How can instant payment technologies enable economies to move faster?

How UPI technology will transform the digital payment space and help the global economy recover from the pandemic.

Instant payments is an emerging technology that is changing the way we live. In my previous blog, I discussed the benefits of Instantaneous Payment Platforms (IPP) and how they can be a game-changer for businesses, governments and consumers, such as reducing the time it takes for digital payments to be sent, ensuring businesses are paid on time and releasing more liquidity into economies.

As businesses around the world accelerate their digitisation plans in the wake of the Covid-19 pandemic to cater to our increasingly virtual lives, almost everything can now be done online – and the instantaneous payment sector, which allows cashless payments to be processed securely within seconds, has never been more important than it is today.

While working from home during the height of the Covid-19 pandemic became the norm, so did the accelerated digitisation of the retail industry, which ramped up online platforms and payment solutions to keep up with consumer demand.

Eighteen months into the pandemic, we are seeing a similar trend in the services sector: a wide-ranging number of applications that have been rapidly designed to accommodate a world that is emerging from lockdown but wants to continue with the safety and convenience of their digital lives.

One example of this is the UAE’s Rizek app, which offers users anything from Department of Health-licensed home PCR testing kits that can be used for international travel to pet grooming, car maintenance, beauty and well-being, and removalist services.

Like the retail industry, the adoption of instantaneous payment platform technologies will be key to the success of the rapid digitisation of the services sector.

The shift to instantaneous payments is already well underway in the UAE, where 97 per cent of small to mid-sized businesses (SMBs) had adopted new forms of digital payment technologies by the end of 2020 compared with a global average of 83 per cent, according to Visa’s Back to Business report.

In June 2019, the Central Bank of the UAE launched the Immediate Payment Instructions (IPI) technology, which enables instant payments that take no more than 60 seconds between bank accounts. However, the IPI is limited to the UAE.

Technology platforms that are open, secure and agile, such as the IBM POWER10, can be a good choice because they offer a springboard between traditional and emerging businesses that keeps a company’s core IT operations ready for the next wave of digital demands.

On a global level, it is India that is leading the way with its United Payment Interface (UPI) technology, which securely links multiple bank accounts through a single mobile application. In fact, it was the first country in the world to introduce an instantaneous payment technology in 2016, long before the pandemic struck.

Since then, it has been working with a number of countries to introduce the technology globally. However, it is possible that each region will introduce its own instant payment technology to bolster capital liquidity into their markets and accelerate their post-pandemic economic recovery.

After Gulf countries link up their instantaneous payment technologies, I expect this will give them enough clout to tie their platforms into others in countries including the US, Europe, Japan and China, which will help to increase liquidity in the market and reduce currency hedging.

Linking instantaneous payment technologies between countries on a global scale will also result in more opportunities for local and foreign investment and spending.

One important benefit resulting from this is that banks will be able to partner with payment gateway companies, which are now collecting 40 times more data per transaction, enabling them to provide loans to SMBs based on future receivables.

While complete global connectivity to instantaneous payments might still be some time away, companies such as UK financial services firm Satago are already offering solutions for SMBs to cover cashflow gaps, manage debtors and predict credit risks in real time by integrating their accounting software with an all-in-one cash management program. The resulting data is invaluable to SMBs, which gives them proof of future sales for bank loans.

But this data is not only for the benefit of SMBs. The advent of innovative technologies such as the Application Programming Interface (API) and artificial intelligence has enabled businesses to collect additional data to provide deeper personal customer experiences.

Examples include robo-advisory investment platforms that use gamification techniques in a bid to tap into a tech-savvy segment of consumers – Generation Z and millennials, who have embraced new mobile payment technologies.

Protecting this data is vital and the IBM POWER10, for example, offers hardware-enabled security capabilities, including transparent memory encryption for end-to-end security, as well as a significantly faster encryption performance.

But how will consumers benefit? For one, all that data will give businesses unique insights into their customers, enabling them to know them better and offer personalised products and services.

More importantly, it also ensures that financial transactions are not only carried out within seconds, but also securely.

The sea-change for instant payment technologies has already begun and multiple industries are undergoing rapid transformations to keep up with a fast-moving world that is emerging from the Covid-19 pandemic.

But the question remains: can instant payment technologies enable economies to move even faster? There is no doubt that this will happen as trapped capital will be released and lead to faster economic growth, allowing us to celebrate the productivity gains that digitisation has brought to the world.