Payments Blog • 7 MIN READ

The Growth of Real-Time Payments

Jamie Pearson

Written by Jamie Pearson

The global Real-Time Payment (RTP) ecosystem is growing rapidly with businesses and governments realizing the benefits of implementing faster, more efficient payment systems.

Elena Whisler, Senior VP at The Clearing House says that the volume of RTPs is expected to soar during 2022 and beyond.

Consumers want it, businesses want it – and they’re willing to pay for instant access to funds in an account, in order to get paid more quickly. Speed, choice, and control are driving real time transactions in today’s rapidly changing world.

To gain critical mass, Whisler said:

“You need the customer demand, the customer push for [real-time payments], but at the same time, you need businesses and financial institutions to offer it.”

 

Why RTPs are an economic game-changer

RTPs are a huge benefit to financial Institutions, merchants, consumers, and society by enabling enhanced visibility into payments.

RTPs can enable better cash management and help businesses navigate day-to-day operations more efficiently by improving liquidity. This liquidity improvement can create a positive impact on cash flow and Daily Sales Outstanding (DSO), particularly for smaller businesses, who may be accustomed to waiting days for their settlement.

RTPs have also enabled commercial B2B relationships to survive and even thrive in a world where supply chain interruptions have threatened businesses.

Moving money faster has also enabled firms to secure their inventory and build relationships with new suppliers while lowering the cost of payments.

Read more about how real time payments are changing the world here.

The rise of RTPs in Asia

Business Insider reports that financial experts are predicting the shift from cash to real time payments in the Asia Pacific region is moving faster than the rest of the world.

RTPs are a critical element of nation-building in the APAC region, with a focus on increased digital and financial inclusion. The steady movement away from cash, and towards a digital economy, means real time payments are catapulting Asia to the top of the tree.

According to a recent report from FIS Global, India, China and South Korea are now the top three global leaders in the RTP space, with over 160 million combined transactions per day.

Part of the reason for the shift away from cash is the growth in popularity of digital wallets and other RTP platforms.

Southeast Asia is a particular growth area. In Indonesia, for example, there are around 50 digital wallet providers competing in that single market.

According to the Mastercard Impact Study 2020, Malaysia now has the highest mobile wallet usage in Southeast Asia at 40%, just ahead of other countries like the Philippines at 36%, Thailand at 27%, and Singapore at 26%.

Consumers and merchants can now settle bills or transfer money at the touch of a button, and with this new convenience, moving forward, no business or consumer will ever settle for less.

Why ‘inclusion’ is driving RTPs

For the APAC region in particular, an additional reason for the rapid adoption of RTPs is the ongoing encouragement from governments and local regulators to stimulate their domestic digital economies – and broaden financial inclusion.

"The contagion effect of RTP success has now placed them front and center in a number of governments' inclusion and digital agendas across India, Singapore, Thailand and others."

Ari Sarker, Co-president at Mastercard, Asia Pacific

 

Challenges for cross border RTP systems

Streamlining payments systems across the APAC region would have obvious benefits for cross-border commerce. However, the lack of uniform regulations, combined with the varying economic and development priorities of individual countries in the region, make cross-border payments a complex undertaking.

Current RTP systems and platforms in Asia are domestic in nature. As such, the area has seen the evolution of country-specific technologies and regulations. Enabling cross-border transactions would require a new set of technological standards and regulatory frameworks.

Different messaging formats and technology systems create a complicated plumbing system that will take some time to amalgamate.

New Real-Time Payments ventures driving growth

FIS Executive VP, Raja Gopalakrishnan says that while challenges still need to be overcome, indications are that real-time payments volumes globally are up at least 40%, with values surging by at least 30%.

And yet the market is still largely untapped. Around 55 billion transactions, or 80% of global real-time payments are still led by five countries: India, China, South Korea, Thailand and the U.K. This constitutes only a fraction of around 56 countries that have begun building the infrastructures for at least some form of real time payment method.

FIS has recently launched two new real time payments ventures:

  • RealNet, a global money transfer Software-as-a-Service (SaaS) platform that enables account-to-account (A2A) transactions domestically and internationally for merchants and other businesses.
  • RealNet Central, provides a full stack of payments infrastructure for clearing houses, central banks and commercial banks around the world, enabling them to modernize their legacy infrastructure and adopt real-time payments.

RTP systems are here to stay

Changes are happening globally, but in Asia, it’s clear that from 2022, RTPs will increasingly become the main focus in payment systems for financial institutions, consumers and merchants throughout the region – and will greatly advance local economies.

Payments Market Infrastructures (PMIs)globally are being built and renovated to make real-time payments possible.

Banks are being forced to restructure their business models to deal with obligations to their domestic customers and provide round-the-clock payments. They are also tasked with managing the multiple payments schemes worldwide and combating the risk of fraud.

Why real time insights and analytics are crucial

The financial services industry deals with massive data volumes. The need to detect complex transactional patterns in real time, correlate this information and analyze it is critical.

Navigating change with relatively new technology like real time payments requires detailed, actionable insights into complex payments environments. This enables banks and financial institutions to gain the business intelligence they need for digital transformation.

They can utilize location and contextual data to create better customer experiences, create new data-based products and make more informed decisions in complex scenarios.

For banks, central Infrastructures and other key players in the real time payments space, transaction monitoring identifies glitches in payment systems and mitigates risk.

Transaction monitoring can also analyze historical information, spot abnormalities and fraud attempts.

While real-time payments are still in their developing stages, with dozens of real time schemes rapidly being established around the world, experts say they are set to at least double over the next year. Now is the time to consider how you will manage real-time payments to ensure overall payment health, to deliver results that drive optimal business outcomes.

Topics: Payments Transact Transaction analytics Real time

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