Instant Payment: a Revolution for BtoB Payments, Too

In roughly three months, businesses will be able to pay in real time in the entire Eurozone using the ECB’s real-time settlement infrastructure. This new system will bring along various use cases, once impossible with typical SCT services.

The service called Target Instant Payment Settlement (TIPS) is expected to be operational in November 2018, and be of help to treasurers and finance officers. Many use cases are seeing the day, from instant direct debits, to cash management.

This instant payment service, available 24/7 all year round, will make it possible for businesses to pay on delivery, improve cash flow monitoring, and recover defaulted payments more easily. BPCE’s subsidiary, Natixis, already planned to implement their instant payment-based factoring solution as soon as next month. This transition to an Instant Payment infrastructure will also provide businesses with a way to automate payroll activities, so employees’ wages can be sent the same day every month.

Eventually, real-time payments will be challenging card schemes, and may induce lower costs for businesses and merchants. Air France will be the first company to rely on this service as early as in the beginning of 2019 (in partnership with BPCE).

Comments – Expanding market potential

One quarter of business collapses are due to non-payments, and more than 20% of cheque payments in France would be used in B2B contexts. This may cause fraud surge, further delay payments, and, of course, increase customer dissatisfaction. Instant payments can then make a difference in helping businesses deal with day-to-day management issues. According to the consulting firm Redbridge, 53% of the surveyed financial officers are planning to rely on instant payment soon.

Instant Payment became a major global trend. Yet, since no business model has been clearly outlined, its adoption could take some time in Europe, and especially in France where card payments still prevail. To this respect, the main card schemes have started to retaliate: Visa launched a real-time payment platform called Visa Direct. Mastercard acquired Vocalink (company behind the Faster Payments infrastructure). And among outstanding moves by domestic schemes, Bancomat partnered with SIA on proposing instant credit transfers to their cardholders.