26 November 2020
Instant Payments and the distinction between the competitive and non-competitive space
In the development of Instant Payments (IP), stakeholders must distinguish between a competitive and non-competitive space. This was pointed out by Michael Steinbach, CEO of equensWorldline, during the session Reaping the potential of real-time payments on the second day of EBAday. This way, Europe can unlock the full potential of Instant Payments that is already on its way to becoming the new normal, says Steinbach.
Common underlying IP-infrastructure
In the so-called non-competitive space, finance organisations must work together to create a common underlying IP-infrastructure at pan-European level. Without standardisation, seamless cross-border IP-payments are far away, while it is important that users do not experience any obstacles when using this payment method across borders. Customers are increasingly looking for cross-border solutions. Retail and wholesale customers often pay across borders, for example for holidays, e-commerce or cross-border trade. “Standardisation is very important”, Steinbach argues. “It works best for everyone if Instant Payments is based on the technical standard ISO 20022.”
According to Steinbach, we can learn from the introduction of SEPA (Single Euro Payments Area), which was intended to create a single European payment market with uniform payment products. “Each country eventually interpreted the rulebook in its own way, creating some kind of mini-SEPA areas. That was not the intention.”
But the competitive space may well be fragmented, says Steinbach, because it creates a healthy competition. On top of the standardised IP-infrastructure, fintechs and banks can build new functionalities and services for their customers. This way it is possible to generate additional value, because the new functionalities and services built on this layer generate an abundance of real-time customer data. “Competition is healthy, so financial players need to have space to come up with new solutions. The fact that fragmentation occurs at this level is not a problem, because in this way customers can choose which service they like the most,” Steinbach explains. He also points to the competition, such as the bigtechs, which are moving forward. “We are in a rush.”
Steinbach sees that the discussion around IP often focuses on business cases, but this is not the way to approach this payment method. After all, it is not a question if financial institutions will introduce IP, but when.
Steinbach: “Instant Payments is the new normal in the future, not only in Europe but also globally. We will end up in a complete instant world and that is already happening. It’s an endgame scenario. If you don’t adapt to this instant world, you will soon be at an unbridgeable disadvantage and customers will walk to the competitor who does work in an instant way. In the end, the whole world will be instant, and so will payments.”