Farewell cards, hello instant payments

Farewell cards, hello instant payments

More than $809 billion is set to switch to the fledgling instant payments system in Europe by 2027, representing a significant threat to cards, according to a new report from Ovum, a London-based consultancy. Instant, or real-time, payments enable account-to-account bank transfers in seconds instead of days.

Banking Technology‘s sister publication Paybefore summarises the report.

Ovum’s “Instant Payments and the Post PSD2 Landscape” research has found that instant payments will account for more than $337 billion worth of European e-commerce transactions in 2027.

Most of the instant payment activity will come from the UK, Germany and the Netherlands. Already, 59% of banks in Western Europe plan to increase spending on their payments infrastructure to support that future, according to Ovum.

The report, which was commissioned by payments technology company Icon Solutions, also covered Europe’s revised Payment Services Directive (PSD2), which includes regulations in the EU that will affect the competitive landscape for payments.

“E-commerce card usage will stagnate at current levels of around $290.1 billion annually and by 2025, boosted by increased consumer convenience and the lower charges that PSD2 facilitates, instant payments will overtake cards,” Ovum predicts.

What’s more, the research indicates that instant payments and digital wallets such as PayPal will stand as the two dominant payment methods across Europe as early as 2024.

Instant payments will absorb up to 72% of e-commerce transactions in the Netherlands, to just under 20% in Italy, in the coming years.

“PSD2 and other open banking initiatives are a golden opportunity for retail banks to re-imagine their products and services, and ensure they are fit for purpose in tomorrow’s digital ecosystem,” says Kieran Hines, head of industries at Ovum.

“In particular, those banks that combine early adoption of instant payments infrastructure with a proactive approach to PSD2 compliance and a focus on the payment needs of both merchants and consumers will be the ones that enjoy the most rapid growth over the coming years.”

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