Get more from real-time payments

The role of real-time payments in the new global payments ecosystem is increasingly vital. Currently, over 60 countries globally either have a live real-time scheme or are working towards the launch of a scheme. Add to that the cross-border schemes which launched in Europe in the last two years, and the push for GPI Instant globally, and it is increasingly obvious that real-time is becoming the ‘new normal’.

Market forecasts predict global growth rates for real-time payments of about 40% annually; scalability and reliability will be crucial tenants of any solution to support the exponential growth of instant payments.  With the reach of real-time payment schemes already expanded to almost half of the global population, the next stage in the real-time payments evolution will be a global network that supports a fast, open and digitally sophisticated payments ecosystem.

One of the questions I am often asked at large events or by stakeholders and clients is: How as a business do we make money from real-time? In our latest White Paper Get More from Real-Time Payments, we have identified a wealth of new uses cases with great opportunities for revenue gains. We believe that business-originated payments – the ‘C2B’ space – will be a hotbed of real-time innovation.

Request for Payment (RfP)

One of the key areas for innovation in real-time payments includes the high-volume biller space. Request for Payment (RfP) launches in the US and Europe later this year, and in the UK when the new Faster Payments platform goes live. RfP services offer billers the ability to send an electronic request for payment and allows customers to respond securely and authenticated via their mobile phone to make the payment. These new RfP services will offer endless opportunities for banks and financial intermediaries to add value for those currently collecting bill payments through other methods: mortgage companies, credit card issuers, utilities and public authorities, to name just a few.

RfP services will put companies and institutions in these sectors back in control of their billing and associated processes, it can improve cashflow and liquidity management, reduce chargebacks, enable faster notification of incorrect account details and simplify reconciliation of payments to customer bills. The ability to send real-time RfPs allows the paying party to remain in control of the timing of the payment which direct debits do not allow today. This improves the end-user customer experience and removes costs associated with ‘bounced’ payments for the corporation. Larger corporations can free staff up from reconciliation and failed pull payments, to focus on more important activities, small- and medium-sized enterprises (SMEs) can manage these costs by using scalable, automated services offered by banks.

We see payments evolution happening all over the world, with examples such as India where digital overlay services have created an explosion in cashless payments in recent years.

Real-time payments can address inefficiencies for corporate customers

One of the biggest inefficiencies for corporations is in accounts receivable and payable departments, where the reconciliation process of incoming payments to outstanding invoices remains highly manual. This, combined with the fact that many corporates have multiple accounts spread across various banks, countries, and currencies, can make payment reconciliation a painstaking process. Real-time payments, with functionally-rich data standards can solve this, by providing invoices and payments that map to the needs of the corporate customer.

Whether the corporation sends individual payments, or batches of messages, the richer data standards help them carry more invoice and reconciliation data with the payment to ensure that the systems (and customers) down the line can benefit from the improved transparency and speed of the payment.

Improved liquidity management, access to cash flow and hence faster delivery from the factory enables corporates to reduce inventory, modernize supply chains, and unlock working capital to conduct business more efficiently.

The advent of Open Banking enables APIs to be used to create a complete and accurate liquidity picture across all of the corporations account holdings into a single dashboard view, which is complemented by real-time payments that allow customers to quickly act on liquidity insight.

By having better visibility, corporates can take advantage of tailored services, such as ‘micro business loans’, that match information on incoming and outgoing payments outstanding invoices or seasonal sales trends, and potential charges for corporate customers for late payments. They can also proactively address liquidity gaps through bridging loans, giving corporations better control over banking costs and improving their experience.

Using data analysis to identify supply chains and trade corridors gives banks the opportunity to customize products to corporations or to connect them to selected partners that may be able to serve them better. One good example of this is factoring. SEB and the Swedish fintech Capcito use APIs to connect with each other to offer financing to corporate customers based on outstanding invoices.

Small-and-medium-sized-enterprises (SMEs) are often underserved in the corporate banking world due to the high costs associated with serving these clients because, up to now, data collation and analysis can be a highly manual process for them. This benefits SMEs via improved access to services and helps banks by giving them access to new sources of revenue

As the reach of real-time expands so do value-added capabilities. Combined with other digital payment trends such as Open Banking, modern data standards and mobile wallets, the possibilities for value realization are almost endless.

Craig Ramsey will be a panellist at Money2020 Europe which takes place in Amsterdam, June 3rd to 5th. His session Now that Instant Payments are here, where are they headed takes place at the Tech Combustion Stage, Monday, June 3rd, 16:10 – 16:50.