In the world in which we operate, the act of payment must be fast, secure, simple, and digitized… And that’s exactly the case with instant transfers, which have been seen, since their launch, as a true revolution in payments.
As you’ll agree, as a merchant, being able to benefit from a fast solution to receive your payments is a boon both for your daily cash flow and for the smoothness of your operations, in order to remain competitive with the expectations of your consumers… yes, but depending on the use case. 🙂
In this article, we’ll tell you all about instant transfers with a focus on SEPA instant transfers, from their genesis to the resulting developments.
Instant transfers are one of the major topics that concern payment service providers and businesses, especially those managing recurring payments .
Before discussing the future of instant transfers, let’s start by describing how they work and their genesis so you can have a good understanding of how they operate.
Functioning of Instant Transfer
The speed of processing payment transactions is a key issue for the development of digital payment usages.
It is with this objective in mind that the initiative around instant transfers was launched in 2014 with implementation by financial institutions in 2017.
Before explaining the specifics of instant transfers, it’s important to understand how they work : it’s a money transfer system that allows a predetermined amount to be sent between two bank accounts, and this is done instantaneously.
The European Central Bank defines instant transfers as “an electronic payment solution available at all times (24/7/365) and allowing, immediately or quasi-immediately, interbank clearing of the transaction and crediting of the beneficiary’s account, with confirmation of the transaction to the payer within a few seconds of initiating the payment.”
Since its inception, traditional payment systems such as checks or bank cards are increasingly being questioned due to their limitations.
For example, speed is indeed a determining factor for today’s and tomorrow’s payments, and concretely, this is precisely the major limitation of checks.
In terms of characteristics, instant transfers meet criteria of immediacy, availability, and mass usage.
Let’s see concretely what its contours are in detail.
What Is the Delay for an Instant Transfer: a Real-Time Transfer?
When we talk about instant transfers, most people think of real-time transfers.
In practice, a number of checks must be performed by the bank issuing the transfer, including checks related to anti-money laundering and combating the financing of terrorism (AML-CFT) that we will deliberately not detail in this article.
The standard processing time applied by most banks for instant transfers is 10 seconds, but it’s noted that, in practice, this duration can be extended up to 25 seconds.
This timeframe includes the time between the issuance of the transfer by the issuing bank and the receipt of confirmation by the same bank (or a rejection in case of a problem) that the transaction has been processed and the money has been sent to the beneficiary’s bank account.
N.B. In the case of a consumer payment to your company’s accounts, it’s indeed the time between the issuance of an instant transfer by your consumers from their bank spaces and the receipt of funds in your company’s accounts, if you don’t use a payment service provider (PSP).
Instant Transfer: A Transfer Available at All Times?
As indicated in the definition provided by the European Payments Council, instant transfers are available at all times, which means concretely 24/7, 365 days a year.
It’s worth noting that a strong characteristic of instant transfers is that they are irrevocable : once the payment order is placed, it can’t be canceled.
An additional guarantee for you, as a merchant, that the payment will be made, right? 😉
Instant Transfer: Where Is It Used?
Instant transfers are used worldwide in many countries under the name Instant Payment.
The euro zone is also concerned since the introduction of the SCT Inst payment method, also known as SEPA instant transfer.
Instant transfers take precedence over so-called classic transfers (SCT) in terms of geographical area, namely the 34 countries including the 27 EU countries, with the UK having recently left, as well as Iceland, Switzerland, Norway, Monaco, San Marino, and Liechtenstein.
Thus, more than 500 million consumers can be reached through this instant payment method.
Instant Transfer: The Payment of Tomorrow in Europe?
Contrary to classic SEPA transfers that can take several days to be processed, instant transfers offer the possibility to see incoming or outgoing flows on your company’s accounts in a short time.
Up to now, we haven’t talked about fees, something that, you’ll agree, needs to be considered if you want your customers to use it to settle amounts due.
Instant transfers are currently free in the majority of online banks, sometimes with a payment ceiling to ensure its free use.
For traditional banks, it’s different so far, with a major limitation: most banks charge for the service between €0.80 and €1… and some banks don’t even offer it. 😮
But… did you know that things are changing ?
Indeed, in terms of fees, the so-called classic transfer has been free since its adoption, which widens the gap with the often charged instant transfer. The European Council has therefore worked on improvement axes to increase the penetration rate of instant transfers.
Two major improvement axes have been highlighted:
- the obligation, for a bank or financial institution, to be able to offer instant transfers as long as it offers classic transfers;
- the need to offer adequate fee conditions: instant transfers must be offered at the same cost as a classic SEPA transfer.
The two major novelties we’ve just mentioned will surely change the landscape of payment methods in Europe, and therefore in France, with a payment method that is already being increasingly used.
Instant Transfer: What Are the Perspectives?
In France, for example, in 2022, according to the Payment Means Security Observatory, the observed increase in usage for instant transfers is 85% in volume and 135% in amount compared to the previous year!
Additionally, it’s worth noting that it’s one of the least fraudulent payments (0.044%), with a significantly lower rate than that of cards.
The diagram below from the 2022 report of the Payment Means Security Observatory represents the amount of fraud, in euros, per €100,000 by payment type.
By addressing the main barriers to the use of instant transfers and in a context of rapid digital and payment development, it is highly likely that instant transfers will replace traditional transfers depending on the perspective.
Instant Transfer: What Are the Perspectives for Consumers?
For your consumers, instant transfers can be very useful in the following cases:
- To avoid waiting to be debited on a sometimes unknown date and to be able to closely monitor their accounts,
- To make a one-time transfer, but with an urgent need,
- To pay a bill past its due date.
With the new developments on instant transfers, questions about fees and availability of instant transfers in banks will no longer arise: the future will tell us if this payment method will become one of your customers’ favorites… 🙂
What about the use cases of instant transfers for you, the merchant?
Instant Transfer: What Are the Perspectives for Merchants?
For merchants, the interest of instant transfers will depend on the solutions or services you offer:
- In the case of one-time payments: this payment method can clearly be advantageous due to its instantaneous nature (e.g., refunds, one-time payments, rejections…),
- If you offer subscription services with recurrence: it’s not certain that instant transfers would be the preferred payment method.
How do you manage payments for recurring services?
As a merchant, do you really need a payment method that offers instant transfers to receive your payments? Isn’t it more important to have a reliable, robust solution that allows you to automate your payment collection process?
Well, we have a solution for you, with the products we offer at Slimpay.
For example, here are three products available in the SlimCollect solution that should help you:
→ SlimCollect Recurring : for managing your recurring payments
A reliable and robust solution through automatic direct debits
→ SlimCollect Pay: for collecting one-time payments
A solution approved by your customers through their mobile banking application
→ SlimCollect Verify: for collecting verified account numbers
A secure solution allowing you to verify key data from your customers
In addition to all this?
By using SlimPay solutions, payments are sent to you within one of the shortest timeframes on the market, namely, within one day for automatic direct debits.
Doesn’t that address your challenges as a merchant? 🙂
