B2B instant payments are more and more used in European businesses, thanks to favorable UE regulations. However, they come with their own set of risks and challenges. Indeed, they are more prone to fraud than regular transfers and call for heightened defenses. Baptiste Collot, Trustpair CEO, reveals more details about what to expect for B2B instant payments.
For more insights and best practices, download Trustpair and UniCredit’s latest white paper about Instant Payments.
- Could you remind us of the key differences between instant payments and regular payments?
Regular payments take a few days, depending on the date, etc. They take time. Instant payments get immediately debited. In a few seconds, the amount is credited to the beneficiary’s account. It releases time for the beneficiary.
Instant payments require some technology and networks to be efficient. Some banks can manage it, others can’t. It’s also easier to manage at a national level vs an international level. Some banks charge instant payments, others don’t. Access to “instant technology” has a cost so it’s not surprising.
- Is instant payment more widely used in Europe vs the USA?
Europe is probably more advanced on the topic. However, we’ve seen recent changes in the US on the topic, with NACHA, and FedNow. It’s complicated in the US: there are the big banks but also small local and regional ones. These small structures may have a harder time offering instant payment.
- What are the biggest advantages of instant payments for companies? What will they change for finance teams?
When you are the payer, it doesn’t change much. Basically, you’re debiting your accounts a little earlier than with traditional transfers. It’s not that much of a concern.
However, it does impact positively relationships with customers and suppliers. Getting your money instantly – especially for reimbursements and invoice payments – is better and more convenient. You avoid this friction that happens when you send a payment, but there isn’t proof.
And you just wait around to see when the money arrives. With instant payment, you have the payment right away and you remove the “payment friction” between the moment you pay and the moment the money is received.
In terms of cash flow, there are also advantages. You get the money directly in your account. Cash is king: if you can win a few days and gain the ability to invest this money, it’s definitely worth it.
- What are its challenges and disadvantages? Do instant payments represent any risks for companies? How should companies get ready for them?
The main risk is that you can’t recover the money when it’s sent. You lose the period when banks can get the money back. Banks will surely try to up their game in terms of fraud prevention, but they won’t be able to block instant payments once they’re executed.
This means the risk of fraud is higher, especially the risk of non-recovered fraud. Companies need to manage this operational risk: they need to be sure the payment they’re executing is the right one, sent to the right beneficiary. They can’t rely on banks.
When it goes faster, risks heighten. You need to keep pace and adapt your process through automation and account validation. Embrace the risks by adapting processes and adopting the right technology.
Trustpair protects you against instant payment risks thanks to ongoing and automated account validation. Request a demo to learn more!
