Building a stronger economy with instant payments

The global pandemic continues to have a severe impact on many businesses. Since the first lockdown, nearly 200,000 jobs have been lost in the retail sector alone. There looks to be few signs that this trend will reverse anytime soon. In August, data from IHS Markit shows that the index tracking output among UK companies fell to a 55.3 – a six month low – as problems from supply chains to consumer confidence and staff shortages constrained economic activity.

Time to think about payments innovation

For a long time, payment innovation has focused on the customer experience. Offering new features like buy now, pay later and innovative ways to pay such as via a mobile device or through cryptocurrency are key focuses for research and innovation. These continue to be hugely important, but as it becomes ever more painfully clear that more needs to be done to help businesses along the journey of healing from the pandemic, it’s also time to look at the role payments can also play in aiding a sustainable recovery.

This is where instant payments enter the scene.

Simply put, instant payments are a way for consumers to pay businesses directly from bank account to bank account. In the process they bypass card providers and the fees they charge. As a result, instant payments offer the ability for UK businesses to save billions on card transaction and processing fees. Simultaneously, it also improves cashflow management.

The good news as well is that many existing payment terminals can already take instant payments. With just a quick software update they are ready to go. For the consumer, it’s also easy. Instant payment can be done by a mobile app which reads a QR code that can then be scanned for payment.

The benefits - cheaper, more secure, and quicker

Thanks to the removal and reduction of interchange and acquiring fees that are charged by card providers, instant payments offer a huge reduction in payment fees. The result is that each instant payment transaction is worth more to a business than the same payment made via a credit or debit card. This is capital that can be accessed, and used to fuel growth, without businesses increasing costs or cutting back in other areas such as staffing, quality of service and product or location.  

Security wise, instant payments also add no risk for the customer. This is because security is already baked into mobile devices that allow payments through passcodes, facial recognition technology and biometrics.

For businesses, security is also improved over a credit and debit card. Fake or cloned cards can’t be used, and funds are immediately transferred to the recipient company’s account. The reduction in losses from fraudulent transactions is an added bonus for businesses in recovery. Furthermore, instant payments must still achieve all existing payment security legislation.

A call on the Bank of England - let’s get the UK ready

Instant payments are already in use in many countries across Europe. They are commonplace in Denmark, France, and Italy, to name just a few. In the UK, we are lagging behind. However, the benefits it could provide us are so huge. Legislation wise it isn’t overly complicated to enable instant payments either. It is simply a matter of the Bank of England changing its regulation that will enable instant payments to be rolled out.

As a payments industry, it is our responsibility to call on the Bank of England to review its approach to instant payments. We must band together, and we must be vocal. As the fintech capital of the world, it’s perplexing that we haven’t woken-up to the use of instant payments to help businesses in their hour of need. It’s not an exaggeration to say our economy depends on it and that it can give British businesses the boost they so desperately need.

When it comes to instant payments, the bottom-line is that there is no risk and only reward.