Keeping up with the revolution in the payment industry
The digital revolution is reshaping the industry’s vision on instant payments based on some fundamental elements: speed and opening hours, and total customer experience.
By Inge van Dijk, director of Instant Payments, ING
The digital revolution is reshaping the industry’s vision on instant payments based on some fundamental elements:
- Speed and opening hours. Delivery of 24/7 instant payments to all client segments requires a fundamental redesign of the payment systems to ensure that funds are delivered within seconds to the beneficiary party, all hours of the day/year. Payment infrastructures need to be fast and flexible – while remaining secure – in order to fully leverage the opportunities of such industry changes.
- Total customer experience. Added value can be provided offering socially relevant services like e-ID or making propositions more simple, f.e. easier use of IBAN by means of aliases or providing payment solutions that work customer device independent.
The payment industry is experiencing a deep transformation, with customers’ needs shifting from simple payments to ‘beyond payment solutions’. Continuous improvement of the customer experience, both collectively as well as individually, is required at all times. The total customer experience needs to be considered when providing value propositions: payments are an important but not the only element, even if they are becoming real-time.
Instant payments or real-time payment infrastructures (RTP) are now a reality, with quite a number of countries having implemented instant payment functionality, and others actively considering the imminent roll-out of such projects in their domestic market.
In May, the yearly, international payments conference and exhibition EBAday was held in Amsterdam under the title ‘Payments 2020 – From Vision to Action’. The conference was attended by the entire payments community: banks, PSP’s, consultants… ING was one of the host sponsors. Managers and specialists of ING also played their part in many discussions on the future of payments. Read the different articles on ingcb.com.
The rise of mobile banking and the introduction of real time intra-bank transactions have created urgency for interbank 24/7 real time payments, looking at matching the digital consumer experience: just ‘one click’, as simple as searching online whilst safeguarding all security and safety aspects to ensure the payment stays reliable.
In Europe, EBA has focused its attention around instant payments as the next frontier for harmonisation and cross-border collaboration in payments, and has recently announced the launch of a task force to lay the groundwork for a pan-European instant payment processing service. Currently, the European scenario appears to be quite fragmented, as outside the Eurozone banks didn’t have to comply with SEPA requirements and have been already moving quickly to a 24/7 real time environment, while most existing SEPA infrastructures will require a substantial upgrade to be able to support the RTP systems (such as immediate or close-to-immediate interbank messaging).
Clearly, there are challenges and opportunities that arise from the evolving payments landscape: on one side, margins are dropping and the traditional banking model needs to rapidly adapt to these trends, such as speed, ease of use and simplicity. On the other hand, PSD2 (the regulation that will replace the current Payment Services Directive) will open up possibilities for newcomers and the first Third Party Providers (TPP’s) are already active in the market. Leading to an expected shake-out both among incumbents as well as new entrants.
Banks need to ensure that they stay relevant during this shake-out period, and focus on adapting and improving their proposition, collectively and individually, in order to generate shared value. Cross industry cooperation has proven to be successful in the past and it will remain crucial in the future: for example, the Dutch cooperation on the development of iDEAL (an e-commerce payment system used in the Netherlands, which allows customers to buy on the Internet using direct online transfers from their bank account) has shown in the past that a successful interbank cooperation model works.
Similarly, successful initiatives in other countries have been undertaken, like BLIK in Poland, Swish in Sweden and the most recent case of Danish instant payments. All these projects have entailed a closer and prompt involvement of stakeholders and interest groups (from clearing houses to ERP providers, terminal suppliers, software vendors, app suppliers, etc.).
ING strongly believes that instant payments will greatly foster innovation in payments and reshape the way we do payments in the coming years adding value and opening up all sorts of possibilities for all market segments, both consumer and business.
‘The impact of real time payments on consumers and their businesses’, a short write-up of an interview of Inge van Dijk, director of Instant Payments, ING
‘Payments is all about customer experience’, by Mark Buitenhek, global head of Transaction Services, ING
‘Innovation and digitisation: the treasurer’s imperative’, by Mark Buitenhek, global head of Transaction Services and Dick Oskam, global head of Sales, Transaction Services, ING