Enigma Technologies Co-founder and CEO Hicham Oudghiri said the ecosystem surrounding instant payments is complex.
“When it comes to instant payments, everyone has their own voice,” Oudghiri said in the latest installment of the continuing series “What’s Next in Payments: Instant Payments: What Will Turbocharge Instant Payments Growth in 2024?”
There are several “sides” to the faster payments equation, spanning consumers and merchants, he said.
“And there are the financial institutions in between them handling all the ‘magic’” and facilitating the payments themselves, he said.
Consumers want a range of payment options on hand, and faster payments can appeal to them (especially when it comes to receiving funds). Merchants, ever desiring faster funds flowing into corporate coffers, value the transparency of cash flow brought through instant payments.
“The merchants are going to be the ones who are putting in place incentives for wider adoption,” Oudghiri said.
The incentives might include discounting the prices charged for products and services if customers elect to pay with instant methods. That option may prove especially appealing to online platforms, he said, adding that “from a business model perspective, the merchant really wins.”
But with faster payments lie concerns about faster fraud, and PYMNTS noted to Oudghiri that the “windows” in which red flags can be examined, and payments reversed or held, are shrinking.
In a nod to addressing those security concerns, Oudghiri pointed out that peer-to-peer platforms have been boosting identity verification efforts, including prompts that prod senders to ensure they know who is on the receiving end of a transaction.
In addition, platforms such as Enigma have sought, with advanced technologies, to help institute robust know your business (KYB) screening so that FIs and platforms can onboard legitimate merchants. Multifactor authentication can also play a critical role in cutting down on fraud, especially for larger transactions, he said.
“There’s also a lot we can do with the physical device,” he told PYMNTS, adding that device-level analytics and other defining characteristics can bolster fraud defenses.
Beyond the individual efforts of merchants and FIs, there’s much work to be done to bring instant payments to a truly global stage. Interoperability between far-flung, multiple domestic faster payments schemes currently remains elusive, said Oudghiri. However, the G20 nations have a roadmap for cross-border payments and instant payment interoperability.
“There’s going to be a lot of stitching these systems together,” said Oudghiri, and there remains some debate as to whether FIs are going to need to build their own “greenfield” systems or partner with providers to enable instant payments to gain further traction beyond their home countries.
The financial system will wind up acting as an intermediary across a variety of geographies, helping local partners and parties integrate with global payment rails, he said.
Looking out through the next few years, the rise of instant payments will broaden financial inclusion — not just for individuals, but for small- to medium-sized businesses as well.
Instant payments will “improve the quality and speed of commerce and the overall cash flow of one half of our economy” as smaller firms benefit, he said. Gig economy workers, too, will be most beneficially impacted by faster payments, accessing funds as soon as a project is completed or a deadline is met.
“All of these sectors will benefit immensely from instant payments,” he said.
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