Instant Payments: Game Changer or Just Another Buzzword?

Arguably every treasurer on the planet has heard about real-time payments, and many will already have used them in their consumer lives. But what are the concrete benefits of implementing instant payments in a business context, for both B2C and B2B flows? And is the work needed to adjust to real-time flows, data, and reporting, really worth it?                                               

The technology you use impresses no one. The experience you create with it is everything.

Sean Gerety

For decades technological advances have dictated change in our society. But not every technological innovation has proven to have staying power. For most, it’s now impossible to imagine life without smartphones and tablets. But after an initial flurry of interest, innovations such as smart glasses and 3D TVs turned out to be just a passing fad. In determining what stays and what doesn’t, convenience and improved customer experience is what makes the difference. 

The same applies to financial innovations. Some of the likely ‘stayers’ among recent financial advances include embedded finance, contactless payment solutions, and event-triggered automated payments. Why? Because they open up a myriad of possibilities that all aim to improve customer journeys. The story is the same for one of the latest trends in the financial sector: instant payments, with their high potential to improve the customer experience.

So why discuss instant payments now? The European Commission’s announcement in October 2022 that it will pursue further regulation of instant payments is an important milestone that promises to remove many of the barriers currently standing in the way of this exciting new payment form. Though banks have already started introducing instant payments, this regulation will be a catalyst for further uptake. It will also be an important driver in helping to make instant payments the most used payment method across Europe for consumers, as well as for corporates, eventually creating a ‘new normal’.

The business case

But what are the benefits for corporates of using instant payments? And how can improved customer journeys help businesses to grow?  

Some examples where corporates can benefit from instant payments – and the 365 book days and reporting associated with it – are immediate delivery and receipt of time-critical payments, sending and receipt of funds 24/7 outside business hours, improved cash flow, cash management optimisation, and opportunities for innovation.

There is already a significant adoption rate in the European market of digital payments both for consumers and corporates. This, combined with instant payments and 365-reporting, will pave the way for corporates to further improve not only their own processes but also their services to end-customers.

But many corporates are still not using instant payments and 365-reporting to their full advantage. To achieve that, corporates need to develop the ability to process and consume the information and messages shared with banks in real time. Once they have that capability, business actions can follow up seamlessly.

While the bigger corporates already have efficient cash management tools and procedures in place, not many of them currently operate 24/7. And they have not yet adapted their customer support or administrative processes for instant payments and 24/7 services. As such, treasurers and finance departments within corporates will need to decide what this new trend will mean for their liquidity management, and how instant funding could improve that, because the impact will be significant. So, let’s take a closer look at how corporates can use instant payments to their benefit.

Counting the wins

To begin with, instant payments can bring substantial advantages to the e-commerce industry in supporting the online experience of shoppers. Consumers are already used to buying products 24/7 in real-time, but now with instant payments consumers can also receive money back immediately into their bank accounts when returning an unwanted purchase to a store.

Instant refund

Immediate receipt of money after the product is returned in store

There are also interesting use cases in sectors such as insurance, like helping providers to improve the net promoter score of their policy holders:

Instant pay out of claims

Getting an insurance declaration paid immediately, 24/7, every day of the year!

In both examples, the corporates have embedded instant payments in their business service to improve the end-customer experience, and potentially gain competitive advantage. But that’s not all. Instant payments and 365-reporting can also be the driver for many more 24/7 real-time use cases that improve the end-customer experience.

An open goal

Imagine the substantial hidden sales opportunity for many corporates upon entering the 24/7 universe, while including real-time payments in their services, for example same day wage payments for temporary workers could attract new business for staffing agencies. Moreover, instant payments will be an enabler for further cash management optimisation. For example, when combined with instant cash pooling, balances can be centralised in near real-time, including outside of business hours, potentially generating higher investment returns.

Given the above, it will become more important for corporates to optimise their supply chains and logistical processes, while embedding instant payments into their treasury and business processes. As companies are revisiting their business models to capture the benefits of real-time payments and 365-reporting, they also need to identify reliable (banking) partners that can support them during this transition.

As a pan-European player, ING, is rolling out instant payments and 365 book days & reporting throughout its wide European network, putting the bank in an ideal position to support corporates in offering centralised real time 24/7 services to their customers all over Europe, both domestic and cross-border.

What’s more, the upcoming regulation around instant payments will help to increase adoption in the markets where ING offers payment services. As such, instant payments will become a relevant factor with the potential to improve customer experience across Europe and serve as a driver for corporates to grow their businesses. Not just an innovation with staying power, therefore, but a real game changer!