A superb discussion at EBAday 2023 was on the move to real-time cross border payments everywhere. Movement from next day payment delivery into the bank account to within an hour to become the new norm.

“The G20 proposed standard of 75% payments made within 60 minutes.”

The G20 standard coupled with the EU are mandating instant euro payments by year-end is pushing the payment industry. The UK shows virtually everyone likes instant payments. In the UK Automated Push Payments are growing at 30% per year the Payment System Regulator (PRS) mandated 100% reimbursement for APP Frauds.   

“The Payee, the beneficial area, has the most problems.” 

The winner of EBA FinTech Trophy 2023 was iPiD which validates cross border payee bank accounts actual owners. IBANs (International Bank Account Numbers) do not show any name, genuine or false. 

UK and Netherlands implemented Confirmation of Payee (CoP) for domestic payments.  Over 90% of the banking community do not check the name of the account/sort code match the actual owners name on the bank account. An ideal environment for scammers.

“Customers want payments to happen.”  

Consumers and corporations like predictability and certainty. The days of the cheque are numbered, along with cheque fraud. 

APP Fraud will exceed current fraud levels across the various payment schemes. The UK, credit card fraud has dropped down to second place, a first for any country worldwide.  The major issues for instant payments in cross-border payments are misdirected payments and scams. 

“What does the customer require from instant payments?”

Basically, an invisible payment process that is invisible to easy, user friendly and free or at least affordability.   Low value payments services seem to be over-priced and poorly served. Many countries have laws prohibiting the levy of fees on domestic payments but none on cross border payments. 

International payments, regardless of amount, carry a transaction fee, (€5 to 10) or a percentage of the amount (1 to 2%) and an FX margin (1.5 to 3%).  Given the size of small payments, a cross border payment for €100 could cost between 8% to 11%.  Regardless of fees, customers want payment to happen but will shop about.

“Adding friction in the payment flow”. 

The goal to reduce friction is still a big goal but adding friction could have benefits. For example, should fraud/bad actor payment activities be cordoned off for 24 hours? Every country has its own customer risk lists and their own operating systems. Interoperability with the arrival of ISO20022 message standards should enable information to flow much faster and easier in the future. Minimising friction is a great ambition, but some friction could be positive.

“Does everyone payment need to be instant”. 

No, provided the payments occurred with certainty and arrived on the date specified then the customers’ obligations had been met. Repetitive payments, like monthly payroll, can use other payment schemes. Here large corporates and governments could be a the major market along with using Open Banking.

As hide and seek game goes, “ready or not”, instant payments are coming.