At the time of instant messaging, not long ago we had to wait a whole day that the sum lands on the recipient’s account after issuing a bank transfer. Not to mention, if the time of the transfer coincided with a weekend or a public holiday, it could have been several days. To avoid this, in 2014, the European Central Bank’s, European Retail Payment Committee (EBRD) established the SEPA inst. (Single Euro Payments Area), which is designed to make payments as safe and easy for anyone in Europe as in the user’s own country, regardless of the payment method. Towards this common rules and standards of SEPA, instant payment has been laid down.
With the emergence of pan-European instant payment systems, which were only meant to speed up the general bank transfers, payment request techniques and paying with QR codes have become widespread in other parts of the world. The best known of these systems were Singaporean FAST, Chinese Alipay and WeChat.
With the introduction of the instant payment system, the transfer is executed within 5 seconds, 24 hours a day, and 7 days a week. In addition to promptly executing transfers and making banking more convenient, the market expects cash usage to be rolled back.
The start of instant payment system in Hungary
Currently there are 18 European countries using instant payment system, which Hungary joined on March 2, 2020.
All in all, the changeover in the Hungarian banking sector has been accompanied by a very significant infrastructure development, in terms of national economy and national security as well. The internal banking systems, their logic and operating process also had to be rethought. The transition to the system introduced on March the second did not go smoothly for all the banks. Some banks have suspended some of the net banking functions, or the transaction history was not reachable, but overall, the start-up has gone well and most banks have now fixed all the minor or major errors.
One of the major tasks for the banks, with the implementation of the new system, was to provide sufficient liquidity needed for instant transfers. “Therefore, in Hungary, the Central Bank has put in place a mechanism to put all available bank’s collateral into a system outside working hours. “If it turns out that the bank is out of its reckoning and has less coverage than needed in the weekend, we can automatically give credits; the bank doesn’t even have to ask for it.”-said Lajos Bartha, the director of the Hungarian Nation Bank.
What the instant payment system means for the private sector
With the introduction of instant payment, domestic transfers of less than 10 million HUF will be credited to the recipient’s account within 5 seconds. The system will be used for paying amongst people, for example, splitting a dinner bill, paying at the grocery store or for online shopping. With the instant payment system, transfers will continue to be charged to each user at the rate specified in the bank’s list of terms and conditions. While paying with a card is free, the users may be charged for transfers and this can cause problems and in the wider spread to the system on a daily basis.
In contrast, the user’s openness is helping to spread the new system, as 83% of Hungarian adult Internet users find it useful – according to recent research on eNet.
The so-called value date transfers, that is, when a transfer is scheduled to a predetermined date, will be included in the instant transfer system from September. However, pensions, family allowances and unemployment benefits are also excluded from the current instant payment system.
What the instant payment system means for the business sector
The most important benefit is merchants will immediately see the value of the goods or services in their bank account after a payment is made.
From March 2, 2020, banks will only execute individual corporate transfers, and banks will be able to make batches of transfers only from September. Typically, companies transfer wages and supplier invoices in batches format, so these will not be done through the instant payment system.
Payment with secondary authorization
In addition to instant payment, it was also a mandatory development for banks to include the secondary authorization. Instead of a bank account number, the opportunity is given to initiate a transfer by entering the recipient’s registered email address, phone number, or tax number, using a secondary identification (secondary ID). In order to use the secondary identification, each user must register the listed information in the bank. In many banks, it has to be registered personally, which is not a customer-friendly attitude. “Banks can also charge money for the usage of secondary identifications,” said Lajos Bartha.
New payment methods
The instant payment system will also provide a new payment form, which is not yet available at all banks. An example form is the request for payment, which can facilitate payment to utility companies, since it only requires users to approve the payment request.
This is an opportunity to replace the current payment habits in everyday’s life, such as yellow check payments and direct debit, with a more modern and convenient service.
In the context of electronic payments, a ‘payment request’ can be defined as a set of rules and the technical elements associated with it. These allow the payee (or creditor) to electronically request the payer (or debtor) to pay a specified amount of money through a single transaction. (European Payments Council – RTP MSG closing document)
Another form of payment is the transfer with QR code, where the user captures a QR code posted on a check, invoice, or at a merchant with his or her compatible mobile phone and pays off the bill using the instant transfer system.
How to make the new payment system more user-friendly?
We looked at how the structure of Internet banks changed with the introduction of the new system. For this purpose, we examined the transfer process of 4 Hungarian banks (MKB bank, Erste bank, Sperbank and OTP bank). We can see that the secondary ID payment has been implemented at all the four banks.
This is easily solved by the banks from UX point of view. The user can select with a check box to initiate the transfer with a bank account number or secondary ID. After selecting the secondary ID payment, the user can select its type. This can be a tax number, tax identification number, mobile phone number, email address. What is missing in each case is to help the user understand what a secondary ID means, and how they can register their own data.
At these banks, it’s not possible to distinguish the different methods of transfer visually neither, which makes it hard for users to know which section they are.
The payment request has a separate menu point at MKB and Erste Internet banks. In Erste’s case, clicking on the payment request menu, will take the users to a page for filtering payment requests, from which they can also initiate one. The structure of the page is similar to the a bank account transfer page.
In this case, it is not clear to users which payment requests can be filtered, as this is the first time users enter the payment request page and want to make a new request. When initiating a payment request, the users are not guided how to fill in the fields.
You can filter between inbound and outbound requests, which can be selected by tabs on the top. Users may see a “Search failed” message, even though no search is initiated. This flow also lacks the guidance and the clarity needed for the most important features. Also, the “time” is not clear, what the user is expected to do or what to write. For transfers or due dates for invoices, only a date has to be entered, not a time, which may raise questions in the users.
Addresses saved as templates cannot be searched by secondary ID, which makes it difficult to select a template. The contacts that appear among the templates continue to appear in alphabetical order and not by the recent ones.
At Erste Bank, if users wish to do a transaction to a secondary ID, the error message that “the given ID is not registered yet”, will be only shown at the end of the process. Secondary ID registration could already be verified at the time of typing it in, so the user would not need to provide any additional data.
Furthermore, in the case of a foreign currency transfer, there is no possibility of transferring to the secondary identifier.
For the time being, it seems that the banks have not dealt with the user-friendly aspects of the new modules required by the new system. It is likely that by early March, they have focused on site development, and the structure and visual changes from a user perspective are due in the near future.
As with all new technologies, the question arises how safe the new system is and what to pay attention to as a user. According to the research on eNet, only 1 in 2 users plan to register a secondary ID with their bank and/or use it to transfer money to others, as they fear that it will be more difficult to withdraw erroneous payments (54%) more than before. Users think that using a secondary ID is less secure than using a bank account number as well (36%).
If the transferred amount has been addressed wrongly, the user will have 13 months to withdraw it, but the recipient must also approve the cancellation request. In the future, it is also worth paying attention on which kind of payment request is approved, so that users are not victims of fraud.
Future possibilities with open banking
On September 14, 2019, the PSD2 regulation came into force, requiring banks to ensure that other third party providers have access to their customers’ account transaction data. Hence, the so-called open banking was launched. Opportunities offered by open banking and instant payment will inspire even more service providers to add new services to their portfolio.
An example is the possibility of an immediate loan offer and administration . Let’s suppose you want to buy a new home theater system at a retail store over the weekend. You can check the banks’ offers on your phone, compare them, select one and based on your account balance, you can immediately take the home theater system for instalment.
In order that users actually use such systems, it is not enough for service providers (banks) to simply implement new services. They also need to work to make them really easy and convenient to use.