A new white paper from global payments technology leader RS2 explains why banks must control the risks associated with instant payments to survive and prosper in a fast-emerging instant payments future.
Instant payments will be the phenomenon of the next five years, according to the new white paper from RS2.
As instant payments go global, they will bring with them a whole host of new risks which existing bank systems are ill-equipped to deal with. As leading consulting firms project[1] instant payments will grow ten-fold this decade to reach $1.2 trillion by 2030, RS2 are calling on banks to prepare their systems now.
The call from RS2 comes at a time when organizations such as the Bank of International Settlements (BIS) are in the advanced stages of developing international instant payment networks based on mobile phones.
The BIS initiative in instant payments, Nexus, recently announced its next phase[2], which will see banks in Thailand, Malaysia, the Philippines, Singapore and India all connect their domestic instant payment systems to enable instant transfers between these countries.
“Cards are still the most popular way to pay, and instant transactions via card will grow fast. But bank tech stacks need to keep up.”
RS2 note that immediate payments are already well-established in Asia, where they account for 38% of all transactions on average[3] and are experiencing double-digit growth.
Markets such as Malaysia, Singapore, Thailand, Indonesia and especially India are connecting their domestic instant payment networks to deliver faster transactions for consumers travelling between these markets.
In Europe, the upcoming mandate for SCT-Inst transactions across the EU from December this year will see more links between domestic payment systems across borders and a rapid rise in real-time payments by volume and value.
The white paper reports that existing card-based software infrastructures will continue to form the basis of most banks’ instant payments tech stacks.
That’s because cards still rank ahead of digital wallets[4] in developed markets such as North America, the UK and Australia – while data from the European Central Bank (ECB) confirms[5] spending on cards grew by 15.6% across the eurozone in 2023.
Patching up legacy tech: risk “on”…
At present, many bank systems are not ready to cope with the huge surge in transaction numbers that real-time payments will bring.
However, this is just one of the challenges highlighted by RS2’s white paper.
Inconsistent data standards between different markets can make for poor communication and slower settlement, as well as making fraud identification and management more of a challenge.
The new white paper from RS2 also highlights that most bank systems are not yet equipped to handle AML screening, fraud checks and KYC routines in high-volume, high-velocity instant payment environments.
This means that traditional bank systems based on card transactions with longer settlement times are becoming more risky as they come under pressure from high volume payments with instant settlement requirements.
Read the new white paper from RS2 now to find out how banks can transform their payments infrastructure to deliver instant services to their clients.
[1] Acumen Research, November 2022: “Global Real-time payments market”
[2] Payments Cards & Mobile, 1 July 2024: “Project Nexus issues blueprint for connecting instant payment systems”
[3] McKinsey & Co, 18 September 2023: “The 2023 Global Payments Report”
[4] Worldpay, 21 April 2024: “The Global Payments Report 2024”
[5] European Central Bank, 31 January 2024: “Payment Statistics: first half of 2023”
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