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SEPA Instant Payments: Balancing technological challenges with innovation

Nadish Lad
Global Head of Strategic Business, Volante Technologies

Part II

The European Council’s regulation to make instant payments fully available in euros to consumers and businesses will redefine the rhythm of European payments. It will also reshape financial interactions between consumers, businesses, and financial institutions. As we stand on the cusp of this transformation, understanding the nuances of this transition becomes imperative for all stakeholders in the European economy.

This is the second part of a two-part series highlighting key takeaways from our recent webinar, “SEPA instant payments: Are banks ready?” It includes an overview of technological considerations, predictions and future outlook, and opportunities for new products and services.

Technological considerations and innovations

The SEPA Instant Payments mandate is more than just a regulatory change; it will drive major technological changes across the financial sector. For many institutions, particularly those whose systems rely on legacy technologies, the mandate serves as a pivotal moment to modernize. It’s a call to action to embrace cutting-edge technologies that can facilitate real-time transactions.

Advancements in cloud computing, APIs, and payment platforms offer a viable pathway to rapid compliance and modernization. Leveraging cloud-based solutions can dramatically cut down implementation timelines, allowing institutions to move away from capital-intensive infrastructures and towards more flexible and cost-effective operational models.

Webinar panelists highlighted the need for banks to overhaul their technological foundations, not only to meet immediate compliance deadlines but also to position themselves advantageously for future developments. In other words, technology doesn’t just enable compliance; it can act as a springboard for innovation.

As PSPs modernize their platforms, they can develop new services that align with open banking trends and harness the synergies between real-time payments and other financial directives. The focus will inevitably turn to how they can leverage these developments to offer more sophisticated, customer-centric products and drive the next growth phase in the financial sector.

Predictions and future outlook

The trajectory for SEPA Instant Payments involves a dynamic shift in how payments are perceived and executed. The distinction between what is considered ‘instant’ and ‘non-time critical’ is anticipated to become more pronounced. This reclassification is more than semantic; it could influence how corporations and banks strategize their payment operations, possibly leading to a redefinition of payment priorities and the types of transactions that adopt the instant payment method.

In the next few years, the success of SEPA Instant Payments will likely be measured not just by compliance rates or the volume of instant transactions but by the proliferation of innovative financial services that these instant payment rails enable. The true hallmark of success will be in the use of instant payment infrastructure to develop products that deliver tangible benefits to businesses and consumers alike.

Opportunities for new products and services

The impending ubiquity of SEPA Instant Payments will reshape existing transactional processes and lay the groundwork for a surge in financial product innovation. Webinar participants highlighted the potential for a ‘second wave’ of financial products, with ‘Request to Pay’ services and electronic invoicing exemplifying the kind of innovation that instant payments infrastructure can support. This new environment will enable the development of solutions that are deeply integrated with instant payments, offering greater control and efficiency in financial transactions.

As financial institutions strive to meet the mandate, they will be incentivized to think beyond compliance toward leveraging the new infrastructure for value-added services. This includes cross-border payment solutions, enhancing B2C and B2B interactions, and even redefining e-commerce experiences. PSPs have an expansive canvas to design products that cater to just-in-time payment needs, embedded financial services, and real-time international commerce.

Conclusion

The comprehensive regulation of instant payments is more than a legislative push; it is a leap into enhanced fluidity and financial inclusion. While technological and operational challenges exist, so too does the opportunity for unprecedented growth and innovation in financial products and services.

As we approach the implementation deadlines, the call to action for banks, PSPs, and financial institutions is clear: embrace the change, harness the potential of modern technology, and rise to meet the demands of a dynamic economic landscape.

Nadish Lad
Nadish Lad
Global Head of Strategic Business, Volante Technologies

Nadish is responsible for managing the strategy, roadmap and design of Payments propositions for Volante Technologies, adding new innovative products in the evolving digital world.

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