The term “instant payments” conjures up effortless fund flows from one place to another, between individuals, from consumers to companies and between firms themselves. But the latticework and infrastructure behind such speed and unerring performance remains a tricky undertaking.
Tricky though it may be, the movement toward instant payments is an inexorable one, with 21 separate systems extant globally and more sure to follow. The growth in instant payments also carries a mandate of sorts: Banks must be able to interact, use and transmit payments over those same systems, with an eye on remaining competitive. The problem is that legacy technology in place, or even the best-intentioned buys and builds geared toward latching onto those initiatives, may be less than ideal.
“Banks struggle to integrate their back-office technology, with a mindset that still seems based in file-based processing and batching,” Tom Hay, head of payments at Icon Solutions, told PYMNTS. “The fact is, now, that banks need to be on 24/7, and yet, the infrastructure that has been in place is one where the technology has needed to have downtime.”
To that end, his firm has debuted what it bills as a technology platform that can help banks — global ones, national ones and smaller ones — link up with the payments initiatives that are in place within their home countries. Though limited to domestic transactions at present, the eventual adoption of faster payments schemes across more locations would grow to include cross-border transactions.
Banks of all sizes, but especially smaller ones, face challenges as they transition to digital banking, Hay noted. The fact remains that “there is cost and also a lot of complexity” in relying on technology overlays to enable digital progress, and even working with existing payments hubs can be costly, both in terms of money spent and man hours spent, too, on change that may or may not deliver the desired outcomes.
The Icon system, named the Instant Payments Framework, uses open-source technology to help banks leverage their back-office and payments functions with the payments initiatives in their markets. The framework also has a series of pre-built functions, which allow connectivity with relative ease, and Hay said that there is no need to replace, in a wholesale manner, existing technology within a bank. This is especially helpful for smaller banks “that may not have the budget to do a whole new system,” said Hay. Though the initial uptake of faster payments was centered on consumers (and bill pay), interest from corporate users has been growing.