Key Insights on Real-time Payment Market

By Retail CIO Outlook | Wednesday, January 09, 2019

Real-time payments, otherwise referred to as immediate payments and instant payments are gaining ground, driven by consumer demand for speed and convenience. Financial institutions must necessarily respond to this demand because relying on traditional payment instruments will do no help.

The key difference between real-time payment and traditional payment method is that real-time payment guarantees the immediate availability of funds to the beneficiary of the transaction. Immediate infrastructure could replace other payment methods such as cards, checks, and automated clearing houses. Immediate payments infrastructure allows banks to provide more efficient cash and liquidity management services to corporate clients. Financial institutions need to be sentient of this new environment of instant payment solutions. As a result, banks are committed to providing enhanced transaction capabilities both in the short term, but also in the future, as they look to apply real-time functionality to cross-border payments.

The perks of instant payments are

• Enhanced customer proposition

• Round the clock payment functionality

• Finality of payments

• Collaboration with industry stakeholders

• Better reconciliation as invoice can be attached     

The main values of implementing instant payments lie in these three areas:

1. It is required to replace legacy batch based core banking platforms and associated systems, which introduce risks and instability.

2. Strong Customer Authentication (SCA) & Authorization, using multi-factor security creates strong security on the account, which reduces fraud risk.

3. Development and integration of a new centralized market infrastructure will result in complex cost recovery models and ensures early adopters face a difficult business case.

As instant payments adoption continues to rise, business adoption of such services will require further development of related environments to address fraud and harmonization challenges.

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