How collaboration can speed up the real-time payments revolution for corporates

For retail customers, instant payments have come to be expected, but in the B2B world, that kind of speed and convenience is not yet the standard. However, a time in which real-time payments become the norm for businesses might not be as far off as it feels. Even when it comes to cross border payments.

Most countries have either already launched, or are currently working on, new schemes to enable this. In the UK, there is Faster Payments, whilst in the Eurozone there is SEPA Instant, and in the US, FedNow. Similar projects in Australia, India, the Nordics, and Singapore are being developed and within the next few years, most of these schemes should be live. Once they are, change is predicted to be both significant, and fast.

Despite this, we do have a little way to go first, as there are some obstacles the industry needs to overcome along the way.

Why aren’t real-time payments already widely available to corporates?

There are numerous instant payment solutions available for retail customers, so why are the same benefits not available to all businesses?

It certainly isn’t due to a lack of demand. Businesses are in more need of financial support than ever following the pandemic, and many corporates have vast funds constantly tied up – and therefore inaccessible – within the payments system.

For many incumbent banks who serve corporates, the delays are a result of legacy issues with the systems on which their infrastructure is built.

The importance of re-engineering

In order to take full advantage of instant payments, re-engineering will be critical for many banks. One of the largest challenges to overcome is the issue of connecting banks’ front end through to the instant payment schemes themselves. The bank itself may be signed up to Faster Payments, but the corporate banking ledger may not yet be piped through, or intelligent routing might not be in place to determine which payments go to Faster Payments, and which to CHAPS or Bacs, for example.

Managing liquidity by bank treasuries outside of normal working hours can also be a problem, as can errors in payment data, which prevent automated straight-through-processing.

Sanctions screenings then cause further issues, where the screening engines of the majority of banks have a lack of visibility on payments processed by instant payments schemes, looking at the SWIFT message traffic instead. And in many cases, instant payment schemes don’t integrate with banks’ SWIFT gateways.

What should be the benefits of real-time payments then become redundant in many scenarios.

What’s the answer?

Re-engineering underlying systems is a significant project, and particularly for smaller local banks the costs involved can be insurmountable. Therefore, it is important they find another way to help corporates access instant payments. Collaboration can help banks to achieve this.

Financial institutions who choose to partner with new cloud native specialist banks can take advantage of their infrastructure to join instant schemes that deliver real-time payments for their corporates, without having to worry about integrating the right sanctions screening, or connecting to the correct payment rails.

Many have already begun the process of forging new partnerships. Last year, we surveyed 300 C-suite bank executives across Europe and found that half already had partnerships in place with an external provider, or had this on their agenda within the next month. Another third planned to partner within the coming year.

The niche expertise of specialist banks, their agility, and their commitment to building the payment rails for instant payments holds real value, and should be a serious consideration for traditional banks. This collaboration means they can offer their customers access to affordable, frictionless real-time cross border payments at a particularly crucial time as corporates prioritise post-pandemic recovery.