Payments Industry

How businesses can scale with SEPA Instant Payments

By Modulr on 8 April 2020   •   4 mins read

To the untrained eye, payments are seldom seen as the ‘rock stars’ of business functions.

However, they are so critical to the functioning of any business that the changes in their provision or capabilities can have significant consequences for the company, regardless of industry, region or maturity.

Huge opportunities have been created for young, insurgent firms by a combination of technology and regulatory change.

Recently introduced schemes such as SEPA Instant Payments (SCT Inst) hold significant opportunities for businesses but will also ask questions of their existing structures and practices. One of the fundamental things these businesses will need to address will be their internal organisational cultures.

The near-real-time nature of SCT Inst will demand a significant rethink of several core business operations, from partnerships with external providers to back-office processes – especially when we factor in the new flexibility with data which Open Banking is delivering.

Fundamental shifts in thinking are seldom easy or straightforward, but disruptive innovation never is – and there are significant advantages and benefits available to any ambitious business looking to harness instant payments to drive growth.

Top of the list for a business wishing to grow is the opportunity to streamline and rationalise cash management.

Companies often face lengthy gaps of time between sending invoices and receiving the associated payments, making reconciliation more complicated and tying the business’s hands as it waits for money to arrive in its own accounts.

Overcoming these issues will be useful in and of itself – but doing so will also empower a business to have more control over its overall liquidity position.

This can have significant and far-reaching benefits for any company, enabling it to deploy its resources with far more detail and efficiency than under the old paradigm.

Let’s look at an example.

Say a company wants to optimise its salary payments to its staff, SEPA Instant makes it possible to pay out the amount on the same day of every month, irrespective of weekends, bank holidays or any other potential obstacle.

This is clearly more efficient – especially when the process is automated – but there is an ancillary benefit of arguably even greater significance.

If a firm has precise control over the exact moment a transaction is made, and has this control over every single transaction they make, the wider financial structure of a company is suddenly made significantly more flexible.

Liquidity can be managed with a lot more detail and precision than before. In addition to external payments, funds can now be moved between company accounts instantly, with all the added control that entails.

Alternatively, let’s say this same company’s finance department is frustrated by delays caused by having to estimate execution days due to uncertainty over the correct duration of the payments process, from bank operating hours to public holidays, and other considerations.

If the payee can be remitted instantaneously, these issues are often eliminated in one fell swoop.

Similar to the ‘just in time’ approach that revolutionised supply chains in the manufacturing sector, these ‘just in time’ financial capabilities could radically empower companies to be more flexible in their financial operations and give them more options as they grow.

This capacity for growth will be significantly boosted, of course, by the forthcoming lifting of the limit on SCT Inst transactions: on July 1st 2020, the cap will rise from €15,000 to €100,000, which will open up even more opportunities for businesses.

Meanwhile, the capabilities of APIs to surface data in different contexts via standardised interfaces can be combined in inventive ways with SCT Inst to facilitate greater collaboration both within and between companies.

Finally, it’s important to seek out and find providers that offer integrated solutions suited to your needs, or solutions scalable and reliable enough to accommodate your plans for growth.

If your business spans different jurisdictions, can your provider help you reach the level of standardisation you need to fully leverage the power of SCT Inst? Can you deploy your solution at its full maturity everywhere you wish to from day one?

These questions are far from trivial and can have serious strategic importance as you seek to lay the foundations for ongoing and sustained growth. It’s wise to make your choice of payments provider the bedrock of your plans for future operations.

Interested in learning more about SEPA Instant Payments and the future of the European payments landscape? Download our free 2020 guide to European payments today.