From Exclusion to Inclusion: The Momentum of Instant Payments

From Exclusion to Inclusion: The Momentum of Instant Payments


Up until recently, an electronic fund would take a day or two to reach the beneficiary account. The financial cycle for electronic payment - initiation, processing, and finalization- was limited to certain days and time frames primarily relating to the working hours of the financial institution. Constraints such as speed and availability are exactly what instant payments intend to change. Therefore, they have emerged as the defining attributes that set instant payments apart from other forms of electronic retail transfers.

Defining Instant Payments

Instant payment, also known as real-time payment, is an electronic payment method that enables individuals and businesses to transfer funds immediately on a 24/7 basis. These funds become available to the end-recipient in real-time or near real-time.

The Emergence of Instant Payments

COVID-19 played a pivotal role in expediting the transition to digital and contactless payments as it posed an urgent need to limit all types of human interactions, including financial ones. However, prior to that, instant payments were gaining momentum across the world. As of today, it is estimated that more than 50 countries have developed their own instant payment infrastructure, and more countries have expressed their intention to provide instant payment solutions during 2023 or the near future. There are several reasons behind countries’ keen interest in instant payment solutions. However, financial inclusion takes precedence as the leading motive. To fully grasp why, it is crucial to delve into the definition and rationale behind this phenomenon.

The Imperative of Financial Inclusion

Financial inclusion involves breaking down barriers that prevent individuals and businesses from accessing financial institutions. Devoting attention to this goal can bring about significant benefits, including poverty reduction, increased economic growth, and the advancement of income equality. Numerous reasons underscore the importance of prioritizing financial inclusion, some of which are:

  • Inaccessibility of Financial Services
    Financial inclusion has become a growing concern for various developing countries as millions of its citizens do not utilize traditional banking services. Some of these segments are generally unprivileged, for example, low-income households and unbanked customers.
  • Difficulty in Establishing Monetary Policies
    Setting monetary policies requires a comprehensive understanding of economic activities and financial behaviors. Therefore, financial exclusion can hinder the effectiveness of such policies as they do not represent the entire population.
  • The Potential Loss of Savings
    Limited financial inclusion can impede access to essential financial services, hinder efficient money management, and delay timely financial decision-making. These factors collectively impact the customer's saving choices.
  • The Accumulation of Wealth
    Financial exclusion hinders access to vital financial tools and resources essential for wealth generation, limiting opportunities for investing, asset development, and economic growth due to the additional time and cost associated with conventional ways of transferring money and dealing with banks in general.

The Role of Instant Payments in Financial Inclusion

Undoubtedly, the internet and advanced communication systems have greatly enhanced the accessibility to a bank’s financial services. Innovations such as internet banking, online services, and mobile applications have immensely contributed to the inclusion of a broader segment of the population into the formal financial system. Yet, instant payments hold the power to completely shift the financial scheme through their inherent potential of giving unprecedented opportunities to unbanked customers, thus increasing financial inclusion. The following are key elements in instant payments that play a pivotal role in fostering financial inclusion:

  • Accessibility
    Instant payments offer accessibility through various devices such as mobile phones, tablets, and personal laptops, all of which have gained massive popularity. This inclusivity extends to individuals who may not have traditional bank accounts, enabling them to actively participate in the financial system. This not only promotes financial inclusion but also ensures that a wider demographic can enjoy the advantages associated with seamless fund transfers.
  • Speed and Convenience
    The real-time processing of instant payments gives users the advantage of sending and receiving funds instantaneously, surpassing traditional payment methods in speed and availability. Not only are instant payments fast, but they are also incredibly convenient through the complete detachment from cash that usually requires a visit to an ATM or a bank branch. This facilitation of transactions through online banking marks instant payments as a transformative force in the financial system, enhancing overall convenience and efficiency.
  • Cost-effectiveness
    Instant payments are often available at minimal or zero cost in many regions. In instances where fees apply, they are significantly more affordable than those associated with traditional financial transactions. This presents a significant advantage, particularly for individuals with limited financial resources.
  • Top-tier Security
    Instant payments record all transactions in real-time, making it easy to detect and trace any fraudulent activity. This enhanced level of safety serves as a compelling factor, making instant payments particularly appealing for newcomers who prioritize security and transparency in their financial transactions.

In conclusion, instant payments hold the key to changing users' daily financial behavior by offering a low-cost, secure, and easy-to-use method to transfer funds instantly. Notably, this has never been offered by any other traditional financial service, which plays a significant role in transforming the users’ overall perspective of the economy. Instant payments are empowering users, especially unbanked ones, to attain financial stability and future success, thus ushering in a new era of financial empowerment and economic well-being.

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