The path to real-time payments success: key strategies for banks
Anders Olofsson, Head of PaaS at Tietoevry Banking explains the opportunity for banks in real-time payments – and what they should do now to prepare for the opportunities ahead.
On the face of it, real-time payments are booming across Europe – but positive surface figures mask some underlying issues. World-wide, the real-time payments market was worth more than $17 billion last year according to Grand View Research[1], with growth set to outstrip 35% year-on-year between now and 2028. In Europe, however, Mordor Intelligence[2] tell us that growth is relatively anaemic at 24.3%, around a third of what we are seeing in developing Asian economies. And there’s less good news from the EU, too, which reported[3] that just under two-thirds (61%) of payment institutions had signed up to its SCT-INST scheme by Q1 2022 – with just 11.48% of account-to-account payments in the bloc made using real-time payments in the year to March 2022.
Consumer and SME demand for real-time payments is well established. But meeting this demand means making sure that banks have their systems in order first. In practice, this means banks should clarify the clearing mechanism they use for their various payment methods (real-time payment or batch payment), then seek to move a significant part of their batch payment volumes to real-time clearing – especially as the EU will mandate the use of SCT-INST from Q3 2023.
To start with, banks wouldn’t have to offer these products as instant payments, since in many use cases the existing overnight or end of business day settlement periods work acceptably. However, they should be preparing for the future – and that means scheduling payment workloads more efficiently by taking into account considerations such as the available liquidity, processing power and energy costs required to run their systems.
By preparing their systems for real-time payments before offering real-time products to customers, banks will position themselves well for the huge opportunities that lie ahead, including variable recurring payments for subscriptions and bills, request to pay services and more. In the UK, a leader in Faster Payments that’s set to introduce Variable Recurring Payments later this year, instant payment volumes grew by 23% last year, and small businesses are now more frequent users of instant payments than of traditional batch payments[4].
Services based on real-time payments like Variable Recurring Payments or Request-to-Pay are not just faster and more convenient for payers – they also help build customer relationships for the companies receiving payment. What’s more, companies can use real-time payment services to improve their cash flow management, working capital flows and reconciliation. As real-time payment services develop, we’ll also see further product opportunities for banks such as splitting utility bills between people who share apartments or deferring regular payments to help consumers manage their cash flow.
At Tietoevry, we have developed a payments Software as a Service (SaaS) solution that includes real-time payments facilitation and recurring instant bill payments for the whole of Europe. To unlock the promise of real-time payments, please get in touch: payments@tietoevry.com
NB! If you're at EBAday 2023 in Madrid between 20-21 June 2023, we'll be happy to discuss the growing use of account-to-account payments with you at our stand #39!
[1] Grand View Research, January 2023, “Global Real-time Payments, 2023-2030”
[2] Mordor Intelligence, January 2023, “European Real-time Payment Market”
[3] The European Commission, July 2022, “Real-time Payments Update”
[4] Finextra, 19 August 2022, “UK Faster Payment Volumes increase by 23%”
Anders is a distinguished and influential leader in the banking industry, with a particular focus on open banking, innovative payment methods and business models. With more than 25 years of international business experience, including extensive expertise in deep technology, transformation, and outsourcing, Anders consistently drives successes for customers in the retail, wholesale, cash management and payment businesses.