It’s been a long time coming, but Real-Time Payments (RTP) is changing the global financial landscape. According to payment systems giant, ACI Worldwide,
‘Fast is no longer enough when it comes to payments. Immediate is the new expectation, and that expands beyond just transactions...’
Real-time payments, sometimes called instant or Immediate Payments (IP) is the capability to transfer funds between individuals, businesses and governments, making those funds available to the payee instantly, and with instant confirmation.
The global real-time payments market size was valued at USD10.64 billion in 2020. It’s expected to expand at a compound annual growth rate (CAGR) of 33.0% from 2021 to 2028.
Real-time payments offer a faster, more consistent means of payment compared to some legacy methods, which could take days to reach a recipient. This newer, more seamless way to make financial transactions will affect consumers, businesses and world governments, both socially and economically.
COVID-19’s role in Real -Time Payments
Even before the COVID-19 pandemic, consumer-driven changes were happening in the payments world. But the pandemic accelerated the adoption of digital and real-time payments worldwide, as a strategy to keep consumers safer and businesses operating.
COVID-19 has also driven consumers and businesses to question the use of cash. While there is no real evidence to support it, the WHO has recommended the use of contactless payments to reduce the chance of transmission. Some experts predict this is a trend that’s expected to continue towards what could mean an eventually cashless society.
Around the world today, 40 countries have adopted real-time payments solutions, with others planning to go live before 2023.
Source: DeLoitte Analysis
With financial markets around the world in differing levels of maturity, the uptake of real-time payments is facing some challenges.
The reality of real-time payments
In the eyes of a consumer, a real-time payment might seem instant, given that with the swipe of a payment card, they can walk away with goods or pay for services. In fact, the money doesn’t leave a consumer’s account or reach a merchant’s account until well after that transaction has happened.
According to Mark Ranta, payments practice lead at Alacriti, ‘Although unseen and unnoticed, that time lag matters a lot. The lack of real-time money movement actually ends up making things a lot more expensive.’
The benefits of real-time payments
Real-time payment systems offer instant, 24/7 secure interbank electronic funds transfers that can be initiated through smart phones, tablets, digital wallets and on the internet.
Real-time payments offer a great deal of benefits for financial institutions, including:
- Boosting revenue through increased customer spending
- Reduced payment costs, providing higher value services to consumers
- The engagement of new consumer segments
- The reduction of fraud risk
- Improving long term customer relationships
- Enabling innovative new product offerings to stay competitive
Real-time payments can also help businesses to strengthen cash flows and subsequently improve operational efficiencies, budgeting, and overall cash management.
This growing preference for RTP among businesses is predicted to drive the market growth. In fact, a survey conducted by ACI Worldwide revealed that 77% of merchants worldwide are expecting real-time payments to replace physical payment cards.
The challenges of RTP for financial institutions
Before the benefits of real-time payments can be universally recognized, there’s work to be done. Financial institutions and infrastructures need standardization and interoperability, along with a cost-effective flexible interface that fully supports technology re-use.
While Payments Market Infrastructures (PMIs)are being built to make real-time payments possible, banks are being forced to restructure their business models. They must deal with obligations to their domestic customers to provide round-the-clock payments, as well as managing the multiple payments schemes worldwide, and combating the risk of fraud.
Building a solid real-time capability is challenging in itself, but significantly increased with legacy infrastructures and existing system or operational constraints.
To truly capitalize on the opportunity of real-time payments, each country’s payments ecosystem must closely monitor its development and start planning for the future accordingly. The best way to do that successfully is to have access to the relevant data.
Why transaction monitoring is crucial
The financial services industry is one that deals with massive data volumes. The need to detect complex patterns in real-time, correlate this information and analyze it is critical. Transaction analytics and insights drive sales and provide more streamlined services to customers. For banks, Central Infrastructures and other key players in the rea-time space, transaction monitoring identifies glitches in payment systems and mitigates risk.
For financial institutions, transaction monitoring can analyze historical information and spot abnormalities and fraud attempts.
IR Transact brings real-time visibility to your entire payments environment, unlocking unparalleled insights into transactions and trends, streamlining the payments experience, from end-to-end.
Read more about the key business drivers for real-time payments transactions for insights that can help you navigate the changing payments world.