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Embracing real-time payments

Payments experts discuss opportunities and challenges of real-time payment adoption

  • Jeremy Chan
  • May 13, 2021
  • 5 minutes

The past 12 months have accelerated the trend of moving consumers away from cash and more towards digital and contactless payments. With the pandemic having blurred the lines between people’s professional and personal lives, this consumer preference has also had a similar affect in the corporate payments space, says Jessica Cheney, VP of product management and strategic solutions at Bottomline.

“The pandemic has actually aided in the use of more contactless payments, which have also led to more consumers using real-time payment options. That’s one of the tailwinds for real-time payments adoption in the B2B space.”

However, adopting real-time payments (RTP) is not without its challenges, Cheney previously spoke in a webinar hosted by Bobsguide, 4 steps to Success – Kick-start your real-time payments strategy, in which she and three other panelists from Regions Bank, EBA Clearing & Lipis Advisors, discussed some of the hurdles corporates face when making the transition.

With participants from across the globe, a survey conducted during the webinar found that one of the biggest challenges to further adoption was the limitations of legacy systems.

Cheney says one of the best methods to tackle real-time payment adoption is to not think of it as a complete rebuild, but as a gradual process which starts with a minimal viable requirements (MVR), that is then scalable.

“Don’t look at this as a complete rip and replace of the legacy systems, look at this in terms of an overall modernisation approach.”

“Do it in layers, adding something like a payments hub, just for a new payment type that you might want to introduce. Start with the new real-time payment option that you want to support, and then layer in the transition over the more historical payment types.”

Geography also plays a role in where a company may be in their real-payments journey. Europe for example is a bit more mature, with initiatives like SEPA in the EU or P27 in the Nordics enabling a standardised way to accept digital real-time payments. In the US, there are several settlement/payment systems corporates can choose from like, TCH RTP, Fedwire, Zelle and FedNow.

“The headwinds [for real-time payment adoption] continue to be the optionality in the US,” says Cheney.

“Until we get a clear view on true interoperability between the various systems, then there will be hesitancy in mass adoption. However, Zelle & the TCH are already interoperable, with the others such as FedNow openly stating they are due to follow in swift succession.”

She does add however, that the market has been starting to coalesce, with TCH allowing Zelle payment to be transmitted through the real-time payment network. One of the key enablers to further this interoperability between systems will be the adoption of ISO 20022.

“That global standardisation is really the first step in ensuring interoperability. A lot of the domestic, especially in the US, real time capability is/will be based on the standard of ISO 20022.”

Adopting global messaging standards will allow business to scale up operations not only domestically but internationally as well.
“Not only can we use it on a domestic basis, but when we start to expand into cross border, we’re already using a global standard,” Cheney says. “Interoperability, whether we’re talking about domestically, or cross border is really the major linchpin in real-time payments growth.”

International networks like SWIFT have already laid out their roadmap for the adoption of ISO 20022.

Security concerns

A common query that audience members asked of the panelists was around security and authentication. One question for example, asked if Request To Pay or richer data within a digital invoice is a key enabler for friction-free real time payments given it doesn’t allow for manual payment review.

Cheney said that inability to review payments is ‘a bit of a myth’.

“Real Time payments, or instant payments do have all of the same types of pre-release review capabilities. You can have approval workflows on real time payments, you can have the ability to schedule a real time payment. Only after the payment has been released, is it instant.”

Regardless, as payments become more digitised and automated, security will be paramount in the growth of real-time payments.

“I do see that Request or Payment (NA – US & Canada) or Request to Pay (Europe & rest of world) as a key enabler for friction free real time payments, especially for small businesses and their customers,” says Cheney.

“Increased fraud mitigation tools and RTP growth go hand-in-hand. We’re going to see even more confirmation type solutions being either required or requested on both sides. As we start to ramp up usage and use cases of real-time and request for payment, we’re going to see the fraud mitigation tools also ramp up in conjunction – they need to be tied together.”

To listen to the full webinar, which include payments experts from both Europe and the US click here.