Instant Payments: simple, seamless & secure
Paying in cash, by checks, by card or even by bank transfers, are traditional and well-known payment means. Some are more widely used than others: their usage differ depending on the region, the countries, etc.
In addition to this geographical factor, digitalisation along with end-users’ trends and expectations have also shaped the ecosystem. The growth of ecommerce has been instrumental to the change of spending patterns for consumers – anytime, anywhere. At the same time, merchants required faster settlement and more reliable money transfer systems to keep up with the demand.
This contributed to the emergence of completely new and dematerialised means of payment such as mobile payments, with instant capabilities allowing fast and secure transactions to the entirety of the ecosystem.
Instant payments: the ultimate speed of execution
A few seconds or less is now the time it takes to receive a payment. According to the ECB, Instant Payments are electronic retail payments that are processed in real time, 24 hours a day, 365 days a year, where funds are immediately made available for use by the recipient with more guarantees, and real-time information about the transaction.
Today, many countries have implemented (or are currently implementing) instant payment systems, to enable real-time electronic fund transfer interbank.
8 pillars for instant payments
8 major key attributes of a successful instant payment solution:
1. Fast: while the transfer of funds between the payer and the payee takes place in real-time, clearing and settlement may be just as fast.
2. Convergence of payments: ability to combine multiple payment methods (irrespective of the source and the destination of the funds) to ensure schemes and networks’ connections.
3. Optimised cost: instant payments can be used to substitute credit card payments and therefore lower credit card transaction costs for merchants and corporate customers.
4. Omnichannel: a rich API library to facilitate the connection between physical and digital channels in the Instant Payment ecosystem (for e.g. initiating a cash out via a mobile channel to retrieve funds on an ATM channel).
5. Value-added services: must support a wide range of payment services : P2P, B2P, G2P, cash-in, cash-out, request to pay, etc.
6. Secured: fraud protection and security challenges remain key concerns. Players adopting instant payments must have the infrastructure to handle the necessary security.
7. Digital overlay: ability to extend existing payment infrastructures by providing alternative payments methods. Ability to integrate into non-banking or fintech applications.
8. Interoperability: ensure highest levels of interoperability between all the players in the ecosystem.
Instant payments: operation & regulation
The execution of an instant payment involves four main parties : the payer, the beneficiary, and their processing financial institutions. These are based, among other things, on rules of openness and interoperability between them to facilitate the optimal routing of digital financial transactions on one hand, and risk prevention on the other hand.
This interoperability is based on enablers such as APIs which allow better communication between applications, as well as precise regulations which frame and harmonise this cooperation, in particular the European Directive on Payment Services (DSP2), which aims to promote innovation, competition and efficiency, while preserving and enhancing the security of payments for users. This is generating increasing interest from the various market players, in particular fintechs who see real potential in it to increase transaction volumes and create new business opportunities.
Instant payments around the world
Originally appeared on the Asian continent, Japan is the first country to have adopted the ZENGIN instant payment system almost 50 years ago, which has subsequently been the subject of several improvements to remain at the forefront of global innovations, due to the commitment of the ASEAN 2025 community (Indonesia, Malaysia, Thailand and Singapore), for better unification and modernisation of payment systems.
As for Europe, the introduction of SEPA Instant Credit Transfer (SCT Inst), aimed to facilitate money transfers in Europe. It covers 34 countries: 28 member countries of the European Union and 4 member states of the European Free Trade Association. This step was the emergence of many successful payment initiatives, such as: Swish in Sweden, Ideal in the Netherlands, and Jiffy in Italy.
Turning to the Americas, instant payments have been available in the US since late 2017 through The Clearing House’s network (TCH). In Latin America, the first real-time payment system started in Brazil in 2002 with SITRAF (System of Fund Transfer).
Recently arrived in Africa, instant payments are a trending topic: combined with financial inclusion initiatives pushed by governments and central banks, instant payments solutions are increasingly emerging in the region.
With PowerCARD, HPS comprehensive suite of solutions that covers the entire payment value chain, HPS has designed and launched several instant payment initiatives, at regional and national levels.
Building instant payment solutions for the future: Ghana, Morocco and Saudi Arabia use cases
In Ghana, the Ghana Interbank Payment and Settlement Systems Limited (GhIPSS) launched a successful instant payment solution: GhIPSS Instant Pay (GIP). Today, GIP is connected to more than 35 banks, telcos and transfer agents. GhIPSS Instant Pay makes possible for individuals and companies to transfer funds from their bank accounts to the bank account of a beneficiary in another bank instantly. The solution allows users to benefit from a set of secured transfer solutions covering B2B, P2P, B2P and P2B payments, in order to reduce the use of cash and provide the infrastructure for additional services.
In Morocco, along with the Central Bank, HPS played a key role in the design and deployment of the national interoperable mobile payment program. This was the first mobile switch launched in Africa, allowing interoperability between all players in the ecosystem. As of today, we count more than 20 banks and almost 10 payment institutions that emerged thanks to this solution. The players are now able to address customers' and merchants' needs to support payments and transfers from to their mobiles instantly.
HPS contributed to the launch of similar initiatives in other regions, such as in the Middle East: to enhance the electronic payment throughout Saudi Arabia and reduce the dependence on cash, HPS has been appointed by Saudi Payments, to provide a unified QR code platform to enable banks, wallet providers and fintechs to interact seamlessly within an interoperable platform, covering P2M use cases.
Instant Payment has a strong impact on the payment scene: it reduces significantly the usage of cash as well as the cost associated to it. Using Instant Payment as an alternative to cash brings a financial inclusion dimension associated with a strong social impact, that goes beyond providing payment means.
At HPS, we provide the invisible technology to make payments simple, seamless and secure.
To learn more about HPS success stories and instant payments stories, please contact firstname.lastname@example.org.