Real Time or Instant B2B Payments Are Being Offered, but Service Needs Improvements: Report

The team at Banking Circle, an established payments service provider, has looked into how collaboration can “speed up the real-time payments revolution for corporates.”

As noted in a blog post by Banking Circle:

“For retail customers, instant payments have come to be expected, but in the B2B world, that kind of speed and convenience is not yet the standard. However, a time in which real-time payments become the norm for businesses might not be as far off as it feels. Even when it comes to cross border payments.”

Most nations have launched or are currently working on new schemes to support instant or real-time transactions. In the United Kingdom, there are Faster Payments, and in the Eurozone, there is SEPA Instant. Meanwhile, in the US, we have FedNow.

Similar initiatives are being introduced in Australia, India, the Nordics, and Singapore, the Banking Circle team notes. They also mentioned that within the next few years, “most of these schemes should be live.” After they’ve been launched, “change is predicted to be both significant, and fast,” Banking Circle’s blog noted.

The firm pointed out that “despite this, we do have a little way to go first, as there are some obstacles the industry needs to overcome along the way.”

While commenting on why real-time payments are not already widely available to corporates, the company acknowledged that there are “numerous instant payment solutions available for retail customers.” However, the same benefits might not be available to all businesses.

According to Banking Circle, it “certainly isn’t due to a lack of demand.” Businesses are “in more need of financial support than ever following the pandemic, and many corporates have vast funds constantly tied up – and therefore inaccessible – within the payments system,” the Fintech firm added.

They also mentioned that “for many incumbent banks who serve corporates, the delays are a result of legacy issues with the systems on which their infrastructure is built.”

As noted in the blog post from Banking Circle:

“In order to take full advantage of instant payments, re-engineering will be critical for many banks. One of the largest challenges to overcome is the issue of connecting banks’ front end through to the instant payment schemes themselves. The bank itself may be signed up to Faster Payments, but the corporate banking ledger may not yet be piped through, or intelligent routing might not be in place to determine which payments go to Faster Payments, and which to CHAPS or Bacs, for example.”

The Fintech firm also pointed out that “managing liquidity by bank treasuries outside of normal working hours can also be a problem, as can errors in payment data, which prevent automated straight-through-processing.”

The blog post further noted that sanctions screenings then “cause further issues, where the screening engines of the majority of banks have a lack of visibility on payments processed by instant payments schemes, looking at the SWIFT message traffic instead.” And in many cases, instant payment schemes “don’t integrate with banks’ SWIFT gateways.”

According to Banking Circle, re-engineering underlying systems is “a significant project, and particularly for smaller local banks the costs involved can be insurmountable.” That’s why it is important they “find another way to help corporates access instant payments. Collaboration can help banks to achieve this.”

The Banking Circle team also mentioned:

“Financial institutions who choose to partner with new cloud native specialist banks can take advantage of their infrastructure to join instant schemes that deliver real-time payments for their corporates, without having to worry about integrating the right sanctions screening, or connecting to the correct payment rails.”

The Fintech firm added:

“Many have already begun the process of forging new partnerships. Last year, we surveyed 300 C-suite bank executives across Europe and found that half already had partnerships in place with an external provider, or had this on their agenda within the next month. Another third planned to partner within the coming year.”

As noted by Banking Circle, the “niche” expertise of specialist banks, their agility, and their commitment to developing the payment rails for instant payments “holds real value, and should be a serious consideration for traditional banks.” The Fintech company added that this collaboration “means they can offer their customers access to affordable, frictionless real-time cross border payments at a particularly crucial time as corporates prioritise post-pandemic recovery.”

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