In payments, disruptive drivers of innovation are like buses – you wait a long time for one, and then two come along at once.
In isolation, the digitisation of personal banking and the regulation-driven sharing of data between providers would both be huge drivers of change.
However, taken together, they have revolutionary implications that businesses and consumers are only beginning to understand.
From AI-powered personal finance assistants to wider systemic innovation that allows never before seen flexibility in how people organise their money, the Open Banking era is revolutionising how ordinary citizens interact with the global payments ecosystem.
Given that many of the activities in our lives involve a transaction of one kind or another, it’s fair to say that multiple facets of everyday life have been impacted.
SEPA Instant Payments (SCT Inst) is at the core of this revolutionary change.
As you might have guessed from the ‘instant payments’ branding, convenience is the key benefit.
Imagine a hypothetical customer who wants to order something online at a time outside ordinary business hours – late on a Friday night, say.
Whether they’re buying groceries, a fishing rod, or a flat screen TV, the merchant would be unlikely to be willing to ship before payment has been made.
For transactions across country borders in the EU payments area, this could have taken days under the old payments model. SEPA Instant, however, means that merchants can receive payment within seconds and ship the item straight away. The consumer receives the item far sooner than they otherwise would have.
It’s not just online retail that benefits from real-time payments. Waiting is also eliminated in other transactions that may be both more time-sensitive and more important to the user than an everyday retail purchase. The list of transactions where delivery or action is dependent on the payee receiving funds in a timely manner is long and can be critical for people’s lives – from deposits on homes to significant purchases like cars.
The payee may have concerns about business factors like counter-party risk and so on, but instant payments mitigate against uncertainty on the part of the consumer as well – truly benefitting everyone in the payments chain.
The impact of instant payments will not only be felt in B2C transactions, but payroll too. Employees can be paid by instant payments and very few – especially in the gig economy - would not be enthusiastic about services that guarantee they are paid faster.
Similarly, instant payments can improve the employee experience. For example, when employees are trying to settle their expenses, the simplification of the often opaque and time-consuming reconciliation and settlement processes holds great appeal. These are very common friction points that many of us regularly face and are eliminated in an instant. Obligations are met faster, anxieties are removed, and people’s lives function smoother – and the use cases are likely to expand when the limit on transactions is raised from €15,000 to €100,000 on 1 July 2020.
Meanwhile, consumers can settle their own bills faster and through a single, straightforward interface, saving them valuable time on individual payments.
These are immediate examples, but one of the most exciting things about SCT Inst is how the service could act as a catalyst for further, unanticipated innovation. New payment schemes and their supporting technologies often continue to evolve after they’re introduced, and can be leveraged by inventive providers to benefit not only individual consumers, but the entire financial ecosystem.
Given the capabilities SCT Inst has demonstrated while still in its infancy, the sky truly is the limit for where this scheme can go.
Learn more SEPA Instant Payments and its potential by downloading our latest guide on the future of European payments.