Instant payments are set to dominate the global payments landscape for the foreseeable future. Reflecting this, FIS/Worldpay has reported that it expects account-based instant payments to be its leading revenue stream by 2024.
Historically we have relied on Visa and Mastercard as the backbone of global e-commerce. But, that’s all about to change with the introduction of a new-generation payment service which is both real-time and account-to-account.
In Europe, the Retail Payments Strategy, adopted by the European Commission (EC), has determined that instant payments, in conjunction with PSD2 (second Payment Services Directive) and Open Banking, are central to the EC’s short-term ambitions. Added to this, 60 countries are rolling out real-time, account-to-account payment schemes. Companies globally are also embracing a more digital way of working: one where instant is the new normal.
A study by Juniper Research has found that the value of Open Banking global payment transactions will exceed $116 billion in 2026, up from just under $4bn in 2021. This extraordinary growth rate of more than 2,800 percent in five years will be driven by increasing user awareness of Open Banking. It will be supported by greater deployment within Europe as vendors build on PSD2 application programming interfaces (APIs) to provide expanded services.
Open Banking is a fully functional scheme with multi-currency, multi-clearing and functional variation across the network. For example, in the UK it’s possible to clear payments instantly via Faster Payments (FPS). However, in the EU, many banks are yet to implement the new Single Euro Payment Area Instant standard.
The research identified Open Banking-facilitated payments, where payments are made directly from bank accounts, as a growing threat to the dominance of cards within e-commerce. Leveraging permissioned access to bank accounts through this payment method reduces fraud risks by adhering to strict Know Your Customer rules and eliminates costly chargebacks. The research also recommends that payment providers partner with Open Banking API specialists to reduce the risk of disintermediation.
Where there’s an established and consistent domestic standard in account-based payment, it’s already the leading and preferred payment method. Examples of providers are iDEAL in the Netherlands, Sofort in Germany and Swish in Sweden.
Others include the Unified Payments Interface in India, ANT Financial and Tencent in China, Asia Fast and Secure Transfers in Singapore and FPS in Hong Kong, New Payments Platform in Australia, and Pix in Brazil, each which has strong acceptance and high adoption.
At Volt, as experts in new generation real-time payments infrastructure and Open Banking, we believe that next-generation payment functionality will be provided by APIs which can be embedded directly into applications, enabling more customisation, analytics and control.
Open Banking is an opportunity for merchants to enable consumers to quickly, conveniently and securely initiate direct payments from their bank accounts. The benefits are clear: merchants receive their funds in real-time as opposed to days under card schemes, and at significantly lower fees. Open Banking payments are also inherently more secure, with bank-grade security available to the consumer, while card fraud is eliminated.
But currently the new global real-time infrastructure is domestic and disparate: instant payment schemes are owned and operated by regulators and banks in each domestic market. They are also technologically fragmented.
Volt is building the single integration to these new-generation payment networks – the metaPSP for real-time – and the payments orchestration layer. Our intelligent platform, which is scaling from a successful European core to service global markets, makes instant money flows interoperable.
The tectonic plates are shifting towards a digital future: central banks aspire to such systems to modernise their economies and lay foundations for the new generation. They understand that fiat monetary systems are becoming outdated, sparking a move towards Central Bank Digital Currencies.
For example, in the UK, the Chancellor of the Exchequer has announced the formation of a special taskforce to examine the merits of a digital British pound. More than 60 other state institutions are also developing their rationale and framework for the implementation of this next-generation digital platform.
PwC has said that this will “contribute significantly to the modernisation of the international monetary landscape” and that, by providing access to a digital form of central bank money “a big milestone in the evolution of money” is being reached.
If fiat currency is the postcard, crypto is the email. The race towards an international monetary system where value moves as fast as information is upon us, with the free-market Web3 community having established the model for governments follow.
There can be no question that monetary systems and payment infrastructure are undergoing a revolution. The status quo has been long established, but the trajectory of how money is transacted is rapidly shifting.
Tom Greenwood is Founder and Chief Executive Officer at Volt, a technology developer and product innovator with a focus on new generation real-time payments infrastructure and Open Banking.