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Expert opinion

Instant Payments: What are success factors and should we prepare for a disruption?

Thursday 18 May 2017 | 08:23 AM CET

Ralf Gladis, Computop: Instant payments are an opportunity for European merchants and fintech companies, but also a threat to credit, debit cards and alternative payments

Should we expect a disruption? What are success factors for instant payments? And do we need acquirers for this?

Merchants should be very motivated to make instant payments a success as instant payments will provide reach across Europe with its 510 million residents. Payments will arrive on a merchant’s account within 10 seconds on all 365 days of the year. Merchants will bear no chargeback risk because an instant payments transaction will be final. That, in turn, means less cost for the consumer scoring and fraud prevention. Moreover, regulators will require banks to keep prices reasonably low, and there will be no interchange fee. Altogether, this is huge.

Instant payments will be processed from account to account, very much like bank transfers. That raises the question whether we will need an acquirer or online bank transfer brands like Sofort or iDEAL. What value could they add? Their answers typically are that acquirers have so much experience with dispute resolution and refund handling, and alternative payment schemes underline that they are trusted consumer brands. I doubt that this will be good enough to play a key role with instant payments.

So, do we need to prepare for a disruption? The answer is No. There is no disruption or revolution in payments for several reasons:

  • Consumer behaviour changes slowly because payments are a matter of trust and habits;

  • In retail stores, POS terminals and cash registers will have to be upgraded for instant payments. As many merchants don’t buy, but rather rent POS terminals from an acquirer or network provider for 3 to 5 years, they won’t exchange their POS infrastructure and will instead wait for the next renewal cycle;

  • Integrating instant payments with online shops, mobile shops and apps is much easier but changes to the checkout and reconciliation will be necessary and time-consuming.

Since all of this will take some time the short term effect of instant payments will be low. In the long run, the impact will be strong, though, because retailers will probably promote instant payments. And that will be the moment when instant payments could gain market share from cards and alternative payments.

Where do consumers think it should be possible to use instant payments?

 

A payment method must be successful in retail stores because that is where 80% of all transactions take place. Integrating instant payments only at the POS is not good enough, though. Given the popularity of cross-channel services like in-store returns, instant payments need to be integrated in the online shop, too.

And what do consumers expect? 53% want to use instant payments online. Only 25% want to use it in physical stores. Therefore, the online shop is probably the best place to start with instant payments.

Please find more details in Computop’s White Paper on instant payments.

About Ralf Gladis

Ralf Gladis is CEO and co-founder of the global PSP Computop. Prior to founding Computop, Ralf developed databases and wrote books published by German IT editors. During the early years, Ralf acted as architect of the Paygate software, utilizing his technical background. Today, Ralf is responsible for international expansion and marketing.

 

About Computop

Computop is a recognised global leader in omnichannel payment solutions and fraud prevention. As a long established industry leader with a reputation for customer satisfaction and service excellence Computop draws on a unique partner network worldwide, impressive security heritage, and state-of-the-art technological platform in order to deliver global and innovative e-payment solutions that fit any multichannel business model. Computop processed payments at a worth of USD 24 billion p.a. for white label partners and 14.000 mid-size and large international merchants including global brands like C&A, Fossil, METRO, Otto Group, Rakuten and Samsung.

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