Katrin Boettger: What kinds of digital payments should financial institutions and merchants focus on now and in the future?
Adam Needel: For many consumers, digital payments have been a life-saver in recent weeks. Many small businesses that in the past used paper bills to trigger payments have replaced those with electronic bills — and have probably realized that they are more efficient. Digital payments can also help those merchants that cannot let their product leave a site until payment is received. Getting the bill electronically is a great initial first step, but getting the electronic payment to the supplier is the vital next step. Digital and contactless payments have also greatly helped during this crisis to reduce the interaction of person to person, or person to POS.
KB: What role will real-time payments play in improving digital payments?
AN: Real-time payments will be crucial to facilitating and speeding up business-to-business payments. Removing the typical two- or three-day ACH clearing and settlement time is a huge added value, especially for those merchants trying to survive on extremely reduced income streams.
Request to Pay (RtP) is the next prime area of focus. So many small businesses are trying to operate without going into the office. Receiving electronic bills to support payments initiation and reconciliation is a great start and using real-time payments rails allows for businesses to get their money as fast as possible, so they can remain liquid and solvent.
RtP services will also play a role for people who must go to a store during this pandemic, e.g., to get food or medicine. Real-time will lead to more contactless payments. For example, customers can scan a QR code with their mobile devices to trigger the payments process, avoiding pushing a single button on the POS device or even tapping a mobile device against it.
KB: Can today’s merchants and financial institutions offer a great digital payments experience over real-time rails to everyone who is in need?
AN: This all depends on where one is in the world. India, the U.K., Australia and Malaysia are some of the mature real-time markets, offering various digital payment platforms and services to customers and businesses. In Europe, real-time adoption is growing; ACI just supported a Hungarian bank to connect to the country’s real-time scheme that went live a few weeks ago. As the scheme is mandatory and all banks are participating, we can expect to see new digital overlay services very soon. Europe has also launched several new schemes for cross-border instant payments — SEPA INST and RT1 and TIPS, so a lot is happening there. The U.S. adoption rate for real-time is also growing, but given the current use cases rolled out, offering a digital payments experience over real-time rails will be a challenge for many merchants, and most will likely continue to use cards or cash.
KB: Do you think the crisis presents a challenge or an opportunity for the industry?
AN: I feel that both opportunities and challenges will arise out of the pandemic. Many smaller businesses will have seen the benefits of adopting new ways to make payments. For fintechs and banks, this presents an opportunity to offer new solutions to these businesses, which in turn will bring new revenue options for financial institutions.
Of course, the current situation also presents challenges. Launching new services and rolling out new solutions during a time of economic crisis and retail restrictions is not an easy task. For banks and merchants, the question will also be to what degree they will be able to modernize within their current ecosystem. They need to decide how much modernization to their core systems is needed to handle the non-functional requirements and most likely to handle the new common standard of ISO 20022. For merchants, the question will be whether providers are able to handle real-time rails. And with revenues down, operating budgets are commonly being reduced, thus forcing difficult priority calls for both merchants and banks.
All in all, I am optimistic though — the global industry is creating new and innovative digital overlay services underpinned by real-time, and despite the challenges the crisis will only accelerate that trend.
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ACI Low Value Real-Time Payments 
