How to implement an instant payments system

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How to implement an instant payments system


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.

In November 2023, Swift connected domestic payment schemes across Europe, providing end-to-end transparency for instant cross-border transfers within the European Union. The European Payment Council’s One-Leg Out Instant Credit Transfer scheme (OCT Inst) went live and now enables payments to and from Europe to be processed 24 hours a day, seven days a week. OCT Inst has been perceived as an opportunity to leverage the benefits of domestic instant payment systems globally using existing rails.

Demand for instant payment networks has been clear for some time. With Request to Pay, ISO 20022 and Confirmation of Payee coming to the fore, new markets are also preparing for a 24/7/365 world. While the EU’s euro real-time payments have been based on SCT Inst, the UK’s Faster Payments scheme facilitates real-time payments, institutions in the US participate in either RTP or FedNow programmes, India and Brazil have been flourishing with UPI and Pix, Canada continues to delay RTR. More needs to be done, and as more standards are implemented, banks will need to prepare for this transition.

As banks prepare for the transition to instant, implementing an instant payments solution requires careful planning before partnerships are embarked upon.

What to consider before adopting an instant payment solution

1. Be agile

Instant payments solutions must be ready for new requirements from customers, clients and regulators. Before selecting an instant payment solution, a bank must take a second look at their operational infrastructure and indicate where the gaps are when it comes to keeping pace with innovation. Without agility, banks will require costly adjustments or large architectural changes to manage damage control in times of uncertainty or system failure – this is why a cloud-based strategic approach that considers scalability and security is essential. Alongside this, by not adopting an instant payments solution, banks risk falling behind their competitors that are collaborating with technology firms to advance their products and services.

2. Be centralised

When implementing an instant payment solution, banks must ensure interconnectivity with their existing payment processing systems. Legacy infrastructure can no longer be a burden, but some institutions may require existing processes to keep running to avoid failover. Incremental change is the best way forward, and when choosing an instant payment solution for some areas of business, banks must leverage the standardised interfaces available via open banking to minimise disruption and unnecessary friction. In addition to this, implementing instant payments on to existing systems means that costs are reduced.

3. Be secure

When implementing an instant payments solution, banks should partner with those organisations that provide access to open technologies and enable implementation of third-party value-added services. This collaboration can add an additional layer of security, for instance, by asking users to authenticate themselves using multiple methods such as biometrics. In addition to this, working with a fintech that provides advanced fraud detection can help banks identify and prevent fraudulent transactions with technologies such as artificial intelligence and machine learning that can analyse transactional data. Further to this, Confirmation of Payee (CoP) can also help financial institutions and prepare in advance of it becoming a regulatory requirement.

4. Be compliant

The new instant payments regulation will mandate that all PSPs across the 27 EU countries offer and receive instant payments continuously, 24 hours a day, 365 days a year and with this, verify the payee's name against their account number (IBAN) before authorising a payment. If there is a mismatch, the PSP must let the payer know that there could be potential fraud, proceed or halt the payment. When choosing an instant payments solution, banks should look for a provider that can ease the burden of compliance end-to-end and facilitate a smoother transition to instant payments. This includes adopting ISO 20022 which reduces the risk of errors and fraud.


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This content is contributed or sourced from third parties but has been subject to Finextra editorial review.