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Real-time payments look set to take off in the small and medium-sized enterprise market in 2023, according to recent reports in Europe and the US. Bill Lumley reports.

A survey of more than 2000 European small and medium-sized enterprises (SMEs) reveals that more than two-thirds are poised to launch real-time payments in 2023. Published by European banking cloud platform Vodeno, the independent survey of SMEs in the UK, Belgium, France and the Netherlands was conducted to help understand more about the challenges such companies face in the current payments ecosystem. 

According to Vodeno chief commercial officer Tom Bentley, the length of time it takes for international payments from customers to be processed and reach the businesses surveyed was surprisingly low, given the range and variety of technology available. “In the worst scenarios, respondents reported that it takes between two and three days for funds to arrive in their destination accounts. This was the case for 35% overall, 59% of SMEs in Belgium and 30% of those in France,” he says.

Publication of the Vodeno survey coincides with the announcement that a US dollar-euro payments initiative, developed by US and European clearing houses and international payments system Swift, is set to launch next year on completion of a pilot. The pilot service is leveraging existing real-time payments systems in the US and Europe, and is set to begin processing the first live euro-dollar transactions “in the coming months”.

Also published this month, a report examining commercial payment trends reveals that business adoption of emerging electronic payment tools is on the rise and that businesses are embracing a range of emerging digital tools such as real-time payments and digital wallets, and reveals significant regional differences in channel usage.

The report by BNY Mellon and Alite-Novarica Group finds more than a third higher proportion of European corporates are using instant payments, at 67%, than those in North America, at 46%.

Just one piece of the puzzle

Reacting to the Europe-wide Vodeno survey, Mark Hartley, founder and CEO of BankiFi, which this month won the Partnership Award in the Sibos 2022 Discover Perfect Pitch competition, says he is not surprised at the sharp rise in European SMEs expecting to offer real-time payments next year. “It's a natural consequence of SMEs' understanding of the opportunity and the options they now have,” he says.

Prior to the availability of real-time payments, the only option for people to collect money was by card, he says, which led them to be seen by companies as the only approach. Now, he says, the real-time nature of payments accounts has put pressure on the traditional card model. “It therefore doesn't surprise me that merchants and small businesses and consumers alike are all seeing the opportunity and the advantage of either making [or receiving] payments via a real-time method,” says Mr Hartley.

the bank's role should be to join the dots

Mark Hartley

But, he stresses, real-time payments themselves are only one part of the jigsaw. “We get fixated on the payment part itself as the most important thing,” says Mr Hartley. “But actually, the bank's role should be to join the dots and help their customers send the invoice itself and help them get paid, [...] and not just think about the payment in isolation, but the whole process of collecting money and then doing your financial accounting afterwards.” 

“For small business customers, most of their problems are spent around the time it takes them to do all of the administrative things,” he adds. “Helping them solve those end-to-end processes, like procure-to-pay or order-to-cash, is important.” 

A real opportunity

Conny Dorrestijn, CEO of Amsterdam-based marketing consultants Shiraz Partners, says: “Across Europe, banks have excellent settlement mechanisms. It’s all about the willingness to look at an SME and a small trader customer as uniquely important, as they do [when] looking after their large corporate customers with their corresponding banking services and abilities.”

Sharp growth in the use of real-time payments by SMEs is driven in part by the economy and the fact that both banks and fintechs have opened their eyes to the real opportunity in open banking, explains Ms Dorrestijn. “The real opportunity is with SMEs,” she stresses. “Consumers are fickle. They try everything to pay for nothing. Everybody has seen now that the honeymoon period in open banking is over [and] the real opportunity is in the SME space. The more it is talked about, the more people are becoming aware of it.” 

Ms Dorrestijn concludes: “If banks don't open their eyes now and see the light, it's never going to happen. But I think they are seeing it and it's really happening now.”


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