Jose Manuel Peral
Chief Sales Officer at Devengo
No one can now dispute that Instant Payments is starting to change the way customers and businesses pay on the day to day operations. In Europe since 2017, instant payments have seen slow adoption rates, except in some regions. However instant payments are the key to new possibilities for businesses, merchants, and consumers.
The European Commission has proposed that all institutions offering regular transfers must also provide instant payments at no additional cost. The goal that the EU regulators want is to move away from the current batch transfer system and move into instant credit transfer. The consequence of this move will be several, like for example:
- Increased account-based payments for consumers and merchants,
- Reduced working capital requirements for professionals and companies
However these are only a few of the positive impacts, to benefit from the full potential all stakeholder must promote and help the ecosystem, due to the fact that there are no huge private global companies that do so, like is the case of Visa and Mastercards.
Whats does the ecosystem need to keep pushing the instant payments adoption for business and customers:
- A Catalyst for New Retail Payment Methods:
Instant payments should be pushed as a cheaper and better retail payment method. Private initiatives, like Bizum, iDeal or EPI, should develop in all countries and operate payment schemes instead of public authorities. Examples like UPI in India, PIX in Brazil or Bizum in Spain show that systems allowing PSPs to charge market-based fees to merchants and consumers can quickly gain adoption. Easy reconciliation, avoid a settlement per operation, cancel or partial refunds are key functionalities that the solutions need to have a quick adoption from the retailers.
- B2B Market Optimization:
Instant payments offer significant potential for optimizing B2B payments, proof of it is the amount of fintech companies appearing in the space. They can contribute to liquidity optimization for merchants, which means better cash visibility and more efficient cash management. Instant payments have much lower fees than other methods, and can lower the working capital due to the “easy” reconciliation features that some suppliers can add. Also if we combine it with the open banking functionalities and “no” chargeback, I don’t find any reason why merchants would not be fast adopters.
- Access to Infrastructure Must Be Extended:
The majority of consumer payments to merchants in Europe are currently handled by Payment Institutions and Electronic Money Institutions. However, these institutions are not currently eligible to fully exchange and settle credit transfers. Stakeholders need to be able to do cross border movements of money in different currencies.
- Making Instant Payments the ‘New Normal’:
The current legislative proposal holds significant potential to drive innovation, competition, and efficiency in the European payment market. However, for this potential to be fully realized, all stakeholders must embrace the opportunity of instant payments. This new normal is already happening in a P2P model in Spain, India or Brazil, and it will be adopted by businesses as well very soon.
Jose Manuel Peral
Chief Sales Officer at Devengo
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