Ever since the Covid pandemic started both individuals and businesses have had to adapt in many ways and digitalization of payments, instant payments, and global payments are certainly the prime example of it.
Driven by consumer demand, Fast Payment Systems and Real-Time Payments (commonly referred to as FPS and RTP respectively) rapidly made their way to businesses worldwide.
Even banks had to readjust as adoption rates for this payment technology went through the roof. The numbers showed and the evidence was clear: businesses needed to adapt or face the consequences of a relentless shift in the domestic and cross-border payments landscape.
As such, if you’re looking for insight into what is currently trending in the instant payment industry, look no further.
Fast payment systems, also known as FPS, and Real-time Payments sent payments into overdrive, during the Covid Pandemic and the trend is here to stay as waiting for payments to clear has quickly became a thing of the past.
Financial institutions took notice of where the industry needed to be headed and quickly pivoted into building better customer experiences and shift their clients away from cost heavy checking accounts.
Moreover, merchants are now able to be paid immediately, individuals can send money with the push of a button via digital wallets, and everyone stood to gain.
Faster Payment Systems have thrown their hat into the cross-border payments ring.
Their goal is simple: to improve customer experience by lessening the complexity in the transactions while massively reducing costs for their clients.
What Are the Risks of Instant Payments?
Achieving maximum transaction speed comes at a cost: because faster payment time inherently brings a smaller window to properly pinpoint and identify any possible criminal activities. This means that real-time transfers need to be addressed with a way to also be able to verify each transaction and catch fraud in real-time.
What Are the Challenges in Cross-Border Payments Through Faster Payment Systems?
The most well-known challenges can be condensed into 4 categories:
· The harmonization of the regulatory framework
· The regulations and standards creep
· The simplification of Fast-Payments Processes
· The need to address cyber threats
Let’s look at each one of them in more detail:
Harmonizing the regulatory framework for Instant Payments Systems
There are still challenges to overcome, namely in what concerns achieving regulatory framework uniformity for cross-border transactions across different jurisdictions.
The European Union’s Single Euro Payments Area (commonly referred to as SEPA) is a prime example of this, but a global framework would fully de-risk this payment process.
Accordingly, the G20 has created the “Roadmap for Enhancing Opportunities and Challenges of New Technologies for AML/CFT Cross-Border Payments”, aimed at tackling down some of the processes’ problems, boosting transparency, increasing its speed, and so forth.
G20 made its position clear. Its goal is harmonizing AML/CFT requirements as its “Roadmap for Enhancing Cross-border Payments” states.
The Regulations and Standards Creep are Very Real
The game of catch up between regulators and new technology needs to be addressed.
And while there are high hopes for ISO20022, a single standardization approach aimed at all financial standards initiatives.
ISO20022, ISO150220’s successor, will greatly help the instant payment landscape by facilitating automation and reducing human error.
However, even with SWIFT’s expectations, as the tentative starting date approaches (estimated March 2023) the fact is that compliance on this standard is still not attributed to a regulatory body.
The simplification of the instant payment process
As consumer demand sets their sights on having real-time payments, faster payment schemes get developed.
Accordingly, smart systems and machine learning are two very much needed elements which can be used to adapt to how fast things are changing in the payment landscape while being able to keep the integrity and safety of these processes.
By doing so, the payment architecture will be more robust and fraud-resistant which will in turn lead to consumers getting their much-desired convenience via faster payments.
Addressing Cyber Threats
Speed comes at a price and that price is usually slightly less process reliability. If you add higher transaction volume, irrevocability, and data heavy transactions to the mix, and you end up getting an incredibly attractive target for fraudsters.
In fact, it is estimated that when the FPS (faster payments system) was introduced in the UK, fraudulent activity increased by roughly 300%.
As such, fraud is a likely element which needs to be addressed with anti-fraud solutions.
With those being addressed, there is much more room for the instant payments market to grow and prosper. Many believe it is actually still largely untapped.
What Are Key Growth Drivers for Instant Payments?
Growth has been mainly driven by consumer shift and demand for contactless and/or cashless payments, and governmental investing. However, even if awareness for alternative payment methods was there, the COVID 19 pandemic set the need for instant payment solutions into overdrive.
Accordingly, there is high capital governmental investing coming in from many countries as countries feel the need to shift towards nurturing a cashless economy.
New players sprout as internet connections become increasingly faster (5G) and smartphone penetration rates see record numbers across the world making instant payments easier.
Going a bit further, one can see the different drivers, opportunities, and trends for the instant payments market, the online payments market, and the digital payments market.
Instant Payments Market: Opportunities and Trends
In what concerns instant payments growth factors, it’s not just about peer to peer (P2P), but also business to business (B2B). Faster, smoother, and more effective ways of transferring money are fueling growth.
As for opportunities, the market is creating them in a sense that businesses will ease their payment processes and look closely at their core competencies instead.
Trend wise, as mentioned above, machine learning tech and AI will be well met going forward as will low bandwidth solutions.
Growth here derives mainly from governmental investment as many governments made a massive effort to both meet consumer demand for more elegant payment solutions during the pandemic, but also to educate their countries’ citizens in shifting towards contactless payments.
Opportunities arose for retail industries through mobile payments and trends also seem to converge towards AI solutions. AI here however will most likely be used to determine patterns in online payments.
Digital Payments Market
In what concerns growth, its main factor seems to be directly related to consumers as they have matured and constantly reach out for more sophisticated solutions and thus keep driving the digital payments market forward and further.
Gone are the days of the consumer who only wants a simple bank account or a credit card.
The relentless consumer demand paved the way for things such as mobile banking and is still creating opportunities going forward, particularly in what concerns capital flow.
As for trends, aside from the obvious no paper policies, they seem to be especially hard to encapsulate as the market is still in its growing stage and new components are added to it on a daily basis. Cryptocurrencies, blockchain technology, and the metaverse keep tearing down walls so the future looks very promising.
What Are the Restraints of the Instant Payments Industry?
In what concerns restraints, one can point out internet and mobile penetration rates in some regions of the world, internet speed, the lack of awareness, and resistance to change in terms of payment operations.
This in turn means that individuals who caught up with the newest payment initiation and request for payment methods might see issues if they want to send and receive money but see themselves in a setting where the tech adoption rate is low.
Wrapping up
The stage is set for instant payments to shine. Going forward, normally, we’d certain that real-time payments would be fully adopted.
However, with blockchain tech tearing down the walls of traditional finance and established institutions, we never know to expect next for payment services, real-time payments rtp, and online banking.
And while new technology in the financial services industry financial services industry financial is highly unpredictable at times, it’s certainly admirable to see that user experience and convenience are at the heart of many of these new products and services, so the future is certainly bright.
Ever since the Covid pandemic started both individuals and businesses have had to adapt in many ways and digitalization of payments, instant payments, and global payments are certainly the prime example of it.
Driven by consumer demand, Fast Payment Systems and Real-Time Payments (commonly referred to as FPS and RTP respectively) rapidly made their way to businesses worldwide.
Even banks had to readjust as adoption rates for this payment technology went through the roof. The numbers showed and the evidence was clear: businesses needed to adapt or face the consequences of a relentless shift in the domestic and cross-border payments landscape.
As such, if you’re looking for insight into what is currently trending in the instant payment industry, look no further.
Fast payment systems, also known as FPS, and Real-time Payments sent payments into overdrive, during the Covid Pandemic and the trend is here to stay as waiting for payments to clear has quickly became a thing of the past.
Financial institutions took notice of where the industry needed to be headed and quickly pivoted into building better customer experiences and shift their clients away from cost heavy checking accounts.
Moreover, merchants are now able to be paid immediately, individuals can send money with the push of a button via digital wallets, and everyone stood to gain.
Faster Payment Systems have thrown their hat into the cross-border payments ring.
Their goal is simple: to improve customer experience by lessening the complexity in the transactions while massively reducing costs for their clients.
What Are the Risks of Instant Payments?
Achieving maximum transaction speed comes at a cost: because faster payment time inherently brings a smaller window to properly pinpoint and identify any possible criminal activities. This means that real-time transfers need to be addressed with a way to also be able to verify each transaction and catch fraud in real-time.
What Are the Challenges in Cross-Border Payments Through Faster Payment Systems?
The most well-known challenges can be condensed into 4 categories:
· The harmonization of the regulatory framework
· The regulations and standards creep
· The simplification of Fast-Payments Processes
· The need to address cyber threats
Let’s look at each one of them in more detail:
Harmonizing the regulatory framework for Instant Payments Systems
There are still challenges to overcome, namely in what concerns achieving regulatory framework uniformity for cross-border transactions across different jurisdictions.
The European Union’s Single Euro Payments Area (commonly referred to as SEPA) is a prime example of this, but a global framework would fully de-risk this payment process.
Accordingly, the G20 has created the “Roadmap for Enhancing Opportunities and Challenges of New Technologies for AML/CFT Cross-Border Payments”, aimed at tackling down some of the processes’ problems, boosting transparency, increasing its speed, and so forth.
G20 made its position clear. Its goal is harmonizing AML/CFT requirements as its “Roadmap for Enhancing Cross-border Payments” states.
The Regulations and Standards Creep are Very Real
The game of catch up between regulators and new technology needs to be addressed.
And while there are high hopes for ISO20022, a single standardization approach aimed at all financial standards initiatives.
ISO20022, ISO150220’s successor, will greatly help the instant payment landscape by facilitating automation and reducing human error.
However, even with SWIFT’s expectations, as the tentative starting date approaches (estimated March 2023) the fact is that compliance on this standard is still not attributed to a regulatory body.
The simplification of the instant payment process
As consumer demand sets their sights on having real-time payments, faster payment schemes get developed.
Accordingly, smart systems and machine learning are two very much needed elements which can be used to adapt to how fast things are changing in the payment landscape while being able to keep the integrity and safety of these processes.
By doing so, the payment architecture will be more robust and fraud-resistant which will in turn lead to consumers getting their much-desired convenience via faster payments.
Addressing Cyber Threats
Speed comes at a price and that price is usually slightly less process reliability. If you add higher transaction volume, irrevocability, and data heavy transactions to the mix, and you end up getting an incredibly attractive target for fraudsters.
In fact, it is estimated that when the FPS (faster payments system) was introduced in the UK, fraudulent activity increased by roughly 300%.
As such, fraud is a likely element which needs to be addressed with anti-fraud solutions.
With those being addressed, there is much more room for the instant payments market to grow and prosper. Many believe it is actually still largely untapped.
What Are Key Growth Drivers for Instant Payments?
Growth has been mainly driven by consumer shift and demand for contactless and/or cashless payments, and governmental investing. However, even if awareness for alternative payment methods was there, the COVID 19 pandemic set the need for instant payment solutions into overdrive.
Accordingly, there is high capital governmental investing coming in from many countries as countries feel the need to shift towards nurturing a cashless economy.
New players sprout as internet connections become increasingly faster (5G) and smartphone penetration rates see record numbers across the world making instant payments easier.
Going a bit further, one can see the different drivers, opportunities, and trends for the instant payments market, the online payments market, and the digital payments market.
Instant Payments Market: Opportunities and Trends
In what concerns instant payments growth factors, it’s not just about peer to peer (P2P), but also business to business (B2B). Faster, smoother, and more effective ways of transferring money are fueling growth.
As for opportunities, the market is creating them in a sense that businesses will ease their payment processes and look closely at their core competencies instead.
Trend wise, as mentioned above, machine learning tech and AI will be well met going forward as will low bandwidth solutions.
Growth here derives mainly from governmental investment as many governments made a massive effort to both meet consumer demand for more elegant payment solutions during the pandemic, but also to educate their countries’ citizens in shifting towards contactless payments.
Opportunities arose for retail industries through mobile payments and trends also seem to converge towards AI solutions. AI here however will most likely be used to determine patterns in online payments.
Digital Payments Market
In what concerns growth, its main factor seems to be directly related to consumers as they have matured and constantly reach out for more sophisticated solutions and thus keep driving the digital payments market forward and further.
Gone are the days of the consumer who only wants a simple bank account or a credit card.
The relentless consumer demand paved the way for things such as mobile banking and is still creating opportunities going forward, particularly in what concerns capital flow.
As for trends, aside from the obvious no paper policies, they seem to be especially hard to encapsulate as the market is still in its growing stage and new components are added to it on a daily basis. Cryptocurrencies, blockchain technology, and the metaverse keep tearing down walls so the future looks very promising.
What Are the Restraints of the Instant Payments Industry?
In what concerns restraints, one can point out internet and mobile penetration rates in some regions of the world, internet speed, the lack of awareness, and resistance to change in terms of payment operations.
This in turn means that individuals who caught up with the newest payment initiation and request for payment methods might see issues if they want to send and receive money but see themselves in a setting where the tech adoption rate is low.
Wrapping up
The stage is set for instant payments to shine. Going forward, normally, we’d certain that real-time payments would be fully adopted.
However, with blockchain tech tearing down the walls of traditional finance and established institutions, we never know to expect next for payment services, real-time payments rtp, and online banking.
And while new technology in the financial services industry financial services industry financial is highly unpredictable at times, it’s certainly admirable to see that user experience and convenience are at the heart of many of these new products and services, so the future is certainly bright.