Over the past five years, Instant Payment schemes have been developed across the world, gaining the attention of consumers, banks, corporates and regulators. While initially making waves in the consumer-to-consumer space, Instant Payments have grown in global prominence for consumer-to-business and business-to-business payments, with participation in some schemes even mandatory in several countries.
Deutsche Bank’s new guide to Instant Payments outlines how this new payment type can be integrated within modern corporate business processes, and shines a light on the opportunities and challenges for treasurers of embracing them as part of their liquidity management strategy.
“Instant Payments offer a broad variety of benefits, allowing companies to initiate liability payments at the exact moment they are due, meaning that liquidity can be better put to use elsewhere,” says Christof Hofmann, Global Head of Payments & Collection Products at Deutsche Bank. “They can also facilitate credit transfers between parent companies and subsidiaries and be used for bulk payments. The benefits also extend to recipients: Instant Payments are irrevocable and lower in cost compared to credit cards since no additional fees for guarantees are necessary.”
While the initial corporate use cases for Instant Payments emerged in the consumer-to -business space, there are numerous ways that they can be used by corporates, such as: booking spare capacity last-minute (whether with cargo companies, manufacturers or other providers), securing on-demand services (such as cloud computing), or augmenting the client experience (allowing immediate responses to incoming payments or instant pay-out of due claims).
To fully embrace the potential of Instant Payments, corporates need to interact with their bank with almost no latency. This can be realised by the great opportunity of combining Instant Payments with application programming interfaces (APIs) to provide safe, real-time connectivity and interactive collaboration.
“The beauty of using an API solution is that the corporate is able to interact with their bank in real time, 24/7, without downtimes or cut-off times,” adds Hofmann. “The bank, in turn, can offer a better, more cost-efficient service to clients, improving liquidity and potentially gaining a competitive advantage over peers.”
Deutsche Bank’s guide concludes that it is not only speed that differentiates Instant Payments and traditional payment systems. The combination of innovative services that utilise the real-time technology with other market initiatives, such as Request to Pay, will drive market adoption and potentially help establish Instant Payments as the “new normal”.
“Making a payment in real time can be seen as simply the first step on the journey to a real-time treasury,” says Hofmann. “Looking ahead, instant payments mean that liquidity buffers become obsolete, with surplus cash invested elsewhere. Real-time cash-flow forecasts will pinpoint the exact time and amount of borrowings that may be required.”
Read “Instant Payments: a guide for corporates” here.