A screen of a stopwatch indicates real-time. More businesses are opting for real-time payments

Keeping pace with real-time payments

Real-time payments (RTPs) have value beyond consumer industries and are fast becoming essential to business-to-business treasurers.

Daniela Eder, Head of Payments & Cash Management Europe, and Denis Merendet, Head of Europe Cash Management Product, explain how treasurers can take advantage of RTP innovations.

Reasons to adopt

Adopting RTPs can streamline processes, benefit the environment, and improve customer engagement.

Key considerations for treasurers

RTPs are becoming a business imperative, so treasury control is more important than ever.

Getting up to speed

For security and compliance reasons, banks must keep pace with the latest infrastructure and technology.

Complementary services

AI-driven, cutting-edge tech is being developed alongside widely used services like ‘Confirmation of payee’.

Context and current landscape

As of January 2021 there were 3.96 billion social media users^. They connect in real time, and reactions and follows are akin to currency. Add to that the trend for on-demand entertainment and you have a situation where instant is not just the ideal, but the norm. eCommerce is having to keep pace, and payments are starting to deliver immediacy too.

There are already more than 50 real-time payment (RTP) schemes globally^ – they’re coming online from the US to Australia. In Europe, corporates are becoming more used to the SEPA Instant Credit Transfer scheme (SCT Inst). Daniela Eder draws our attention to the fact that “8.3% of SCTs are now instant, or at least delivered in under 10 seconds as per the scheme guidelines^”.

Figures from the recently released TMI and Barclays European Corporate Treasury Survey 2021 (PDF) paint an even more positive picture, with 31% of treasurers currently using instant payments and 40% planning to do so in the coming 12 months. However, Denis Merendet is keen to point out that “the RTP infrastructure is not at an optimum level yet, as not all banks are offering this service.”


Reasons to adopt

Eder is aware “some corporates still believe that RTPs are not suitable for B2B flows, even though value limits have increased” and in her expert opinion will “continue to do so”. Another common concern is around added complexity, although as Eder points out, RTPs will, in reality, “streamline complexity” and “minimise the use of expensive and environmentally damaging paper-based instruments, such as cheques and cash”.

In addition to this kind of cost-saving benefit, instant payments can be used as customer engagement and satisfaction tools. “An insurance company could, for example, pay flood claims out instantly using RTPs,” posits Eder. This would enable those in “disaster areas to pay for shelter and whatever they need to start rebuilding their lives”.

Retail refunds and gig economy payments are two other transactions that could deliver greater satisfaction if they were performed by RTP. “In fact,” Eder suggests, “instant payments can become a competitive element of many modern businesses.”

To treasurers who remain unconvinced, Eder would say that “the flipside of RTPs is that funds can be delivered into treasury coffers at speed”. This has “obvious cashflow benefits”, and “the data that comes with real-time collections can enable faster and more accurate treasury decision-making”.

Key considerations for treasurers

Eder is quite open about the fact that “most treasuries will want on-demand information, especially post-pandemic, but not all of them will – and that’s OK.

“For those that do want to leverage real-time, the next step is to identify where there is a business case to use it. There must be a business imperative – whether it be cost- or efficiency-related, or serving other commercial or sustainable purposes.”

Another important question Eder believes needs answering is: “How will the team deal with a receivable that arrives on a Saturday or at 11pm on a Tuesday, for example? Entire treasury workflows need to be reconsidered and automation built in where possible.”

The impact on foreign exchange (FX) must also be considered. With receipts coming in at any time of day from across the globe, hedging positions may be impacted and currency limits within the treasury policy could potentially be breached.

“In the real-time world, treasury controls are arguably more important than ever,” Merendet adds. “Security is also critical, especially in an era of increased cyber-crime.”

Eder concludes: “When you transition to ‘instant’, everything is impacted – from reporting to reconciliation, liquidity and FX hedging. Preparation is absolutely key.”

Getting up to speed

In relation to infrastructure, the ECB’s Governing Council has mandated the full deployment of instant payments across the Eurozone, requiring all banks to have instant payment capabilities by November 2021 (PDF†^) . All PSPs adhering to SCT Inst that are reachable in TARGET2 will also need to become reachable in TARGET Instant Payments Settlement [TIPS], either as a participant or as a reachable party.

Similarly, all automated clearing houses (ACHs) offering instant payment services must also migrate their technical accounts from TARGET2 to TIPS. TARGET2 will then be switched off.

There is also more development needed around the data infrastructure that supports RTPs. “ISO 20022 underlies many RTP schemes and brings with it the benefit of rich remittance data. This data, if handled correctly, will further improve the efficiency, speed and compliance of payments,” Eder believes.

She goes on to suggest: “In order to make the most of the real-time data that comes with instant payments, the technology needs to keep pace. Ultimately, this means banks investing in secure application programming interfaces (APIs) to deliver that data straight into their TMS or ERP in real time. We’ve already seen corporates leveraging our API capabilities to benefit their real-time set-up.”

Complementary services

What makes the business case for RTP even more compelling is the growing number of ancillary services.

Use of the ‘confirmation of payee’ capability is already mandatory in the UK, while ‘request-to-pay’ (known as ‘request for payment’ in the US) is growing in popularity. In Europe, the SEPA Request-to-Pay (SRTP) scheme^ was launched on 15 June 2021 as part of the European Payments Strategy. Eder suggests that “Request-to-Pay (also, confusingly, known as ‘RTP’) is potentially a good alternative to a direct debit”.

With regards to SRTP, there are potential benefits for both the organisation paying and the organisation collecting. The former no longer has to worry about direct debits being rejected due to insufficient funds – they can check their balance before agreeing to the withdrawal. The latter enjoys increased visibility over the timing and amount of cash inflows – with funds coming in instantly or at an agreed date. “Certainty is also increased as SRTPs are irrevocable, so cannot be contested,” comments Eder.

Other services being offered include solutions for screening of RTPs against sanctions lists and in-built FX conversion services. Merendet believes: “Both have important roles to play, while AI-driven solutions for analysing cash flows and customer payment behaviours are [also] in demand. Some corporates are able to perform such analysis themselves; many will be looking to their banks and vendors to step up.”

Power to your business

“We are in a great position to help treasurers fully leverage the benefits of real-time capabilities by empowering them to make timely, intelligent decisions. Transaction banks have a responsibility to help corporates understand the full spectrum of functionalities that real-time payments bring,” remarks Eder. “We’re talking about much more than the basic functionalities of instant payments and collections. RTPs pave the way for process changes, efficiency improvements, deep data insights, competitive advantages, and even entire business model changes.”

There is no better time than now to start embracing the benefits of this real-time ecosystem – they are there for the taking.

Daniela Eder

Head of Payments & Cash Management Europe, Barclays Corporate Banking

Important information

Content taken from article originally written^ by Eleanor Hill and published by Treasury Management International.

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