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Company insight > Payments
Instant payments:
the new normal
As financial technology improves, banking services are
becoming increasingly ‘instant’. However, until now,
payments have always been subject to a certain amount
of delay. Future Banking speaks to Mark Munne (near right)
and Evelien Witlox at Equens about why instant payments
are becoming ‘the new normal’, and how they can help
banks keep up with the fast-moving financial market.
I
n a generation littered with technology advertising
itself as ‘direct’ and ‘on demand’, we inevitably nurture
expectations that whatever we ask a device for, it will be
carried out instantly. Ask ‘Siri’ to do something, and she does it
instantly – at least that’s the promise. But, financial transfers have
never really been ‘instant’ until the emergence of solutions such as
Equens’ new immediate payment service. The company has
designed an end-to-end banking solution for inter and intrabank
payments, as well as P2P transfers, that securely moves funds from
one location to another – immediately.
“With instant payments, you have a transaction that takes place
in seconds, with an immediate confirmation to the buyer and the
seller. And that confirmation is, in my opinion, very important,”
explains Mark Munne, product marketing manager at Equens.
When a transaction is made where there’s a separate credit
factor, there is a ‘buy and forget’ mechanism. If a user makes
an ordinary payment, they know that if those funds don’t return
back to their bank account in roughly two days, the transaction
must have been successful. But with instant payments, the
user receives an immediate confirmation that the transfer was
completed without error.
“And that enables a lot of scenarios for customers that are
currently not covered by a regular credit transfer,” explains Munne.
“For example, doing an eBay or other ecommerce transaction –
if you’re selling a used bike at the weekend, or upgrading your
smartphone minutes on a Thursday evening.”
If you take that further, you can see the difference in more highvalue traditional-use cases. If you’re paying for the cargo of a ship
that’s waiting in the harbour, you can now do that on a Sunday
morning and the ship can sail away with the payment complete.”
International transport is a sector in which the economy
needs to keep running on a 24/7 basis and immediate
confirmation of funds is vital. Where, currently, transactions are
being carried out in cash, using credit cards or via expensive
processes such as letters of credit, instant payments offer a
much faster and more convenient alternative to these methods.
For this, Equens stands out in the financial industry as an endto-end service provider, where most firms can only provide the
clearing and settlement mechanism (CSM).
An obvious query though is whether instant payments can
be considered entirely safe and secure. A confirmation message
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to eliminate ‘buy and forget’ behaviour is all very well, but
with no window within which to cancel a transaction, are
consumers adequately protected? For Munne, the answer is
a double-edged sword.
“On the one hand, if you take a look at the current way batch
processing works, there is a space of 30 minutes to an hour in
which you can actually intervene and cancel or refund a payment,”
he says. “With instant payments, that doesn’t exist anymore. The
transaction is credited instantly to the other customer and they
can immediately go away with the money. So you need to design
this process in a different way.”
With the ability to do a transaction
digitally, I don’t have to carry cash
anymore. So for society as a whole,
it’s actually a lot safer to have that
digital set up, rather than carrying
a big wodge of cash around.
Consequently, Equens has closely analysed credit transaction
processes and how to verify transfers with methods other than
‘blind knowledge’. As an instant payment usually happens
within seconds, Equens prioritises the real-time documentation
of a transaction so there can be no dispute as to where or when
money has travelled.
“And if you zoom out a bit, and look at instant payments as an
alternative to, say, cash, there is of course a very big benefit,” says
Munne. “With the ability to do a transaction digitally, I don’t have
to carry cash anymore. So for society as a whole, it’s actually a lot
safer to have that digital set up, rather than carrying a big wodge
of cash around.”
Mobility is key
As personal banking moves increasingly on to mobile platforms,
banks open themselves up to new partnerships, allowing thirdparty companies to seek interaction with the customer and be the
first to intermediate between banks.
“It will be very interesting in the coming years to see how
that will evolve and what solutions both parties will bring,”
says Evelien Witlox, Equens’ general manager product
management and innovation.
An important and defining feature of Equens’ business model
is the close attention they pay to the demographics and specific
requirements of the communities in need of instant payments.
“For example,” says Munne, “in the Netherlands, this need
arose because of merchants working over the Easter weekend
– all transactions made on the Thursday evening were only
paid out on Tuesday morning, so there was a four-day gap
between making the payment and the funds actually arriving
in the account.”
On a broader scale, Equens is also aware that there’s a big
drive towards standards in financial services, such as the ISO
20022 standard (electronic data interchange between financial
institutions) and the new EPC SCTinst rulebooks.
“You’ve got to have a solution that on the one hand adheres
to the European standard, but on the other hand is flexible
enough so you can actually tap into the specific requirements
of that community,” Munne continues.
But how quickly is the banking and financial sector as a
whole catching up to this idea that instant payments are a
solution that can optimise meeting the needs of the banks as
well as their customers? According to Munne, the industry is
taking notice, but securing ubiquity of use, in the same way
afforded by debit or credit card payments, will only increase
the appeal of instant payments.
“I know that if I take a holiday to France and I go into a
supermarket in Nice I can pay with my debit card, and I know
that will work,” explains Munne. “I don’t need special cards,
and I know the user experience I’ll have there is exactly the
same as in a supermarket in my hometown in Belgium. So we
have that ubiquity in card processing already. This needs to be
there for instant payments as well and that’s something we still
need to work on across Europe.”
Witlox sees the relationship between the success of banks
and the success of instant payments as a symbiotic one. The
instant payment infrastructure needs to be able to cope with
the demands of the customer ‘any place, any time’.
“We believe that in order to make instant payments succeed
and to maintain the current speed of progress, we need to be
able to compete with what is already out there,” explains
Witlox. “Banks really have to face the exploding competition of
the fintech companies, which are competing for the first port of
call for the customer. In our opinion, there’s no way around it
but for banks to make sure that their customers will continue to
have them as the place to go for payments.”
Partnerships
Many banks are starting to look for a partner that can make
sure they are keeping up with the market and that they stay
compliant with regulations. Equens’ own expected merger
with Worldline will make Equens Worldline Company the
largest pan-European financial processor with more than
ten billion payment transfers, a hefty boost towards keeping
up with the financial standards that continue to grow and be
a burden to banks’ investment budgets.
Equens’ systems are designed with instant payments in mind.
“What we see is banks asking more and more, ‘Do I invest in my
own back office or do I work with a reliable partner?’,” says Witlox.
“This is one of the drivers for why Equens is joining forces with
Worldline – so that we have the skills to make sure our customers
can be competitive in the market.”
Investment budgets are going to have to be carefully considered
by banks looking to adopt instant payments. The amount of
upgrades and redevelopment required to implement the instant
payments infrastructure, depends very much on a bank’s existing
set up; there are banks for which implementing instant payments
will be a substantial change, but many have already begun
changing their infrastructure to become less batch-oriented.
Many banks are starting to
look for a fintech partner that can
make sure they are keeping up
with the market and that they stay
compliant with regulations.
However, as Equens believes instant payments to be the ‘new
normal’ with a potentially huge scope, the company has designed
their new platform to integrate with the current credit transfers to
allow for a smooth transition.
“Managing the transition from a batch-based platform to
an instant payments platform is a feature we knew would be
very important to take into consideration when designing our
systems,” says Munne. “Implementing a new platform next to
the old one and having the two operating in parallel is going to
be an expensive solution in the end; you need to scale one up
or scale the other one down. Being able to do that efficiently is
really important.”
Efficiency, it seems, is the name of the game – one that
Equens currently seems to be winning. “We believe we can be
a very valuable player in this market,” says Witlox. “We aim to
make the banks and the financial players successful in their
quest to fulfil the needs of their customers.”
Further information
Equens
www.equens.com
Future Banking | www.banking-gateway.com
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