Instant payments are experiencing a promising start with implementation initiatives by banks in the Netherlands, Hungary and the Nordics. However, retailers have not yet found enough compelling reasons to embed instant payments in their point of sale software. Merchants appreciate the fact that they receive the funds within 10 seconds in their bank account 24/7 and that the payment is guaranteed, but they also encounter a number of barriers, which is why a quick adoption of instant payments has not yet taken place.
It is up to banks, fintechs and payment processors to remove these barriers and to add value to instant payments for retailers, especially now that it is becoming increasingly clear that instant payments are becoming the new normal.
First of all, there are struggles that apply to every new payment system in the start-up phase: merchants and consumers must feel comfortable initiating transactions, the acceptance network must grow radically, and users must gain as much confidence in instant payments as they do in card payments, etc.
Fragmentation and unforeseen circumstances
However, there are other barriers that prevent a quick adoption of instant payments by retailers. In addition to conventional methods such as cash and card payments, the number of payment options has increased in recent years. New regulations, technological possibilities and new customer requirements have led to an ever-wider range of ways for customers to complete transactions. Fragmentation in the market is increasing, making the payment landscape more and more complex.
Another crucial aspect that retailers face is when a product or service is not delivered after an immediate payment. What happens if the merchant fails to deliver goods due to unforeseen circumstances, lack of product availability or bankruptcy? If a consumer buys a plane ticket by credit card but the trip does not take place, the customer will in most cases receive the money back automatically via the bank. This might not be the case via instant payment, because the rules are different from the well-known regulations of international card schemes. This situation might scare off merchants.
Remove these barriers
As mentioned before, it is up to banks, fintechs and payment processors to remove these barriers and also to build new functionalities on the instant payments-rails so that merchants can take full advantage of the benefits of instant payments. Think of instant payments applications that are linked to the ERP and accounting system of retailers and process the payments directly in their accounts. This way, the administration is automatically updated in real time and no accountant needs to be involved. It is also possible to automatically deliver a digital receipt to the customer.
This is just one example of the many possibilities in which instant payments could make the life of the retailer easier and create value for them. In addition, instant payments generate an abundance of real-time customer data that can be used for better and personalised domestic but also cross-border services created by banks and third parties. When instant payments become mature, retailers will wonder why they ever hesitated to adopt them in the first place.