Instant payments, also called real-time payments, are a form of electronic payment that is said to be “available 24/7/365, with the payment processed and funds made available to the recipient instantly,” the latest Juniper Research report explains.
However, there is not a singularly accepted definition of instant payments, “with differing definitions on how quickly a payment must be processed to qualify as instant,” the Juniper Research report noted.
For the sake of this report, Juniper Research defines an instant payment as: “Any payment scheme where funds are capable of being received in 10 seconds or under, outside card networks, and confirmation of the payment to the parties is available in one minute maximum.”
As stated in the Juniper Research update, instant payments “are often confused with faster payments, which are an electronic payment that, providing both the sender and the recipient are on the faster payment scheme, can process a payment almost immediately, but can take up to two hours.”
This means that instant payments “are a form of faster payments, but not all faster payments are instant payments.”
There are other standout characteristics of instant payments “that differentiate it from other payment types.”
The research report further noted that “most notable is the irreconcilable nature of instant payments. As instant payments are in the recipient’s bank account within 10 seconds, there is no opportunity for the sender to cancel the payment.”
There is also no physical way “for the bank to take the money back from the receiver’s account.”
This means users of instant payments “are at greater risk from fraud, as they cannot stop the payment once the transfer has been made.”
Instant payment schemes do “not change the nature of the threat, but make the crime harder to catch or trace.”
Instant payments are also noteworthy for the immediacy of “the confirmation of payment for both sender and recipient, as well as the use of industry-specific standards in clearance and settlement. A commonly used standard is ISO 20022.”
A key area for differentiation “for vendor’s instant payments capabilities is the use of value-added services.”
This opens up a host of opportunities “for instant payment providers to create a product to meet the needs of a specific market or type of payment.”
The report from Juniper Research also mentioned that these features “can integrate with other systems; allowing instant payments to be part of a larger change in business payments.”
As stated in the research report, instant payments are “not a new technology, with the first instant payment system being launched in Japan in 1973. Called Zengin, it offered instant credit transfers between banks online and clears the funds following the transaction.”
The Zengin system is still in operation today, “on its seventh generation, and provides coverage of almost all private banks in Japan.”
The second instant payment was SIC (Swiss Interbank Clearing) in 1987.
Since its introduction, it has reportedly been “operated by SIX Interbank Clearing Ltd on behalf of the Swiss National Bank. SIC processed large-value transactions and retail payments.”
The next system “was Taiwan’s CIFS (CBC [Central Bank of the Republic of China] Interbank Fund Transfer System) which was first online in 1995, but was not capable of instant gross settlements until 2002. It handles large-value electronic payments and operates domestic payment and settlement systems in Taiwan.”
In 2001, South Korea’s HOFINET launched.
Through the 2000s, more countries brought domestic instant payment systems online.
The instant payments market will grow by 161%, up from $22 trillion in 2024.
This substantial growth will be “driven by the increased popularity of A2A (Account-to-Account) wallets, such as iDEAL and Twint, along with the rising popularity of Open Banking.”
A2A and Open Banking payments both “enable transactions to be made directly from bank accounts, bypassing the card entirely; reducing costs for merchants and complexity for users.”
Open Banking allows digital wallets to leverage bank payments “without requiring partnerships with individual banks; boosting access significantly.”
The reported added that the ability to quickly and securely access bank accounts “through Open Banking, alongside bank-backed A2A wallets, will increase consumer instant payment transaction volume from 252 billion in 2024, to over 600 billion by 2028.”
A2A wallets are popular for peer-to-peer transfers, often “used for informal lending and repayments to friends and family.”
Features such as splitting payments “between multiple users as a key driver of their popularity.”
Additionally, the need for greater merchant acceptance of bank payments, “both at physical checkouts and eCommerce, as the pressing hurdle to greater consumer adoption.”
To increase adoption, we recommend that merchants “incentivize consumer use by offering purchase discounts when using bank-linked payments.”
By encouraging adoption, merchants will “benefit from lower fees for each transaction in comparison to cards,” the Juniper Research report concluded.
