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3 Tech Trends to Watch in 2021


Some payments schemes will only meet this definition if certain conditions, such as anti-fraud measures, are met; however, this definition includes schemes that are capable of such speed, without necessarily meeting it with every single transaction.

Instant Payments Gaining in Popularity

Instant payments, also known as real-time payments, are having a disruptive effect on the payments market by injecting speed into transactions where speed has previously not been available. However, the changeover to instant payments schemes is not happening in a universal way and is generating many challenges of its own, such as scaling these new solutions and fraud.

The European Central Bank defines instant payments as "electronic retail payment solutions that process payments in real-time, 24 hours a day, 365 days a year, where the funds are made available immediately for use by the recipient."

Given the uncertain nature of the word ‘immediate’ in this example, we will set out our own definition of instant payments. Juniper Research defines an instant payments scheme as "any payments scheme where the funds are capable of being received in ten seconds or under, outside card networks." Some payments schemes will only meet this definition if certain conditions, such as anti-fraud measures, are met. However, this definition includes schemes that are capable of such speed, without necessarily meeting it with every single transaction.

Instant payments schemes tend to be updated versions of legacy payment settlement schemes created by individual payments authorities in countries. Card payments, while certainly fast, do not tend to lend themselves to the same use cases as instant payments schemes, given the requirement for the supplier to accept the card transaction, which has relatively high transaction fees.

While some schemes predate its development, instant payments solutions are generally associated with the ISO 20022 standard. This standard, first published in 2004, aims to standardize the messaging format for financial messaging between financial institutions. When adopted fully, ISO 20022 will mean far greater interoperability between international payments schemes. However, its adoption is very mixed, depending on the country market. Most payments regulators have ISO 20022 adoption roadmaps in place, but many of these have unclear timelines or significant windows until they are fully complete.

There have been significant problems in terms of ISO 20022 adoption. In May 2020, SWIFT announced an unexpected delay to full ISO 20022 implementation in Europe, from November 2021 to November 2022, which drew some criticism from banks and the European Central Bank. However, in general the movement to ISO 20022 has been positive.

The value of instant payments, where transactions are completed within ten seconds, will reach $18 trillion in 2025, up from $3 trillion in 2020, a growth of over 500 percent. This represents 17 percent of all B2B and consumer digital money transfer and banking payments by value in 2025. West Europe is driving innovation and will account for 38 percent of instant payment transaction value by 2025.

Open Banking Becoming Commonplace in Europe

Open banking is where connections to bank accounts are made available via APIs, so other banks, account aggregators and authorized payments vendors can access account information, offer added services or initiate payments.

In 2020, open banking has made significant progress, having recently launched across much of Europe. It is starting to emerge in other markets.

Banks have begun to recognize the competitive advantage of a more open approach. Offering a superior open banking experience can be a compelling differentiator as part of a wider digital app experience. Open banking also creates a level playing field in markets where regulatory intervention has led to open banking deployment. As all banks are required to deploy APIs in this scenario, the situation is the same and does not put any one bank at a disadvantage.



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