Instant Payments Around the World

Gone are those days when transactions took hours or days to complete. Customers don’t have to wait to transact money during banking hours anymore. All this is possible due to instant payments. 

Instant payments are a way of exchanging and processing payments between bank accounts or peer-to-peer in real-time. The most common types of instant payments include instant bank transfers, real-time payments through mobile numbers or unique IDs, QR codes, and e-wallets.

A transaction is called an instant payment when it fulfills the following characteristics:

• The transaction is settled and usable immediately
• The payment can be executed 24/7/365 
• The settlements are open-loop, i.e., it happens directly in the participating bank accounts

Instant payments are becoming widely popular, especially post-COVID. According to ACI Worldwide, instant payment transactions surged by 41% in 2020. ACI predicts the CAGR of instant payments to be 23.6% until 2025. 

In essence, instant payments are fast, secure, and transparent, as both the sender and the recipient receive the transaction message simultaneously. They have also brought financial inclusion, especially in countries with a majority of the unbanked population. 

Let’s find out how instant payments work worldwide.

Instant Payments Around the World

The US

The US is warming up to the instant payment concept. Zelle, The Clearing House’s RTP, Venmo, PayPal, and Visa Direct are a few of the leading instant payment players in the US. The US might seem slow in instant payment adoption compared to other countries, with only 1.8 billion real-time transactions taking place in 2022. However, that number could quadruple to 8.9 billion in 2026. Additionally, the US government is already on its way to initiating a new online payment system called FedNow Service by 2023 to enable individuals and businesses to transact instantly. 

China

China is one of the early adopters of instant payments. It launched a payment system called Internet Banking Payment System in 2010. Since then, there’s been no looking back. China has a lot of active users. The country recorded 18.5 billion real-time transactions in 2021. As a leading propagator of mobile-first digital payments, it’s no surprise that over 80% of China’s urban users have used mobile payments. China predominantly uses QR codes and digital wallets for collecting and sending payments. AliPay and WeChat Pay are the leading digital payment platforms in China. 

India

The one country that has surpassed China in terms of instant payments is India. India recorded a whopping 25.48 billion real-time transactions in 2020. India had set up Immediate Payment Service (IMPS) through the National Payments Corporation of India (NPCI) and later Unified Payments Interface (UPI) to make instant payments easy and quick. Paytm, Google Pay, and PhonePe are leading players in instant payments in India. Robust payment infrastructure coupled with the government’s support has made India one of the leading adopters of instant payments. However, despite the increased adoption, India is yet to replace cash as the primary payment mode. 

Europe

In 2018, Europe launched Target Instant Payment Settlement (TIPS), which allows banks to transfer funds to customers in real-time – 24/7/365. It enables banks to process end-to-end transactions within 10 seconds or less. Currently, banks charge up to 30 Euros for instant payments compared to traditional transfers. No wonder instant payments account for only 13% of credit transactions. Only two-thirds of banks offer instant payments. Non-banking institutes don’t even have access to payment systems. All these factors have complicated instant payment adoption. However, cities like Brussels are revising their rules to allow non-banks to participate. The recent EU law also aims to reduce the service fees to equal to or less than bank transfer fees. 

Australia

Australia is expected to surpass 2 million real-time payment transactions daily. They launched a New Payments Platform (NPP) in 2018 to enable customers, businesses, and governments to transact payments in real-time. The Australian government paid $12 billion through NPP towards COVID-related support and disaster relief. The government could make real-time payments to victims of wildfires and floods on weekends too. Over 107 financial institutions in Australia offer NPP services to 90 million accounts. NPP allows third-party authorization and simple beneficiary identifiers instead of bank state branches and account numbers. It makes NPP adoption easier and more seamless.

 

Japan

Japan is the pioneer of digital payments as it launched the Zengin system in 1973. In 2018, the Japanese Bankers Association launched a 24/7 system that allowed instant, 24/7/365 payments. Over 70% of Japanese banks already implemented this system after the launch. Like India, Japan has always relied on cash payments. However, with the government’s push, the country aims to grow cashless transactions to 40% of all transactions by 2025. 

Singapore

Singapore launched Fast and Secure Transfers in 2014 to enable real-time payments across the country. Since then, over 80% of businesses and individuals in the country have used it to make instant payments. PayNow is a customer-facing application built on FAST infrastructure. Singapore is also attempting to make cross-border or international payments easier by integrating FAST with other platforms like Thailand’s PromptPay, India’s UPI, and Malaysia’s DuitNow. The focus is to expand instant payment capabilities to new regions and create better connectivity between international markets. 

Common Challenges in Implementing Instant Payments

Banks, non-banking financial institutes, and governments worldwide are keen on increasing instant payment adoption. However, there are roadblocks to implementation. These challenges include:

• Poor or legacy infrastructure: Theold payment infrastructures cannot process real-time transactions. Banks and non-banking financial institutes need to modernize infrastructure and solve system and operational issues. The new payment infrastructure must be scalable and allow nationwide connectivity.

• Stringent regulations and banks’ interference: Security policies like GDPR, CCPA, and other country-specific regulations cause a barrier to adoption. Other factors, like the banks’ interference, could also impact implementation and adoption. Central banks want to have control over the payment process and keep it local to ensure that it remains in their jurisdiction.

• Slow customer adoption: In countries like India, a large population is still unbanked and prefers cash payments. Customers follow specific financial habits that are hard to change. Sometimes they are also unwilling to change their behavior. It stops customers from trying new payment methods.

• Security: Cybersecurity incidents like phishing, malware, ransomware, and social engineering pose a massive security risk to instant payments. The payment infrastructure has to be updated regularly, gateways have to be secured, and terminals should be safeguarded to prevent such attacks.

• Lack of standardization: Every country has different technical know-how, infrastructure, integration rules, and regulatory compulsions. This lack of standardization makes interoperability difficult. 

Overcome These Challenges with Verinite

At Verinite, we understand the challenges banks and other payment providers face in implementing instant payments. That’s why we help financial institutions like banks and non-banks transform their payment experiences. We provide consultation services to help organizations improve the future, automate the processes to unlock business potential, carry out application development and maintenance, and do quality assurance tests to enhance business value and become customer-centric. 

We have helped Yes Bank implement wallet payments, performed end-to-end testing of QR code payments for Security Bank, and implemented the payments system for Peoples Bank. We make payments simple, secure, and faster.

To know more about instant payment implementation, contact us.