01 September 2017
Investments for Instant Payments will make payments as convenient and easy as possible
The introduction of instant payments, real-time payments, will lead to a huge upheaval. That is what I predicted in a recent article in the German newspaper Börsen-Zeitung. Instant Payments are a hot topic and there is a reason for that. The estimated investments are higher than the introduction of the euro, which I explained in this recent article for the German magazine In Return. These investments are necessary to make payments as convenient and easy as possible for the end user, I stated in this article for Der Treasurer. In this blog post I will summarize the developments of Instant Payments for the banks and their customers.
Digitization is speeding up the development of payment transactions. This changes customer behavior, but also implies changes of the tasks for payment service providers. Payments are becoming a commodity, a general good for which no one will pay anymore. The competition for the benefit of customers is exclusively taking place on the product and services side. The payment process is integrated into the value-added chain, where e.g. buying is the main focus instead of paying. The entire process is increasingly being digitized, improved and simplified under the motto ‘convenience’. The customer will no longer perceive the payment process in this awareness as today.
Nationally limited systems will not survive
In line with the purchasing behavior, particularly on the Internet, a worldwide-wide ‘Global Payments World’ will develop, in which nationally limited systems will not survive. Payment transactions will become global and instant. This means that transactions can be sent at any time and at any time, transmitted and settled in the same second, which makes them independent of time, space and currency. Payments follow the example of the Internet, where everything is real-time.
The introduction of Instant Payments also leads to changes for the end users. Card payments are still widespread, but the card-based payment service is also becoming a digital bank. In the case of Instant Payments, the transfers are immediate and the payee receives the money immediately. A payment guarantee is therefore not required, as is the case with debit card payments. This will have serious consequences for domestic debit card schemes, such as the German Girocard Debit Card Scheme, which will over-time be replaced by means of instant payments solutions.
Embrace new possibilities
It is clear that the business model for banks will change with these new technology, which means there are other and new opportunities coming up. Fintechs could bring a new way of thinking into the existing processes of banks with their innovative ideas, which is necessary to develop new business models. It is wise for banks to embrace these new possibilities to provide the best services for their customers.