December 28, 2017

Real-time or Instant payments – is there a difference?

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Patrik Centellini

Senior Business Consultant Payments, Tieto

Niklas Thurfjell

Sales Manager, Retail Payments and Cards,

A pretty straightforward question from a colleague really got us thinking about the terminology we use in the payments industry.

Hi, Niklas Thurfjell and Patrik Centellini here. We just got a question from a colleague who has a fairly good insight and understanding of the payment industry. The question was: Hi payment lovers. Need your help with sorting out the meaning and difference in Real-time payments and Instant payments.

Wow, good question we both thought. And bold as we discovered. Because it seems that many people are wondering the same thing. People that daily operate on senior level within the payments industry could not explain nor understand the difference. So, we thought that it would be a good idea to try to sort out all the different payments terms.

Real-time payment and Instant payment are used almost synonymously – so is there a difference between the two terms? The answer to that is no. The meanings of real-time payments and instant payments are the same if you follow the definition by Euro Retail Payments Board, ERPB, where they are described as electronic retail payment solutions available 24/7/365. The real-time or instant payment results in the immediate or close-to-immediate interbank clearing of the transaction. Both the payer and the payee will be notified within seconds after the payment is initiated. 

So, that part is nice and clear. But what about all the other terms that are used to describe this payment process? Similar terminology is used in our native languages, for example, in Swedish we have the terms direktbetalning (direct payment) and Betalningar i realtid, BiR, (Payments in real-time). The difference between the two is that what’s direct with direct payment is that the buyer is charged instantly, but the money doesn’t necessarily get to the vendor in that same moment. The underlying platforms who send payments from the buyer’s bank to the vendor’s bank have not been real-time platforms, but have sent money in batches a couple of times per day. 

With BiR (payment in real-time) this changed when the Swedish clearing house Bankgirot made possible true real-time payments that reached the receiver within seconds. This platform is the foundation in the mobile payments solution Swish. 

Internationally, different terms corresponding to BiR have been used. In England it has been known as Faster Payments. However, the last two years, Instant Payments have been the most used term internationally. With the launch of the European real-time platform SCT Inst (SEPA Credit Transfer Instant), this has been cemented further. In forums such as Swift, EBA etc. you talk about Instant Payments which we regard as “the right” international term. So, if you are in Europe - go ahead and talk about Instant Payments, and maybe not so much about the other terms…

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