Instant payment, which blocks?

Three years after its appearance in France, instant payment accounts for only 3% of transactions. A slow implementation that has its reasons.

In 2018, the European Central Bank implemented instant payment, which allows transfers of up to € 100,000 to any beneficiary in the SEPA zone in less than 10 seconds. In the first quarter of 2022, this payment method represents only 3% of the volume of French transfers according to the National Committee for Written Payments, while it is widely available at banking facilities. Several factors explain this stagnation.

A paid service

“The first factor that explains this non-adoption of instant payment is that it is almost always a paid service,” said Maxime Chipoy, president of individual financial media MoneyVox. A hundred French banks have chosen to debit instant payment, the result of a massive investment: the implementation of instant payment has relieved French banks of several hundred million euros, according to several banking operators interviewed by the JDN, an investment that is still far from amortized. “At the time, we had to build processing facilities to handle payment requests in less than ten seconds. Now it’s less than three seconds,” recalls Laurence Felix-Makatcheff, deputy director of payments at the post office.

Amortization is therefore the goal of financial infrastructures that offer commissions ranging from fifty cents to 8 euros to be paid instantly, but this billing is a specificity of French banks that bear formidable infrastructure costs, especially in branches. “The Netherlands closed half of their agencies in ten years, in France we closed 10% (Infostat Marketing study, ed). This means that Dutch banks have more freedom in their pricing policy and their financial balance “, Maxime Chipoy specifies.

The French model maintains the traditional network of transfer and adds that of instantaneous transfer, a model that is justified in the short term, but which raises questions for the future. With instant bank transfers, transactions are processed one by one, unlike traditional bank transfers. “During a classic transfer, there is what is called a clearing house which works in a cycle and which ensures stability without being dependent on peak loads in particular”, explains Julien Lasalle, head of supervision of non-cash means of payment at the Bank of France. Therefore, some banks have started to develop their offer by distinguishing small amounts from large amounts. Several banking institutions now offer free instant payment up to a certain amount, and then pay once the threshold is exceeded.

For professionals, having to pay to pay is a major obstacle to adopting instant payment. “Traditional banks charge SMEs for activating this service, which includes a lump sum of between one and ten euros, plus a transaction fee that depends on the amount in question”, deplores Jean-Daniel Guyot, co – founder of the bank for companies and SMEs Banca Memo.

A limited payment

In theory, the regulations set the maximum amount of an instant payment at 100,000 euros. In fact, each entity can choose its own limit. “Management systems based on LBFT (fight against money laundering and terrorist financing, ed) have been designed for transfers that do not take into account real time and the need for immediacy “, explains Jean-Daniel Guyot. For traditional banks this is a profound operational and organizational change that would be at the origin of these limits, with a “The banks do not want to go too fast, for these fraud risk reasons”, assures Laurence Felix-Makatcheff. The fight against fraud also requires new investments, particularly in terms of artificial intelligence to intervene in client behavioral study The European Central Bank must decide next September on a possible reduction of controls on clients.

A lack of communication

“Many customers have not been informed of the instant payment and its benefits, and many discover the feature by accident,” notes Maxime Chipoy. A lack of communication from traditional banks, where peer-to-pear payment operators and neo-banks have made instant payment a differentiator. “Immediate wire transfers must become evident, they already account for 60% of our transactions,” anticipates Xavier Prin, marketing director at Boursorama.

The covid crisis has helped promote new payment methods. An example of this are the 10 million Paylib accounts created in the last two years, which bring the total to 25 million users of the French payment solution. A dynamic that illustrates the growing interest of French consumers in real-time payments. “We are on average uses of less than 100 euros, always on a small scale, all our users are not necessarily comfortable with digital, so we must work to make this payment method easily accessible to everyone”, explains Vincent Duval, CEO of Paylib. “There is a problem for people who can easily keep track of their expenses and transfer money to each other when they have several bank accounts, but also for payment at merchants,” says Maxime Chipoy. We will have to communicate and develop this service around the payment process with merchants, which requires our support, ”adds Laurence Felix-Makatcheff.

A question of sovereignty

On a national scale, European banking networks do not allow direct interoperability. In the case of a cross-border transfer, the transaction is processed by one of the American networks such as Mastercard or Visa. “It raises questions of European sovereignty and autonomy,” warns Julien Lasalle. In case of deep disagreement between Americans and Europeans, the processing channels could be blocked, similar to what happened in Russia. Europe seems to have an opportunity to seize according to Julien Lasalle. “Cela devrait inciter les acteurs européens à bâtir de nouvelles solutions de paiement du quotidien basées sur le virement instantané, par exemple via des applications mobiles, à the instar de WeChat ou Alipay en Chine. Encore faut-il saisir cette opportunité”, poursuit -they. In 2020, the ECB launched the European Payments Initiative, an initiative that aimed to create a pan-European payment system and banking network. An ambition that brings together 13 banks and payment players aimed in particular at developing wallets for payments between individuals and merchants. The project is expected to be completed in the coming weeks.

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