How to build a secure and efficient instant payments infrastructure

The financial industry is transforming into an increasingly open ecosystem. Now, driven by vast amounts of data, nonfinancial players are bringing innovative use cases to the market. Central to this transformation is the widespread adoption of instant payments. Institutions worldwide have embarked on ambitious projects to modernize their financial environments.

In this series of articles on instant payments, we’ll focus on the keys to implementing a new payment infrastructure from both product and project management perspectives.

Why instant payments?

Instant payments enable monetary transfers between banks to be settled and finalized in central bank money within seconds. These payments, also known as real-time or immediate payments, stand in contrast to traditional payment methods, which can take hours or even days to settle. Instant payments operate around the clock to provide immediate transaction confirmation and instantaneous availability of funds to the recipient.

Another important component of most modern instant payment infrastructures is the ISO 20022 messaging standard. These Extensible Markup Language messages allow for the transmission of rich and structured data alongside the payment transaction, which enhances informational flow within the financial ecosystem. This increase in data transfer opens new possibilities for automation, reconciliation, analytics and value-added services.

Likewise, instant payment systems often offer additional functionalities such as Request to Pay, Alias/Proxy and even third-party access. The combination of speedy transactions and comprehensive data capabilities provided by ISO 20022 messages make instant payments a powerful tool for modern financial ecosystems.

How can instant payments be used?

Utilizing modern technology, such as APIs and rich data in ISO 20022 messages, a new platform can open a range of use cases benefiting from the speed of instant payments, including:

• Peer-to-peer (P2P) payments
• Point-of-sale payments
• Business-to-business payments
• Invoicing and bill payments
• E-commerce
• Funding/defunding of wallets and other accounts
• Government payments
• Emergency payments and disbursements

Who benefits from instant payments?

Instant payments bring benefits for various stakeholders, including banks, businesses and consumers, and the potential benefits will continue to grow as the technology evolves.

Banks

Instant payments provide banks with a competitive edge in today's digital-first financial landscape as they:

• Foster a modern and digital brand among consumers
• Increase the volume of transactions
• Allow banks to offer new value-added services (e.g., real-time lending)
• Optimize banks’ liquidity management

Businesses

Businesses, including merchants and gig workers, can reap some of the same benefits – such as increased digital branding or new use cases – in addition to:

• Improved cash flow with money instantly settled into accounts
• The option to offer new payment methods to customers
• Improved supply chain management

Consumers

Instant payments offer convenience and flexibility, and include:

• Brand new use cases with easier ways of paying and being paid (e.g., P2P payments)
• Increased transparency and immediate updates to account statements, beneficial in managing personal finances

Instant payments represent a significant evolution in the financial industry, with the potential to foster innovations we may not yet comprehend. Introducing a modern instant payment platform has a positive macroeconomic impact by enhancing economic growth through a higher level of cash flow and increased levels of financial inclusion as third parties enter the interbank space and, in turn, lower the barriers for end-users to access new digital payment services.

Learn more about developing an instant payments infrastructure by downloading our white paper, From Vision to Reality: Planning Your New Instant Payment Infrastructure