The benefits of real-time payment for consumers are clear. It’s fast. It’s secure. Paying for goods has never been easier.
But for businesses operating on RTP networks, the outcomes are a little murkier. There are increased costs, and integrating the technology with existing systems can be difficult. Managing hedging and liquidity becomes a greater and sometimes pronounced challenge.
But when used expertly - and with the help of the right partners - RTP networks are putting the businesses which leverage them at the forefront of their markets.
So how can businesses make the most of the tech? It starts with asking the right kind of questions, Michael Jurkovic, Director, Payments Development at ANZ Institutional says.
“Our customers - the ones on the front end of that innovation curve – are asking themselves, how do I improve my existing customer experience?” he says. That is leading to an uptake of corporate adoption - and some innovative application - of the technology.
That innovation is made easier by the versatile functionality of RTP networks (including near-real time payment), increased data capabilities and 24/7 access – as well as some assistance from ANZ.
“Customers are asking ANZ, how do we actually use these services?” Jurkovic says. “How do I use RTP networks to make my existing customers happier and stick around for longer, or even bring in new customers?”
“With that mindset, we’re seeing some really interesting applications of RTP networks.”
There are a number of countries across Asia further along the RTP road than Australia, according to Balaji Natarajan, Head of Payments & Cash Management Product Asia at ANZ Institutional.
Among the key drivers of this are governments and central banks wanting to “remove friction in the financial system”, he says, a trend lifting the digital economy model in the region. “It’s a very hot space for a lot of countries.”
ANZ customers in the insurance space have been leaders in Australia, using the technology to move toward a real-time claims process, Jurkovic says.
“They are able to work with their customer in real time, satisfy themselves as to the veracity of an insurance claim, and then affect the claim settlement in near real time,” he says.
It’s the same story in Asia.
“With RTP networks, the insurance company doesn't need to ask customers to re submit the bank details you set up when you registered the account, or if your account is still valid,” Natarajan says, noting with RTP overlay services, companies can very easily validate using the unique customer ID registered.
The superannuation industry is also a leader when it comes to evolving to utilisation of RTP networks, Jurkovic says, particularly around “reducing liquidity movement friction in the system”.
“They're looking to RTP networks to reduce some of the latency in the existing system, for example between companies paying into the superannuation clearing house and the disbursement of the superannuation money into the super funds themselves,” he says. “This gets the money working more quickly than it otherwise would.”
Working-capital management is another key area ANZ sees market-leading innovation, particularly around speed of payment, as “time is money”, according to Natarajan.
“The digital economy thrives on cutting down the time for realisation,” he says. “There is finality and certainty. There’s no going back.”
The almost-instantaneous reception of funds allows businesses (especially on the collection side of large corporates no longer required to wait overnight for funds to arrive) to put the money to use almost immediately.
“We are seeing a lot of those implicit changes in how treasury works,” Natarajan says.
For businesses new to RTP, or considering making the move, a common concern is bridging the gap between their existing business and treasury processes, and what is required under RTP networks.
But integrating doesn’t necessarily mean throwing out all legacy systems or practices, Natarajan says. Batch processing, for instance, is still viable on RTP networks.
"Batch processing is a construct which can now be isolated, and you can still make an instant payment when you are ready with your batch of payments," he says. “We see that happening.”
Taking insurance again as an example, once the batch of claims has been submitted, reviewed and readied to be completed, it can be paid through the instant-payment mechanism.
“But the underlying process within the insurance company would still be a batch getting created,” Natarajan says. "You are now able to de-link internal complexities from making a payment or receiving a payment from a customer.”
“Your processes could be different for different activities. But at the point when you want payment, you still have the choice to do things on a real time basis."
Jurkovic says an appropriate level of integration with RTP networks comes down to what a company is comfortable with – and often it goes back to what they are trying to achieve with their customer experience.
“It’s how a company thinks about their customer base, what sort of services they want to expose, and how they need to link those services back into their treasury or enterprise resource planning (ERP) management systems,” he says. “And asking what they need to do to make that happen if the case is compelling enough to secure or maintain customers.”
Jurkovic says some ANZ customers are “well and truly” on a journey to uplift their treasury and/or ERP systems in a way that facilitates the use of RTP networks.
“Other [ANZ customers] have had to think, well, if we want to improve our client experience, we actually need to think about our back office more generally - and not just our treasury management systems,” he says. “Back office environments, operational processes, may need to be adjusted to improve the experience.”
That becomes critical as broader usage of RTP networks expands. In Australia the adoption of PEPPOL standards for e-invoicing by government has provided a real incentive for businesses considering making these adjustments. This includes significantly shorter payment terms for select small contracts.
“The businesses prepared to make changes to their systems to support e-invoicing are likely to see a material benefit from a working-capital point of view,” Jurkovic says.
Reconciliation is also an important factor, with RTP networks providing “an opportunity to move [payments] data much quicker than a batch system could otherwise do”, Jurkovic says. This allows customers to deal with that data “far more quickly and in a 24/7 way, whereas that’s just not possible through the current systems”.