‘Instant Payments’ as it’s named clearly means “paying or receiving payment instantly*”
Instantly* means within few seconds anytime – 24/7, 365 days
Instant payments also known as “Immediate Payments” or “Real time payments” have been dubbed as the “New Cash” of this era of digital payments as it works at least as fast as cash (if not faster than cash).
According to the ERPB, instant payments are defined as –
“An electronic retail payment solution available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation). This is irrespective of the underlying payment instrument used (credit transfer, direct debit or payment card) and of the underlying arrangements for clearing (whether bilateral interbank clearing or clearing via infrastructures) and settlement (e.g. with guarantees or in real time) that make this possible.”
Instant payments are set to drive the most significant transformation in the global payments landscape since the introduction of today’s electronic payment mechanisms.
In the digital era, it is incomprehensible why e-payments should take longer than e-mails or instant messages/ SMS, live movie streaming or Instagram. There is definite growing demand for immediacy of retail payments transactions and delaying things would be denying customers of their needs and expectations.
There are three ways to access TIPS:-
SEPA Instant Credit Transfer (SEPA Instant) is a unique real-time payments scheme in that it is a regional interoperable scheme. It fits within the global trend where the rise of mobile offerings, the wish to reduce cash and alternatives to classic Payment Service Provider (PSP) environments are driving the uptake and PSP propositions towards real time payments. The SEPA Instant scheme is an optional scheme, available to any Payment Service Provider (PSP) in the geographic scope of SEPA.
The SEPA Instant Credit Transfer, as defined by the European Payments Council (EPC), specifies a target maximum execution time of 10 seconds. In this timeframe, the funds have to be made available to the beneficiary or the payment rejected. The scheme operates 24/7/365 and delivers real time failure notifications. The maximum SEPA Instant transaction amount is EUR 15,000. The limit will be increased to EUR 100,000 on the 1st July 2020.
EBA CLEARING launched RT1, an infrastructure solution for the processing of instant SEPA credit transfers at a pan-European level. The payment system operates around the clock on any day of the year. It supports payment service providers in transferring euro transactions between payment accounts in less than 10 seconds end to end, with immediate availability of the payment amount to the beneficiary. RT1 has been engaged in substantial onboarding activities since its launch and currently reaches over 1,000 payment service providers (PSPs) in 12 countries through its 32 participant institutions
(According to EACHA – A published pan-European scheme is a pre-requisite to create the necessary clarity for infrastructures and operators in the clearing and settlement space, to design working solutions)
Earlier the Real Time Payment services were deployed using ISO8583, a standard that governs the cards and ATM market. More recently ISO 20022 is emerging as dominant standard. It has been around for a decade and has matured sufficiently to be adopted more broadly.
Innovations in domestic retail payments have multiplied at a gravity-defying pace in recent years, driving unimaginable improvements. Entire domestic markets have completely transformed the way they shift value.
Current internet-based technologies and multi-functional technological devices have deeply changed the way payments are made. In just eight years between 2010 and 2018, the usage of cash in low value retail transactions in Sweden, for instance, dropped from 59% to 20%
The global development of internet-based retailers operating worldwide has spurred the emergence of transnational e-commerce. Payment solutions and service providers now aim to deliver the same level of service irrespective of the payer’s and the payee’s location, albeit with the obligation to comply with a number of different national or regional regulatory frameworks. In this context, cross-border payments tend to become a key prerequisite both for global merchants and consumers.
According to some experts the investment required may go up to Euros 5 million but the actual amount may vary from an organization to another, depending on the level of existing payment infrastructure and systems and the amount of time and efforts needed to integrate them with the existing systems – it could also be as low as only Euros 500,000/-
According to the European Central Bank (ECB) in order to preserve the ecosystem from fragmentation and leverage the harmonization and integration achieved with previous initiatives, the Instant Payment ecosystem should be divided in three main layers.These three layers are the
Yes, experts believe that block chain technology is a perfect companion for Instant Payments when used in the clearing and settlement layers.