How Real-time Payments Can Fuel Emerging Business Models

Instant payments are being implemented around the world, promoted by governments to support financial inclusion and the digitisation of economies.

Across Asia, where usage of credit cards is relatively low, instant payment schemes will be in place in most markets in 2020. These schemes offer digital alternatives to cash, cheques and over-the-counter payments, enabling both businesses and consumers to make instant payments 365 days a year, 24/7.

As the adoption of these schemes increase, institutions can and arguably should leverage instant payments to grow their businesses, facilitate the development of new sales channels and enhance the customer experience for their end-consumers. For example, in Asia, Citi has launched instant payments for institutional clients across 10 markets, supporting their evolving business models as they increasingly engage their end-consumers directly.

There are a number of ways that businesses can leverage instant payments, using supporting features which include Tokenisation, QR Codes, APIs or Request to Pay. 

Tokenisation
Tokenisation allows individuals to link their bank account number(s) to a piece of personal data such as a mobile number or national identification number so that transfers to and from bank accounts can be made using either of these data points.

Some companies are leveraging tokenisation within their staff and agent payroll processes, making it possible for employees to choose their own bank and change their salary accounts from time to time without having to update payroll files. Businesses can leverage this capability to improve the speed of onboarding new or temporary hires rather than requesting them to open new accounts with a specific bank.

QR Codes
Having a standard QR code in a country means that any bank or wallet app can be developed to read the market-standard QR code (for example, EMV Standard) and initiate instant payments. This is different from closed-loop infrastructures which require a buyer and seller to use the same payments service provider.

QR codes can be static or dynamic. In the case of the latter, a different code can be generated for each sales transaction so that a buyer scans a code that is unique to their purchase. The code displayed by the seller will have embedded details including bank account number, transaction amount and reference data to enable automated reconciliation to the specific sales invoice. 

Application Programming Interface (API)
APIs offer instant, real-time connectivity within a transaction, and can be used to trigger instant payments as well as instant notifications of payments received. API notifications can be sent to sellers through an ERP system, an app or mobile phone, Point of Sale Terminal or to a third party.

As e-commerce companies adopt direct sales models and in some cases, use third parties for last mile delivery, API technology is a key enabler to ensure all parties remain informed on the progress of a sale.

In the sharing economy, where goods and services are sold by one company in their digital or physical ‘shopfront’ on behalf of another party, we see potential for sales proceeds to be automatically and instantly split between the parties involved as a strong enabler of new sales models. Companies are also using APIs to initiate instant outgoing payments across many different areas including the insurance sector where providers are developing automated instant claims processes as a client experience differentiator. 

We see the development of instant payments as a timely complement to companies looking at big data opportunities or introducing AI technology in their decision-making processes. 

Request to Pay (RTP)
Request to Pay (RTP) allows a company or an individual to request a payment from another company or an individual. This game-changing functionality will create the foundation for entirely new models of interaction between companies and their customers, agents, third parties and employees. Practical examples would include an online sales page where a buyer has already entered in their personal information such as their mobile phone number before coming to the payment section.

Leveraging RTP and Tokenisation, the booking system could allow the customer to pay via instant payments based on their already entered personal data, eliminating the need to provide additional payment information such as a credit card number. This has the potential to enhance the customer experience especially for first-time customers where their payment data has not been saved from prior purchases.

There are practical applications of RTP in the ‘gig economy’, where a company would likely pay their employees more frequently based on work that has been done. As an example, RTP would enable the employer’s system to verify the payment amount due to a requestor based on hours worked, goods produced or sales closed. 

Creating Opportunities
Companies that experiment and employ these emerging solutions can effectively enable new sales channels, create a seamless customer experience and realise cost savings through automation.   

In the face of disruption, a differentiated client experience is increasingly is the key to getting and staying ahead. Technology and data are enabling customisation and analytics are increasingly being embedded into sales promotions and business decision-making.

Shifting traditional payment channels to instant payments will enable companies to obtain richer real-time data, which can be leveraged for more effective and strategic decision-making.

We are already seeing multiple examples where companies that have been able to simplify and enhance their customers’ journeys are now winning market share and/or growing the overall market.

Experimentation, along with co-creation and collaboration from relevant teams within a company, including third party partners that can impact the customer journey is the next natural step.

It is a necessity, not a choice.