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Expert opinion

Instant gratification: secure real-time payments can meet consumer demand

Wednesday 7 December 2016 | 08:43 AM CET

Thomas Dolenga, UniCredit: The payments world is undergoing a period of radical change, with new technological advances such as blockchain and instant payments promising to enhance the speed, efficiency and security of corporate transactions.

Digitalization has brought unprecedented levels of speed and convenience to everyday tasks – no wonder, then, that the corporate world is demanding the same level of service. With respect to payments, banks are looking to meet this with a range of digital solutions such as blockchain and instant payments, which promise greater speed, efficiency and trust for transacting partners.

The new solution on the block

Blockchain – the technology behind Bitcoin – has already attracted a huge amount of press attention for its potential to revolutionise payments, and banks are already working together – through initiatives such as the R3 bank consortium – to make this vision a reality.

Certainly, the potential benefits of blockchain are considerable – enabling payments to be executed instantly and securely via encrypted data packages on a distributed ledger. Indeed, by using blockchain, erroneous payment instructions are caught – and can be amended – prior to being submitted. This stands in stark contrast with current procedures, under which mistake-laden payment instructions are transmitted, rejected, returned, and corrected before the transaction is submitted properly – a diversion that can add days to the processing of a payment.

Inevitably, however, there are a number of obstacles to be surmounted before blockchain solutions can hit the market. Particularly pressing are issues of capacity, reachability and scalability, which leave blockchain payments with a way to go before they can deal with high or expanding levels of throughput.

Time for real time

While we may have to wait some time before blockchain is facilitating real-time, secure and efficient payments, the same cannot be said for other forms of instant payments based on more established technology.

In fact, 18 countries around the world – including Japan, Singapore and the UK – are already operating faster or instant payments systems, while a further 12 have similar programmes in the pipeline.

Much of the demand for these faster payments is coming from the ecommerce sector – where faster payments translate to quicker delivery times and better customer service – yet instant payments offer substantial advantages for all companies that need to make or receive payments. Critically, if payments are executed instantly upon submission, the flow of goods need never be held up by an outstanding payment.

Development of instant payments across Europe is already well under way, with SCTinst – a new pan-European standard based on existing SEPA instruments – set to be implemented by November 2017. Meanwhile, more than 70 banks are collaborating on SWIFT’s global payments initiative (gpi), due for implementation in early 2017. The initiative aims to establish a common set of standards for clearing cross-border payments on the day they are transmitted – with transactions tracked in real time.

Initiatives such as these, along with the promise of blockchain innovations in the pipeline, give banks a firm foundation for the future – meeting heightened customer demand with faster, more secure and more efficient payments.

About Thomas Dolenga

Thomas Dolenga is Head of Cash Management Products at UniCredit. Before taking up his current position, Thomas was responsible for Product Development for Cash Management, Clearing, Securities Services and Trade Finance at Standard Chartered in Singapore. Prior to this, he held the role of Director Wholesale Bank at ING Bank in Amsterdam and Singapore, having previously held several positions in IT with the Government of Singapore Investment Corporation, West LB, Hypo Bank and DG Bank in Singapore, New York and Munich.

About UniCredit

UniCredit is a bank with a substantial footprint in Europe and an extensive international network of branches, representative offices, and correspondent banks – enabling it to follow its clients wherever they go. Its payments services come under the Global Transaction Banking (GTB) unit.

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