Banks Just Before the New Age of Credit Transfers

Banks view instant payments as the new normal in payment traffic and are developing business models that focus on use cases with clear added value for customers. This added value can manifest itself in the form of increased efficiency as well as faster and more secure transaction processing.

However, the profitability of instant payments poses a challenge, particularly in terms of passing on investment and operating costs. Customer acceptance of additional fees is low, creating a tension between profitability and customers’ willingness to pay. Banks place great importance on simple, customer-oriented processes and integrate instant payments into existing payment procedures. They do so by leveraging technology to ensure the security and efficiency of payment processes while creating a positive customer experience. This includes some banks asking their customers whether they want their payments to be executed immediately. Overall, banks recognize the challenges associated with introducing this new payment method and the need to increase acceptance and volume to achieve sustainable profitability. Banks currently anticipate processing approximately 5 to 10% of their payment transactions instantaneously.

At the time of introduction, the new function will not have a significant impact on the competitive position of banks. This is because they generally start with a minimal product offering in view of the low transaction volume initially expected.

However, in the medium term, i.e. after the phased introduction by November 2026, instant payments are likely to become a standard offering. This is especially the case with the expansion of functionalities, such as file-based payments for business customers. Banks expect concrete effects on customer satisfaction and loyalty, which could influence their competitive position. They anticipate that instant payments will become the new market standard in the banking offering, necessitating their inclusion as a “must” for every bank in the long term. This is primarily due to the fact that not only the largest, but all payment transaction banks in Switzerland must be able to accept instant payments over a period of two years. Such a high level of market penetration should represent tangible added value for customers. Consequently, banks are investing in the provision of their customer solutions at an early stage.

Banks already use instant messaging-capable core applications from their software suppliers and connect these in a standardized way with other internal applications that are necessary for processing. This includes online banking, where payment capture is a critical point for a smooth and customer-friendly experience due to the “always-on amount authorization.” This requires a solution that is as streamlined and intuitive as possible. The integration of instant payment functionalities into existing systems and processes therefore also requires new processes, with a particular focus on risks, interfaces, and downstream process steps.

The implementation of the instant infrastructure causes investments that go far beyond the costs of a normal release: for additional servers, connections, and applications that cannot be integrated into the existing infrastructure. The requirement to provide the service around the clock also has a direct impact on the organization of operations and leads to additional costs.

The banks have planned various training and support activities for the introduction of instant payments. Staff will be prepared through specialist training in areas such as liquidity management, back office, and compliance. Customers will be familiarized with the new system through communication measures.

Some banks are already developing specific content such as FAQs for support and information campaigns for their customers. The focus of the training is on the new channel, the time requirements, and possible reasons for refusing payments.

User guidance should be intuitive and users should be trained with regard to risks and special features, such as fraud risks and liquidity management. For customers, the new instant payment service should be intuitive and self-explanatory, supported by product data sheets and user instructions.

Preparing employees and educating customers is crucial to ensure effective use of the new service.

The banks faced numerous technical challenges during the changeover. The implementation of the instant payment process required a redesign of the

processing steps, which now have to run in parallel instead of sequentially.

The integration of new technologies and applications for sanction checks and microservices for instant payments presented further hurdles. Communication problems, unclear agreements and a lack of resources led to bottlenecks in implementation in some places.

Adaptations to numerous applications and interfaces were necessary, also involving external software providers. Uncer­tainty about the expected latency times at the start of the project made planning difficult. In order to integrate instant payments, the banks had to fundamentally revise their payment transaction processes. This affected both the technical architecture and the customer requirements. Integrating the new instant payment platform with the existing systems was a particular challenge, as every second counts in end-to-end processing and even slight delays can
lead to timeouts.

Other challenges included the lack of support in existing messaging products, a market for such technologies that is still developing, and a communication protocol that is not yet optimized for real-time use. The temporal coupling of sender, clearing, and recipient proved to be complex, as customers, not banks, control the processing load and peaks in instant payments.

Banks employ various strategies to mitigate security risks and prevent fraud in instant payments. In the event of anomalies, payments are rejected immediately and re-evaluated at a later stage. Account checks, real-time anomaly detection, artificial intelligence, and biometric authentication processes enhance security. Customer education and collaboration with the financial center are also crucial aspects. The banks emphasize that their security measures align with the current industry standard and are continuously being enhanced.

Furthermore, the banks have adapted their compliance mechanisms in order to meet the regulatory requirements, even in the context of rapid settlement. This includes, in particular, adjustments in the area of sanction checks.

Banks that are currently implementing instant payments emphasize the importance of thorough preparation and planning. They recommend that institutions that have yet to implement should not underestimate the time required for preparation, particularly in terms of starting early with internal clarifications on product definition and playing through possible use cases. This also means, for example, analyzing the effects on existing processes with the software suppliers at an early stage, particularly with regard to architecture and technology.

It’s advisable to concentrate on the key delivery items and consider the interaction between the organization, processes, and systems. It’s also important to allow sufficient time for the pilot phase, the testing of various use cases, and any optimization measures.

The introduction of instant payments is the start of a development with many benefits for customers. It is a joint process that focuses on relevant topics that offer added value for customers. The improvement in the speed of bank payments represents a significant step forward that will allow us to catch up with European standards. This is an important step for the Swiss financial center, which can thus catch up with services where constant availability is already standard.