Instant payments are set to soon become the new standard

Cash as a means of payment is on the decline, as digital payments have surged in 2020, not least due to the COVID-19 crisis.

The EU supports this development and has formulated a strategy in fall 2020. The strategy aims at promoting the emergence of new, European business models. Instant payments are set to soon become the new standard. They ensure that funds are available on the payee’s account within seconds, irrespective of time or day. Within the Single Euro Payments Area, cross-border transactions in euro – including direct debits, debit card transactions or bank transfers – will become just as simple, secure and cost-efficient as domestic ones.

The Oesterreichische Nationalbank (OeNB) believes that instant payments will become the new normal by 2025, says Stefan Augustin, Director of the OeNB’s Equity Interests, Payment Systems and Internal Services Department. Now is the time for banks to leverage the opportunities of instant payments, if they don’t want to lose the race against alternative payment service providers, says Augustin.

Trend towards a hybrid payments landscape

While cash payments are still a significant factor in Austria, Augustin observes a trend towards a hybrid payments landscape. The Corona crisis has proved a catalyst for digitization. In 2020, the volume of consumer transactions totaled EUR 5 billion in Austria. Of this, around EUR 3 billion were

made in cash, EUR 1 billion were card payments, and another EUR 1 billion were account-to-account transfers according to Augustin.

The EU strategy aims to make instant payments available across the EU by end-2021. For this to happen, though, the individual countries will have to ensure a higher degree of harmonization according to Holger Neuhaus, Head of the Market Innovation and Integration Division at the European Central Bank.

Innovative solutions are gaining ground

In a few countries, notably Sweden and the Netherlands, innovative payment solutions are already available, but there is no common European standard that would ensure system interoperability, says Neuhaus. This is where the EU strategy comes into play: It aims at promoting pan-European solutions and reducing fragmentation. According to Neuhaus, this is the EU’s key to gaining ground on international competitors. Today, the mobile payments market is dominated by international BigTechs like Apple or Google.

A European solution is what the Austrian-Swiss payment service Bluecode has been pursuing. With the European Mobile Payment System Association it helped found, Bluecode is working on the development of a European payment roaming service, says its CEO Christian Pirkner. The solution is set to go live in 2021. (APA/CC)