Jon Levine, Head of Institutional Banking at Banking Circle, shares his thoughts on how the adoption of instant payments is progressing.

Instant payments are something of an industry hot topic at present, and rightfully so. Other areas of our lives have been digitalising and speeding up for years. Information and data can be accessed instantly, purchases can be confirmed in seconds locally and even across borders. Yet payment processing has lagged behind.

In leading markets such as the UK, where the ecosystem has been maturing rapidly over the past three to five years, the growth of instant payments is going very well. In other parts of the world, it is a newer phenomenon, although the EU, in particular, has made some great strides in bringing about wider scale adoption. In fact, instant payments will become mandatory across the Eurozone in 2025, which brings urgency and significant challenges for banks and payments businesses across the region.

The hidden challenges

While customers wait impatiently for instant payments to become the norm, financial institutions grapple with a multitude of back office challenges. Not only the technical layer of how the payment is processed in the payments scheme, but the entire IT stack, the core banking system, sanctions engine, customer screening tests. Everything needs to be aligned to instant payments.

Then there are the fraud considerations. How do you mitigate consumer fraud or sending a payment to a wrong person or a bad actor? And of course, the money disappears instantly, wherever it is directed.

These challenges should not be underestimated. It is a significant undertaking to move to instant payments. But it does seem to be the way of the future. Financial institutions must, therefore, get on board to help payments catch up with the other areas in which we engage instantly and internationally.

It is all about bringing the technology stack forward, the payment systems themselves being available, safe, and secure. Also, all parts of the ecosystem must become available, including confirmation of payee, and the rules of the game being clarified regarding fraud and reimbursement. The focus in the future will be how to create interoperability between different parts of the world. For example, how do you marry up UK and EU instant payments?

The role of financial infrastructure providers

We really are at the forefront of innovation; this is the beginning of the global instant payments journey. There is a lot going on in different parts of the world, which is very exciting to see. However, as banks and payment businesses gear up to face the many challenges, they need external support.

That’s where Banking Circle fits in. As a financial infrastructure provider, we work with financial institutions, payment providers and merchants to facilitate commerce around the globe.

Commerce is an increasingly global phenomenon, with more and more trade taking place across borders. But the ultimate buyer of goods and services thinks local in terms of how they engage with financial utilities: local payment methods, local cards, local bank accounts. Banks like Banking Circle sit in the middle to connect the dots from one end of the payment to the other, ensuring the individuals and organisations at each end of the transaction can pay and receive funds in their familiar way.

The cross-border payment picture

The market has long said cross-border payments are ‘broken’ – they take too long, they cost too much. The challenges of improving cross-border payments differ from those facing local instant payments, and the trend does appear to be improving.

Existing legacy players are upping their game and SWIFT is bringing new tech to the forefront. Furthermore, businesses like Banking Circle are looking at different and innovative ways to process cross-border payments more quickly, to make cut off times more customer friendly and to improve traceability of payments.

As an industry, we are undoubtedly heading in the right direction. However, cross-border payments still have an awfully long way to go before they get to where the end user wants to be.

Innovative businesses across the financial ecosystem are meeting the challenge of instant payments and making impressive progress in breaking down obstacles. As such, the industry is rapidly evolving to support seamless and efficient global transactions, to match how we interact and transact around the world today, and in the future.