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RTP Adoption in Europe Is Set to Rise - Is It Beneficial for Merchants?

Boaz Gam

Boaz Gam


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Article content
  1. Ongoing Efforts Promoting the Adoption of RTP in Europe
  2. 5 Key Benefits of Instant Payments for Businesses
  3. Top 3 Challenges Linked to RTP Adoption
  4. How Can Increased RTP Adoption Affect the European Payments Landscape?

How Will the Rise of RTPs in Europe Affect Businesses?

According to the latest statistics, internet usage among European residents aged 16 to 74 has reached 90%. Notably, 74% of individuals shop online regularly, yet only 14% have experience using instant payments. While these figures reflect an ongoing digitization trend, they also highlight the fact that Europe has yet to unlock the full potential of real-time payments (RTPs).

In this guide, we explain the potential benefits and challenges of the widespread adoption of RTPs by European merchants and share insights into how instant transactions are expected to transform the local payments landscape.

Ongoing Efforts Promoting the Adoption of RTP in Europe

How Will the Rise of RTPs in Europe Affect Businesses?

At the beginning of 2022, only 11% of euro credit transfers across the EU were instant, while the figures for cross-border transactions between member states were even lower.

To address this issue, on October 26, 2022, the European Commission published a legislative proposal to enable 24/7/365 instant euro payments for bank account holders across the European Economic Area, aiming to enhance their accessibility and affordability.

What’s more, under this proposed law, financial institutions across the Single Euro Payments Area (SEPA) countries must offer instant payments at the same cost as standard credit transfers or lower than that. This initiative aims to increase the number of local banks and PSPs offering RTPs as well as the volume of SEPA Instant Credit Transfers settled in Europe.

Industry experts predict this initiative to have a significant positive impact on RTP usage in European countries. This is related to the fact that positive adoption tendencies have already been registered in EU areas where banks have made RTPs widely accessible and free to use, like the Netherlands, Finland, Sweden, Denmark, and other Nordic countries.

But why is it so important to pick up the pace in adopting instant transactions? This is mainly due to the fact that while Europe lags in this regard, local businesses and consumers are missing out on the numerous benefits offered by RTPs - keep reading to learn more about it.

5 Key Benefits of Instant Payments for Businesses

How Will the Rise of RTPs in Europe Affect Businesses?

It comes as no surprise that the success of any business relies heavily on efficient and secure payment solutions. Thus, outdated systems that are complex or slow can hinder cash flow, increase fraud risks, and lead to customer dissatisfaction.

RTPs, on the other hand, offer numerous advantages to businesses, including:

1. Immediate Access to Funds

Unlike conventional payment channels, instant transactions enable merchants to access funds without delay. This facilitates faster working capital availability, enabling organizations to allocate funds more efficiently and fulfill their financial commitments in a timely manner.

2. Enhanced Liquidity Management

RTP systems improve business liquidity management by providing up-to-date account balance data, which eventually leads to merchants making more informed financial decisions. Moreover, instant transactions also optimize the account receivable management process and reduce the need for manual reconciliation.

3. Advanced Fraud Prevention

Instant payment systems typically rely on sophisticated technological solutions like biometrics or multi-factor authentication, which makes it significantly more difficult for fraudsters to gain unauthorized access to funds and sensitive data.

4. Instant Transaction Validation

Real-time transactions get validated and authenticated instantly, which minimizes the risk of fraudulent payments, reduces the likelihood of chargebacks and disputes, and enables businesses to promptly address any suspicious activity.

5. Improved Consumer Experience

RTP systems enable fast and flexible transactions, immediate payment confirmations, and prompt refunds. Such speed and convenience elevate the customer experience, boost client loyalty, and drive conversion rates up. In fact, it is expected that instant payments can help European merchants unlock up to €1.84 billion per year.

Top 3 Challenges Linked to RTP Adoption

How Will the Rise of RTPs in Europe Affect Businesses?

While RTP systems have plenty of benefits, which are fuelling their adoption worldwide, it is crucial for businesses to recognize that they also come hand-in-hand with certain challenges and potential risks, such as:

1. Operational and Technical Adjustments

Implementing instant payment systems often requires companies to make significant investments in their infrastructure and conduct multiple technology upgrades. This can be especially challenging to handle for small businesses with limited resources.

2. Compliance with Regulations

Adhering to various real-time payment regulations can be a complex and time-consuming process. What’s more, due to the fact that RTPs are continuously evolving, staying up-to-date with emerging standards and regulations requires ongoing efforts from businesses.

3. Limited Time for Due Diligence

While the immediacy of RTPs is generally considered an advantage, it also leaves limited time for due diligence. This means that the companies have a shorter time frame to conduct background checks, which may leave them vulnerable to money laundering and other dishonest activity, especially when it comes to B2B transactions and high-value payments.

How Can Increased RTP Adoption Affect the European Payments Landscape?

How Will the Rise of RTPs in Europe Affect Businesses?

Overall, the advantages of instant transactions for businesses outweigh the challenges associated with their implementation. But will the increased adoption of RTP systems also be beneficial for the European payments landscape?

It turns out there are plenty of potential upsides to it, namely:

  • Enhanced payment choices. As RTP adoption in Europe increases, local consumers will have greater options to choose from during checkout, which is likely to lead to reduced PSP fees.
  • Payments innovation. The increased adoption of instant payments might fuel the development of innovative RTP-related services, such as instant top-ups, payouts, and open banking-enabled transactions.
  • Higher customer spending. As RTPs are forecast to reduce service provider fees and operational costs for businesses, merchants will have more resources to invest in new loyalty, reward, and discount schemes. This, in turn, can help boost consumer spend despite the EU’s rising living costs.
  • Fairer competition. The implementation of the Instant Payments Regulation in EEA encourages healthy competition among PSPs and businesses by setting common standards, leveling the playing field, and lowering the barriers to entry for new industry players.
All in all, instant payments hold significant promise for consumers, merchants, and the whole European payments landscape, with the EU Commission's legislative proposal being a key milestone toward greater success.

As the initiative progresses, we are sure to see more and more businesses across various jurisdictions reaping its benefits, ultimately contributing to the vision of a genuine single euro payments area that has no differences between national and cross-border payments.

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