4 minute read
Why real-time payments are a good thing for your business
Real-time payments (RTPs) are one of our top payment trends in 2023. Both consumers and businesses want access to funds more quickly. And with RTPs, getting funds happens instantly.
Ruben Salazar, global head of Visa Direct, agrees, "The largest and most important macro trend that we are experiencing in the payments industry today is real-time payments."
Real-time payments had a market size value of $17.56 billion in 2022. Researchers anticipate this number will grow globally by nearly 35% by 2030. But how are real-time payments different from traditional payments? And why are they surging now?
"Real-time payments are the largest and most important macro trend that we are experiencing in the industry."
Global Head of Visa Direct
RTPs: It's all about speed
Batch processing was once the norm. That's when payment networks batch and process payments at scheduled daily intervals. You get the funds once these payment networks settle them through the batch system—sometimes taking up to seven business days.
But RTP rails process payments instantly, transferring funds into your account in seconds. You don't have to wait days to see your money in your business account or wonder when a payment will clear—the payment happens in real time.
Better cash flow, greater transparency
A recent PYMNTS study found that 86% of US businesses generating $500 million to $1 billion use real-time payments. Fifty-three percent of the survey respondents said real-time payments improve cash flow management. Another 33% reported that RTPs offer more transparency in the payment process. When payments fund faster, you can forecast and manage your money more efficiently.
What's driving real-time payments now?
Government regulations, new technology and customer expectations are accelerating RTP growth worldwide.
Real-time payment networks are expanding globally—in many cases, due to new regulations. In 2015, only 14 countries were using RTP technology. Today, nearly six dozen countries on six continents support real-time payments.
- Canada: Real-time payments are underway with Real Time Rail (RTR).
- India: Forty-one million real-time payment transactions happen daily, making it the global leader in RTPs.
- UK/European Union: New UK and EU regulations require banks to provide third-party providers with open access to bank accounts. This has led to the emergence of open banking. In combination with real-time payments, businesses can accept and credit payments directly to and from their customer's bank accounts in real time.
- Hong Kong: The Hong Kong Monetary Authority is focused on real-time payments and launched Faster Payment Systems or FPS to support real-time payments in the market.
- US: FedNow is the Federal Reserve Bank's new real-time payment network, expected to launch as early as 2023. This new service will enable financial institutions to provide RTPs across the US.
It was once too challenging to process billions of retail transactions in real time. However, times have changed. System capacity has grown so much that this issue has virtually disappeared. RTP networks can use the ISO 20022 standard to allow instant clearing and, in many cases, settlement of retail transactions.
Your customers prefer the convenience, control and transparency of real-time payments. They expect access to their funds 24/7/365. And if they need to make a payment at the last minute—or get paid—they want to send or receive payments immediately.
In addition to these heightened expectations, with around 9% of US adults currently or recently employed in the "gig economy," the need for real-time payments is growing.
"In the US, there are 59 million individuals who are working in the gig economy," said Salazar. "You want to get paid when you finish your work. You aren't expecting a check in the mail. You want to see your payments at the end of the business day."
RTPs are gaining momentum
As you can see, real-time payments come with many benefits. Faster access to funds. Easier management of cash flow. Greater transparency. This is the recipe for momentum—and we'll see it take more shape in 2023.
"Real-time payments enable new use cases for consumers and businesses," says Ron van Wezel, strategic advisor for Aite-Novarica Group. "Think about the ability to settle a restaurant bill in real time, pay taxes and other obligations at the last moment, pay for your purchases directly from your bank account, fund your investment account in real time… the possibilities are endless."
Besides real-time payments, what else is trending in 2023?
Download our 2023 Commerce and Payment Trends Report to explore our forecast on what's shaping payments and commerce this year. Learn about social commerce, the metaverse, blockchain, live commerce and more.