No more shopping “on tick”! Why E-Commerce insists on Instant Payment

February 4th, 2019, Editor: MBF

While more and more small shops have to close, online trading is booming. The Germans had a turn over of more than 60 billion euros here in 2018 and there is no end in sight to the shopping frenzy. This is good news for the e-commerce industry, but also poses a problem for retailers: How can I get my money as quickly as possible without having to re-finance my business in times of increased demand?

Especially when it comes to payment, trading is facing a classic trade-off. On the one hand one would like to offer the customer maximum flexibility by buying on account, free shipping, etc., on the other hand no trader can and wants to wait longer than necessary for his money. Particularly with an order before the weekend or holidays up to 3 days can go into the country, before the money is finally on the account of the customer. A resulting interim financing necessary costs the dealer not only additional money (which he then passes on to the end customer) but also involves a high organizational effort by adding a bank or a payment service provider.


Who benefits from Instant Payment?

Instant payment is particularly suitable for B2C merchants, as the amount is currently capped at EUR 15,000. This is perfectly sufficient for the vast majority of all B2C purchases, whereas in the B2B sector such amounts are often just peanuts.


The SEPA-based credit transfer is currently provided in Germany by Hypovereinsbank and some institutions of the savings bank group, other banks are still working on its implementation.


The potential of the technology is great, because payments can not only be sent in real time but can also be processed automatically.


Apple once again a pioneer

Not only the banks and the e-commerce industry have Instant Payment on their screens, but also the US technology company Apple is once again a pioneer. The company introduced its Apple Pay payment service back in 2014, and it has been available in Germany since the end of 2018. What’s special: Only a randomly generated 16-digit pseudo credit card number is transmitted, making this payment method more anonymous than payment with a conventional credit card.


How does the end customer benefit?

Not only retailers but also customers themselves can benefit from Instant Payment. The faster the money is received by the provider, the faster he can instruct the shipping. As an end customer, I will receive my goods even faster in the future – sometimes on the same day.


Another advantage is increasing data protection. While the customer had to transfer the entire account data to the merchant with conventional transfer methods, a verification flag is sufficient with Instant Payment, which receives a notification from the bank that the payment has been made.


This means that merchants and buyers benefit equally and online trading can continue to grow.

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Source cover picture: iStock / AndreyPopov