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  • Thierry Spanjaard

Instant Payments may not always be visible, but they are changing the way we pay

In our time when digital goods and services are delivered instantly, everything is online, and can be done in a snap, how can we accept to have our bank transfers processed in 24 hours, or even sometimes up to 72 hours? This is the reason why the industry is adding “instant payment” as a new option in the already rich set of payment options.

Instant payment is characterized by a transfer of money from an account to another one within seconds, 24/7 availability, immediate availability of funds in the recipient’s account and unrepudiable transactions. Typically, instant payments can be accessible from any digital tool: mobile app, tablet, web, kiosk, etc. They can be used for peer-to-peer transactions as well as for payments to merchants.

In the EU, instant payments are driven by the EPC (European Payments Council) rulebook and are essentially seen as an evolution of transfers, or SCT (SEPA Credit Transfer), leading to a specification called “SCT Inst.” One of the goals of instant payments is to make payments easier than with cash or cheques. Also, as they are instant, they allow for a faster run of economy, especially in emerging countries where small merchants tend to purchase new goods directly using the funds obtained from the sales of the day.

From a more global standpoint, the goal of instant payment is to displace cash, thus, to reduce the burden of the invisible cost of cash for the economy, estimated between 0.7% and 2.5% of the GDP. As they are totally online and do not require specific hardware, instant payments are more cost-effective than other payment means, such as credit and debit cards, especially as they do not have to support the transaction fees levied by the major payment schemes. Also, instant payments allow to envision the development of new services and they are open to PSPs (Payment Service Providers) in line with the directions set by the PSD2 (Second European Payment Services Directive).

Instant payments may not always be visible to the end user. For instance, in Paylib, the mobile payment system development by a consortium of French financial institutions, instant payment mechanisms constitute the underlying layer of peer to peer transactions as explained by Vincent Duval, the company CEO during an EESTEL session.

Instant payments are meeting a growing interest in Europe, especially thanks to mobile payment apps developed in various countries: Bizum, launched by 27 Spanish banks; Kwitt, by Sparkasse and other German financial institutions; Payconiq and Bancomat in Belgium; Paym developed by the British Payments Council, etc. The ECB has set up as a goal that national instant payment systems should be interoperable.

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