An Instant Payment System is a digital financial service in which the payment notification message and the availability of funds to the payee occur in real time, or almost real time, this payment service should be available all the time i.e., 24 hours all year round. So, an instant payment’s main features are not only speed and service availability, but also service continuity.
Financial inclusion means that individuals have access to financial services that meet their needs. These services range from bank accounts, affordable credit or financial advice.
Benefits of Instant Payments
- Enable both banked and unbanked customers to use the service because end users have an option of opening e-wallets without necessarily having bank accounts, all users require is a mobile number.
- Make it easy for end users to keep track of and manage their monthly expenses, this is due to the nature of instant payments where exit and/or availability of funds and notifications happen instantly, indicating current balances.
- Are low-cost, and the end users find them far cheaper compared to transaction and maintenance fees associated with cards.
Instant payments therefore if done right, are one of the key drivers of financial inclusion, hence the term instant and inclusive payment systems. It goes without saying that the inclusivity of instant payment systems comes into play if they meet certain user requirements such as security, affordability, convenience, openness and robustness.
The instant and inclusive payments have great potential to connect the poor to the digital financial services and improve their livelihoods and achieve the sustainable development goals as follows.
- No Poverty
Access to and use of IIPS can be an aiding factor in lifting families out of poverty, by providing services that will stimulate economic activities in communities e.g., available micro loans for small businesses and the ability to receive cross border payments from relatives.
- Gender Equality
As shown in the preceding point, the availability of IIPS aid economic activity, this can reduce reliance of women and girls on men and reduce unequal access to financial services, women and girls can leverage on these services to make a living by getting loans and opening new businesses for themselves. Jurisdictions that are keen to reduce gender discrimination should view instant and inclusive payment systems as a catalyst and invest in it.
- Job Opportunities and Economic Growth
Where there is vested interest and intention in development of IIPS, there is more job creation, entrepreneurship and technological innovations. There must be investment on innovation and infrastructure development for these payment systems to thrive.
Improved access supports overcoming barriers of exclusion and drives financial inclusion and access to a range of financial services. Partnerships and collaborations among governments, the private sector and foreign investors can go a long way in achieving sustainable developments through secure, affordable, open and robust digital financial services.
Product Development Manager at Botswana Savings Bank
DFI Alumni and Community Member