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The implications of instant payments

May 15, 2024

In today's digital age, immediacy has become a key element for both users and consumers. In this area, instant payments have emerged as a true revolution in the financial sphere, redefining the way consumers and businesses interact in their daily transactions. 

These transactions, conducted in real time, not only offer a faster and more efficient solution compared to traditional methods, but also reflect the growing demand for services that align with the fast pace of modern life.

However, beyond speed and convenience, instant payments carry with them a number of implications that affect various sectors of the economy and society. From technological adaptation and regulation, to the impact on business models and customer expectations, the advent of instant payments marks a turning point in the global financial paradigm.

What are instant payments?

Instant payments, also known as immediate payments, are financial transactions that are processed in real time, allowing cash transfers between accounts in a matter of seconds. Unlike traditional bank transfers, which can take hours or even days, instant payments eliminate these waiting times, offering a faster and more efficient payment solution for medium-sized and large companies.

These payments are based on advanced technologies and digital platforms that facilitate communication between banks and payment systems. Through secure protocols and authentication systems, instant payments ensure that money and information are transferred securely and reliably.

Instant payments should not be confused with other types of payments which, although fast, are not immediate. These include credit and debit card payments or mobile payments which, although fast, are not processed in real time.

Current trends in instant payments

Instant payments, and more specifically international payments, are one of the main trends in digital payments. In fact, according to a report by Juniper Research, instant transactions where funds are settled in less than 10 seconds are expected to account for 9.3% of all B2B transaction volume in a few years.

Both the IMF and the European Commission have also recognised this unstoppable trend. The IMF highlights multilateral international payment platforms as a promising avenue with a "transformative impact" on the international instant payment industry. The EU has also tabled a new proposal to amend the existing rules on international instant payments, especially for immediate payments in euro.

All in all, some of the most important trends in terms of instant payments are expected to be the following:

  • Mass adoption: The convenience and efficiency of instant payments opens the door to mass adoption by both consumers and businesses. The expectation of real-time transactions, rather than added value, is becoming the norm in many sectors, from retail to financial services.
  • Integration with other technologies: Instant payments do not operate in a vacuum. They are integrating with other emerging technologies, such as blockchain, artificial intelligence and cryptocurrencies like bitcoin, to offer even more secure, transparent and faster solutions. Moreover, this technology is present in many enterprise systems, such as treasury management platforms, facilitating the work of corporate financial managers.
  • Mobile payment platforms: With the rise of smartphones, mobile payment applications such as Apple Pay, Google Wallet and Samsung Pay are gaining popularity. These apps allow users to make instant payments with just a few taps on their mobile devices.
  • Regulations and standards: As instant payments gain popularity and adoption becomes more widespread, governments are establishing regulations to ensure the security and efficiency of these systems, especially with banking. These regulations, already in place in several countries, seek to protect consumers and ensure the integrity of the financial system.

Impact for companies: What do instant payments bring?

Instant payments are transforming the financial and business landscape, offering a number of tangible benefits that go beyond speed. Some of the key benefits for businesses include the following:

  • Operational efficiency: The ability to process transactions in real time means that businesses can access funds more quickly. This improves cash flow, facilitates the management of finances and enables a more agile response to business needs.
  • Customer satisfaction: In a world where consumers value immediacy, offering instant payments can significantly improve the customer experience. Not only can this lead to increased loyalty, but it can also attract new customers looking for fast and reliable payment solutions. Ultimately, increasing revenues.
  • Reduced costs: Instant payments can reduce the costs associated with processing certain transactions by eliminating intermediaries and reducing wait times.
  • Improved security: The technologies behind instant payments often incorporate advanced authentication and encryption. This reduces the risk of fraud, protecting both businesses and their customers.
  • Market expansion: Instant payments facilitate cross-border transactions, allowing businesses to expand into new markets and accept payments from international customers with ease.
  • Innovation and adaptability: Adopting instant payments can position a company as innovative and adaptive to current trends. This can be especially valuable in competitive sectors where differentiation is key.
  • Improved decision-making: With the immediate availability of funds and real-time data collection, businesses can make informed decisions more quickly, whether to invest, expand or adapt to changes in the market.
  • Integration with other digital services: Instant payments integrate easily with other digital solutions, such as customer relationship management (CRM) systems, ERPs or e-commerce platforms, creating a cohesive and highly automated digital ecosystem.

How to implement automatic payments in a company?

Implementing instant payments in an enterprise is a process that requires planning, investment and adaptation. The following are the key steps and considerations for a successful transition:

  • Needs assessment: Before embarking on implementation, businesses should conduct a thorough analysis to determine their specific needs. This involves understanding transaction volume, customer expectations and how instant payments will align with business objectives.
  • Choosing a platform: There are multiple solutions and providers in the market offering instant payments services. It is critical to research and select a platform that fits the needs of the business, offers robust security and has a proven track record of reliability.
  • Integration with existing systems: Once a platform has been selected that best suits your needs, it is important that it integrates seamlessly with your company's existing accounting, financial and operational systems to automate, as far as possible, all business processes. This may require collaboration with technology experts or specialised consultants. And, of course, it requires using the right technology and systems, such as Embat's real-time treasury management solution.
  • Training and education: Technology implementation alone is not enough. It is essential that the company's staff, from the finance team to customer service, is properly trained to use and manage instant payments. This will ensure a smooth transition and minimise errors.
  • Monitoring and updating: The technology and regulations surrounding instant payments are constantly evolving. Businesses should establish monitoring mechanisms to ensure that the system is working efficiently and make updates as needed.
  • Security and compliance: Given the real-time nature of instant payments, it is vital to implement advanced security measures. In addition, companies must be aware of local and global regulations related to instant payments and ensure compliance with them.
  • Communication strategy: Informing customers about the adoption of instant payments and their benefits can be a differentiating factor. Companies should develop an effective communication strategy to educate and inform their customers about this new payment option.
  • Ongoing evaluation: Once instant payments are implemented, it is essential to conduct regular evaluations to measure their impact on the company's operation and finances. This will allow adjustments and optimisations to be made as necessary.

Conclusions

In conclusion, implementing instant payments in an enterprise is a process that goes beyond simple technology adoption. It requires careful planning, investment in training, and a focus on security and compliance. However, with the right steps, businesses can take full advantage of the benefits of this financial innovation.

Carlos
Serrano García-Lisón
Co-founder @ Embat
Carlos, CFA and Industrial Engineer, brings his experience from J.P. Morgan and TowerBrook Capital Partners to corporate treasury management as a co-founder of Embat.

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