Real-time account-to-account payment infrastructures or ‘instant payments’ have tremendous disruptive potential worldwide, since the card payment value chain is long – and merchants in particular are always looking for ways to cut down on the fees they must pay to accept payments.
Listed below are the top instant payments predictions, as identified by GlobalData.
The payments discourse in the last few years has focused on the big buzzword technologies: AI, blockchain, biometrics, and IoT. However, the most transformative technology for payments in 2020 will not be any of those, but instead instant bank-to-bank payments systems.
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The ability to send money in real time between bank accounts has obvious applications for remote payments, and many popular online and peer-to-peer (P2P) payment services in the developed world rely on these systems to underpin their fast, cheap domestic transfers. However, the real prize is electronic payments at the point of sale (POS), long dominated by cards.
Instant payment systems can offer much lower processing costs than cards, and they can also offer functionality such as P2P payments and settlement speeds that card-based payments can’t match, making them attractive to consumers. These factors make instant payments a direct threat to card-based payments infrastructure, albeit only where instant payment systems are available.
The US launched its own instant payments infrastructure in 2019, managed by The Clearing House (TCH), but the sheer size and disconnected nature of the market has meant that only 11 of the 26 TCH member banks are using the scheme. The system may be in place, but it will not lead to any short-term change in the market.
Instead, real-time payments will continue to become more popular in the US, fuelled by increased consumer awareness and the use of P2P services like Zelle. People will increasingly use convenient functionalities like bill pay and subscription services, but full-on adoption in the US is still a few years out.
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By GlobalDataIn Europe, open banking is meaning much more back-end data that was never meant to be exposed to the world, which creates cyber vulnerabilities but also creates modern processing issues. Payment hubs need to be upgraded to integrate multiple payment options and meet real-time open banking obligations, particularly if banks want to remain key ecosystem players.
Internationally, instant payments will be slow to take off, as each country has its own system, which means another layer to create that interoperability. Remittances are not going to feel any disruption near term, but within regional blocks like Europe, NCTT is beginning to play that role.
This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.
