Since 2018, instant payments have been offered by various private banks and many savings banks. These are real-time transfers: the money transferred via instant payments is available to the recipient within a few seconds, round the clock and 365 days a year. However, many people are puzzled as to what added value this should bring. Isn’t it a long overdue equation with payment methods such as PayPal, Sofort. or credit cards, where the payment amount is also directly authorized? Isn’t the normal bank transfer an anachronistic imposition anyway?
Instant payments have advantages for online merchants – if the systems are designed for it
The faster receipt of payment allows online merchants to confirm payment immediately and ship their goods faster. Real-time transfers can also have a positive impact on the merchant’s liquidity planning and receivables management. To take advantage of these benefits, however, both banks and merchants must invest in their IT systems, which today are usually not designed for instant payment processes. Even on less complex levels, challenges lurk: For example, the direct assignment of payments only works if the customer clearly states the intended purpose. Otherwise, the manual processing of transfers is necessary and the speed advantage is lost.
Real-time transfers are an opportunity for traditional banks
There are numerous initiatives in the UK and the Netherlands to promote the wider use of instant payments. The banks there hope that instant payments will keep transfer-based payment methods relevant to customers. This is also a justified hope for German banks, which have been losing their share of payment transactions to digital competitors for years. Here, many banks demand fees for every payment made with instant payments, which in the case of small amounts easily exceed the value of the transfer. A possible stumbling block?
It remains to be seen whether and how instant payments will become widely accepted. As long as customers do not see any real added value and have to pay fees for it, it will be difficult to establish real-time transfers. After all, the success of a payment method is ultimately determined by its customer benefit, e.g. PayPal Buyer Protection. To increase demand, instant payments must be presented as a new infrastructure, not as a new product. One can only hope, this realization will also mature among the traditional banks, which will otherwise finally lose payment transactions to digital providers.
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