An interview with Paul Walvik-Joynt, SVP, Payments International Sales, Nets.
As you pay for a weak cup of coffee and some used toys at a market day at your kids' school, chances are the payment event will be over in less than a second. Nordic consumers have embraced the many popular mobile peer-2-peer (P2P) solutions, most of them running on instant payments rails which shift money from person to person in less than a second:
"In the Nordics, we have a very digitally based payment society compared to a lot of places in the world. It's an area in which we are distinctly ahead: mobile penetration is high, the usage of applications and apps, that ensure we can interact instantly, is high, so I think that puts us at the forefront," says Paul Walvik-Joynt, SVP at Payments International, Nets.
In his view, the demand for payments being effectuated in real time reflects the general pace of society today:
"Instant payments are important in our society today because most of the interaction that we have is going at a much faster pace than it used to - the way we communicate, our expectations to how easily things should be available. Because information is available at a snap of a finger, the expectation is that payments should also be instant and available at the snap of a finger," Walvik-Joynt points out, noting how the younger generation is driving the pace:
"Young people, who are not accustomed to how things used to be, when you could wait hours or even days for payments to go through – they cannot relate to that. They expect any transaction to be as you experience in social media: when it's posted, it's out there and available right away, and I think that's the key driver behind instant payments, actually."
The payment event will be a non-event
Nordic consumers of all ages have welcomed the functionality that allows them to transfer small amounts to friends and family instantly by using their mobile phone. These services are largely based on instant payment platforms and are likely to offer even more innovative solutions on top of the transfer of money, not least enabled by the additional ability to exchange rich information:
"I think it's interesting to see not only the level of innovation in the P2P space, but also seeing how the vastness of information, that you can put around a payment event and process in an instant payment engine like ours, provides for user-experiences that are more rich than you could see previously," says Paul Walvik-Joynt, referring to the RealTime24/7 solution installed in Denmark and Italy, and under implementation in Hungary and Slovenia. He believes we will see payment events connected to other types of business events in the years to come:
"The basic premise will be that we converge towards more instant business processes. They will be much more fluid, and much more hand-in-hand, so that at the end of the day, the consumers or corporates, or anyone having a touch point, will more or less feel that the payment event is a non-event. The transaction that you carry out between persons and/or businesses, is more seamless yet it contains more valuable information to you than what we see today. I think that's where you'll see the most innovation happen in the next couple of years," Walvik-Joynt predicts.
A wind of instant payments sweeping across the world
Asked to take a holistic view of where we are in the Nordic region compared to the rest of Europe and globally, Walvik-Joynt seems optimistic:
"I think that the Nordic region is at the forefront of the digital horizon, and the whole financial sector, and the fintech sector, is a testament to this innovation pace not seeing any decline," he says.
This is reflected in the Digital Economy and Society Index 2018 published by the European Commission, ranking Denmark, Sweden, Finland and Norway first, second, third and fourth respectively in the use of digital technologies by both enterprises and citizens. In Denmark, one of the front runners of modern instant payment installations is running, powered by the RealTime24/7 solution, and many show an interest in making the leap:
"I think there's a big interest in projects going on across the world, and I would even say that there is a wind of instant payments sweeping across all of the world right now, actually," Walvik-Joynt adds.
Although the high level of digitisation in the Nordics has helped along the proliferation of instant payments under constant development, other regions need not despair:
"The thing is, for other geographies, there might actually be an even higher potential since a lower percentage of their existing payment landscape is digital. Broadly speaking, you can say that in the Nordic region, we are 80% digital, maybe 15-20% cash, while in other parts of Europe, other parts of the world, it's turned on the head: it's 20% digital, sometimes even lower, and a higher percentage of cash. By introducing instant payments, the upside is tremendous in terms of what you can transform and how you can help society bring new payments products and experiences into those regions," says Paul Walvik-Joynt, stressing the huge potential he sees in the cash displacement one can do.
Instant infrastructure could transform the payment landscape
In fact, putting in place an instant infrastructure could enable countries to take out some of the old legacy solutions that may be challenging and costly to maintain, and transform their payment landscape:
"You can actually run most of a whole payment infrastructure on the instant payment rails, and that is one of the key areas that we see: it's a platform forming the basis for transforming both P2P transactions, how corporates interact, but also traditional batch-oriented solutions of file-based payments and so forth – all of these things can be incorporated into the platform and then in a modern setting in which new services can be developed and rendered at a much faster pace than it was before," explains Paul Walvik-Joynt, all the while underlining how being able to effectuate payments 24/7 puts some requirements on how you deal with your back office processes and availability:
"This has sort of been the norm in the Nordics for quite some time, and that background helps transform other geographies where we are present. The fact that the transactions are happening in real time ups the game in terms of the analytics you can put in place. Fraud prevention techniques, including AI and predictive analysis, are essential," Walvik-Joynt stresses, noting how fraudsters will always be attracted to any type of payment environment where you see a high upswing in usage.
His advice is to be vigilant, having a keen focus on both fraud prevention but also on how cyber security plays a vital role in securing these environments.
A challenge to be available 24/7
Installing instant payments is being considered in many parts of the world, and the biggest challenge, according to Walvik-Joynt, is to take the leap and fully understand not only all the possibilities there but also what type of capabilities you need to put in place to become real-time:
"It's an additional challenge to be available 24/7, and I think it's not a phenomenon pushed by instant payments, but, back to what I initially said, our whole society and how we transact. We expect everything to be available 24/7, we expect it to be easy to perform a payment, we expect to be able to purchase whatever we want at whatever time we want. We expect processes that support the purchases we've made also to be available 24/7. So, I think it's more the inherent change in our expectations to any customer experience which is more prone to be a 'I want it now, I will procure it now, and I will get it now'. That is probably the fuel behind not only instant payments but also the information society that we have today, where information is ready at your fingertips at any given point in time," Walvik-Joynt concludes.
“We expect processes that support the purchases we’ve made also to be available 24/7. So, I think it’s more the inherent change in our expectations to any customer experience which is more prone to be a ‘I want it now, I will procure it now, and I will get it now’. That is probably the fuel behind not only instant payments but also the information society that we have today, where information is ready at your fingertips at any given point in time,” Walvik-Joynt concludes.