the most efficient strategy. This enables banks to optimise existing IT resources, protect legacy investment, lower cost and cope with fast changing internal and external requirements. Investment in testing for example, currently a remarkable 25% of the initial cost, provides a real opportunity for savings,” said Dr. Leo Lipis, founder of Lipis Advisors. “Instant Payments has been seen as the domain of large multinational banks with the resources to implement complicated, cumbersome systems. This research clearly shows that this isn’t the reality. By using a solution from an experienced vendor with genuine payments expertise, small and medium sized banks can rapidly take advantage of the benefits that Instant Payments offers.”

Key Findings

  • Cumulative project costs over five years can be as low as €500,000
  • Maintenance fees are on average 20% of the initial solution’s cost per year
  • Transaction volumes are not the biggest driver of implementation costs
  • Integration and testing require the largest investment
  • Implementation costs are split between:
    • 40% on hardware and software licensing costs
    • 35% on system integration, configuration and customisation
    • 25% for system testing

“Prior to this study small and medium sized banks looking to transition to Instant Payments had no way of understanding what this involved. The findings show that, contrary to received wisdom, Instant Payments is a feasible proposition for everyone and does not require endless budgets and massive headcount. Building a compelling business case has been a major barrier to deployment thus far. This research will help banks understand the approaches, challenges and complexities to aid strategic planning,” said Tom Hay, Head of Payments at Icon Solutions. “Instant Payments is here to stay and it’s only through enabling small and medium sized banks to connect to national schemes that consumers and businesses across the world will be able to take full advantage of its benefits.”

The research, conducted by Lipis Advisors in June and July 2016, was commissioned by Icon Solutions, the independent IT payment consultancy and specialist technology provider, is based on 15 interviews with senior representatives from banks, processors and vendors as well as six case studies from banks that have made the move to Instant Payments.

The report Implementing Instant Payments: Insights from Early Adopters is available for download.

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About Lipis Advisors

Lipis Advisors is focused solely on the payment system industry; its knowledge of payment systems is its greatest strength and its experience on the subject is unparalleled. Lipis Advisors is in constant contact with industry leaders in all aspects of payments systems – including the areas of national and international payments, high-value payments, cards, risk management, clearing and settlement networks, and payment security. The company excels at payment system research, strategy, design, and implementation.

Lipis Advisors’ dynamic, international company is based in Berlin. Senior staff personally perform every consulting assignment and guarantee the highest standards of trust and quality. The company demonstrates extensive knowledge of international payment systems, making it a valued partner to a number of clients working in the US, UK and throughout continental Europe.

To find out more, visit:

 About Icon Solutions

Icon is an independent IT payment consultancy and specialist technology provider serving financial institutions across the globe. From IT strategy, architecture and design, to project delivery and software development, Icon allows institutions to rapidly capitalise on the latest technology and market drivers to reduce costs, boost revenues, and ensure compliance with regulatory and industry standards.

Instrumental in helping financial institutions efficiently deploy Faster Payments services in the UK, Icon’s world class advisory team has a proven track record and unparalleled payments knowledge. Icon recently launched the Instant Payments Framework, a technology solution to provide a faster and more cost effective path to instant payments services.

Trusted by institutions across the globe, Icon has the expertise to build technologies, the experience to transform businesses, and the vision to lead the industry.

To find out more, visit:

Contact details:

CCgroup for Icon Solutions
Imran Majid or Abbie Godward
+44 (0) 203 824 9200