valantic implements Instant Payment platform RTPE

Payment: Real-time transactions drive payments sector

Global trends, changing business models and innovations pose new challenges for the world of payment transactions. New payment providers simplify payment processes and seemingly threat the existing ecosystem of banks and financial service providers. Seemingly – because banks also keep up with the times. Within comprehensive services, valantic has already implemented a technology for banks now being able to offer clients the possibility to make payments in real time.

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Bankink of the future

Meanwhile, payments in real time have to support all possible payment types – including P2P, B2B, B2C and C2B. This also expands the complexity and the additional technological levels which have to be supported by banks, companies and traders.
Rapidity and convenience are crucial – thus, for example, Česká spořitelna in the Czech Republic has recognised the need for a modern and future-proof solution. With a balance sheet total of 33.7 billion euros, more than 10,000 employees, more than 600 local branches and five million clients, the Czech financial institution is the biggest commercial bank in the Czech Republic. The subsidiary of the Erste Group supervises more than 16 million clients in seven countries and is thus one of the biggest bank groups in Central and East Europe.

What factors are currently influencing technological change?

Instant payment has long become a worldwide subject sustainably changing the payments sector. As competitive and regulatory pressure rises worldwide, financial institutes quickly realise that they have to redesign their payment systems. The cost pressure for conventional payment architectures also promotes the consolidation of redundant features. Furthermore, consumers claim rapidity, convenience and simplicity for payments.

Within one decade, real-time payments around the clock have emerged as key driver for innovations in the payments sector; in many parts of the world, this technology has become the norm. The drivers of such payment systems vary between cost reduction, increased efficiency and better customer service – and, of course, the adherence of regulatory and compliance guidelines. One of the outcomes has been the European Banking Association’s pan-European SEPA instant payments system RT1 introduced in 2017.

Open Banking

As of the introduction of the Payment Services Directive (PSD2) in Europe, banks and financial institutes have to give service providers which are approved and authorised by the clients access to customer accounts. Open gateways allow more space for managing personal finances and require even more the real-time aspect in financial transactions. The future banking and finance world can only benefit from more transparency and data from the day-to-day business. This knowledge will positively influence numerous subsections and help to segment customers, reinforce customer loyalty and accelerate checks, e.g the credit check.

Modular payment hub

Many banks have already arrived in the future in payment transactions. Thanks to valantic’s Real Time Payment Engine, bank customers have the possibility to carry out real-time money transfers. The valantic Real Time Payment Engine (RTPE) is an open, modular structured payment hub solution which, in addition to instant payments, supports the processing of many different payment types such as SWIFT or SEPA. By integrating different payment channels – such as e-banking, manual recording of payments or payments via third-party providers – the RTPE is particularly versatile and highly flexible.

In addition, the real-time software comprises numerous gateways, features a multi-channel and multi-instrument capability and is easily adjustable to country- and bank-specific requirements. Thus, all payment transaction services which may arise in a bank can be processed out of one central hub. This reduces costs and valuable resources and additionally consolidates computing operations in one system.

The web-based user platform monitors all payments, visualises complex transactions in one GUI and gives an overview of the current processing status. It provides a reliable, scalable and very flexible technology collaborating with current payment processing systems. The high-performance solution provides an almost 100 percent Straight-through Processing (STP) which is of vital importance taking into account the combination of very small margins and the increasing pressure on efficient payment handling.

Benefits for e-commerce

Companies can benefit from real-time payments by using functionalities like hourly payroll and just-in-time inventory management. Payments in real time also permit to transfer more data together with the payment and to simplify the coordination and reporting. Banks are now able to provide extended services and to create further added value for their clients. In addition, companies can also manage their liquidity positions more efficiently in the entire financial supply chain.

Diagram of realtime payments volumes via Paypal, valantic Case Study Ceska Sporitelna

The extended use of online and mobile devices supports this trend which is given by digitalization. Mobile payment solutions such as Apple Pay or Google Pay also confirm this trend as well as the high customer expectations regarding the convenience and flexibility of payments. In the fields of e-commerce as well, real-time payments are a means of ensuring customer loyalty: goods can flow faster and refunds can just as quickly be credited to the consumer’s accounts. Compared to payment transactions with credit cards, real-time payments are considerably less expensive for the traders.

AI supports real-time payments

For detecting criminal activities, the evaluation of data will be particularly important, too – the more transparent the processes are, the earlier fraud and money laundering can be identified. Fraud detection is to be applied not only towards external access but also towards manipulations from within. Thanks to artificial intelligence, all processes and transactions can be monitored in real time, regardless of the data volume. Thereby, no known fraud patterns are searched but the entire behaviour of users and bank clients is checked for anomalies, so that even risks arising from new fraud methods which are not known yet are secured as far as possible.

Real-time payments also provide a platform for further innovation: processes such as e-invoicing and e-commerce payment solutions are also supported by real-time payment systems and allow the customers more control over their money. Consumers as well as companies directly pay from their accounts. This payment method is cost-effective, fast, secure and enables an immediate verification and confirmation of the credit balance. It helps traders to reduce their exchange costs and helps banks to maintain the direct relationship to their customers. The most important, however, is that it meets the consumers’ expectations in today’s world.