Sep
After Instant Payments … What Comes Next?
Considerations for when instant is no longer a differentiator
I recently attended the Innovation in Payments and Remittances conference, hosted by RemitOne, in London. The conference brought together a superb mix of MTOs, fintechs, PSPs, and compliance professionals to discuss the evolution of the money transfer and cross-border payments business.
If there was one over-arching theme shared by keynote speakers and panelists, it was “real-time payments.” Industry practitioners agree that instant payments is the top attribute desired by customers today and that the ability to deliver on fast payments is today’s most powerful differentiator.
However, this gave me pause. Just like fees, competing on transaction speed is essentially, a race to the bottom. After all, you can’t get much faster than instant, and once all or most payments are instant (which is the rapidly accelerating trend), then what? How do you compete?
I found that most practitioners could not answer this question, and concerningly, it seemed that most had not considered it.
Certainly, speeding up payments is still a worthwhile pursuit. This is especially true for global freelancers and gig economy workers, who as a cohort, struggle financially and need reliable cashflow. 55% of these workers say they are not doing well financially, 73% work overtime, and 25% work multiple jobs.1 Fast payouts is one way to alleviate their financial woes. Similarly, depending on the rail and corridor, money can still take days if not weeks to reach the intended recipient, across both P2P and B2B use cases. And yet, this is rapidly improving, with almost every payments provider on the planet hurdling toward instantaneous funds disbursement.
But with every digital payment provider aiming at the same goal, what happens when this goal is achieved? What competitive cards will companies have left to play?
The progress toward instant payments is applause-worthy, but at the same time, isn’t this a low bar? Moving money affordably and quickly seems like the basic standard the industry should shoot for: companies seeking to be leaders ought to set their ambitions much higher.
How Do Companies Add Additional Value in Money Movement?
Presently, the money sender has most of the power in a cross-border transaction. They decide which brand to use, which rail, and which endpoint (bank account, card wallet, crypto wallet, etc.). This is true for P2P transactions as well as B2B payouts.
As payments become increasingly digitized, and money movement more competitive, the recipient begins to have more power. This is reflected in functions like Request to Pay, conversational remittances, multi-currency wallets, and dashboards to control when and how to receive disbursements. Here, we get a hint as to how companies can begin to layer on value-added features that go beyond the fee and payment time, which are working simultaneously to commoditize payments.
How can companies innovate to add value beyond fast payments? Below, some ideas for consideration:
Alias management
Very few companies get this right. It is surprisingly complex to securely assign a payment credential to a user-friendly alias, like a phone number or email address. This is the downfall of most domestic real-time payment schemes—they nail the interoperable and instant bank transfer rails but fail to include a tech layer that makes the rails mobile-ready and user-friendly. Alias management technology is a focus of Visa, with its acquired company Yellow Pepper and Visa+ service, who has successfully created interoperability between separate closed-loop P2P schemes. An alias service could help supercharge many struggling money movement platforms and represents an additional revenue stream for providers.
Digital identity
Closely related to alias management is portable digital identity. After fees and speed, the primary motivator for choosing a remittance provider is security and trust. For personal remittances, the remitting company is the first financial service provider a receiver might interact with. Wallet providers already ask receivers to go through a KYC process and vet their ID and payment credentials. This primes remittances providers to offer additional security solutions, like a sign-in service or a portable digital ID for use on other digital platforms. Governments might also like this type of service, as it would promote the financial inclusion of remittance receivers and reduce the domestic use of cash.
Integration with payroll
As sending remittances becomes more digital, so do the potential innovations. Today, employers around the world are partnering with early-wage access providers, such as Payactiv, Zayzoon and Clair, to enable employees to access their funds before payday. These providers are enabling a B2C payroll management function — giving consumers visibility of their wages and control over when and how to receive them. Could a next step in this evolution be sending remittances directly from your payroll dashboard or app? The sparks the idea of “embedded remittances,” which opens entirely new possibilities around how to make money movement contextualized and even more efficient.
Multi-currency wallets
This is not a new idea and is currently offered by the likes of Wise, Paysend, Revolut, Payoneer, Airwallex and others. However, as remittance receivers become increasingly sophisticated, there will be growing demand for this functionality, especially in emerging markets. Around the world, consumers want dollars, and 88% of FX transactions today involve the USD. A dollar-denominated (or Euro, etc.) wallet allows receivers to keep funds offshore, convert funds on demand, pay international invoices, make offshore investments and avoid the inefficient and loss of funds related to currency conversion. Incorporating stablecoins in the mix can also be a winning strategy, especially for global platforms that have minted their own coins and could potentially disburse in this currency (PayPal, Mercado Pago).
The above are simply musings on how cross-border payment enablers can and should be thinking about the future of their business. The industry still has a long way to go to achieve ubiquitous instant cross-border money movement, likely 5-10 years. But certain corridors and use cases are already getting there, putting pressure on companies to innovate in new ways.
I’m hoping the next time I attend a cross-border payments conference, industry practitioners will have considered this question, and we as an industry can collectively look at, What comes next after instant?
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Sources
- Deloitte, 2023. ↩︎
