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EBA report stresses collaboration essential as ecosystems adapt to instant payments

At its global seminar on 'Real-Time Payments and Open Banking: New Realities, New Challenges', the Euro Banking Association (EBA) presented its latest research delivered by its working group on liquidity management. 

The primary responsibility of all corporate treasurers is to ensure their organisations meet any financial obligations as they fall due. To fulfil this responsibility, corporate treasurers rely on their banks (and other payment service providers) to process payments (both disbursement and collection) accurately and in a timely manner. To be able to do so, banks generally need to have access to multiple payment systems, and they need to manage the level of liquidity they provide to these systems to ensure payments, especially time-sensitive payments, are processed without delay.

Over the past decade, infrastructure supporting instant payments processes has been developed. To date, instant payments have primarily been used by consumers, with limited adoption in the realm of business-to-business (B2B) transactions, largely due to the transaction amount limits currently in place for instant payments. While the increase (or abolition) of these transaction amount limits is expected to increase B2B instant payments, some key constraints to their widespread use for B2B transactions remain, both on the corporate and on the bank sides of the corporate liquidity management ecosystem.

The EBA paper argues that companies are only likely to choose to use instant payments if they already follow a 'just-in-time' business model. That said, over time, it is likely that payment service providers, including banks, will migrate their clients from batch-based (ACH) payments to instant payments, compelling corporate treasurers to re-evaluate their forecasting processes and operating procedures. 

At this point, banks will be faced with twin dilemmas: how to ensure they provide sufficient liquidity to instant payments services to ensure time-sensitive payments are processed instantly (especially outside normal banking hours) and how to manage their own intraday liquidity to the satisfaction of their shareholders and regulators. 

Instant payments are changing the dynamics between banks and their corporate clients. To understand interdependencies and to use intraday liquidity more efficiently on both sides, banks and corporates need to exchange information on requirements, expectations, and objectives of payments processing, the report concluded. 

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