4 minute read
Real-time payments (RTP) are one of our top payment trends in 2023. Consumers, employees and businesses want to get paid more quickly. And with RTP, 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."
RTP: 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 receive 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.
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).
- Hong Kong: The Hong Kong Monetary Authority is focused on real-time payments and launched Faster Payment Systems (FPS) to support RTP in the market.
- India: Forty-one million real-time payment transactions happen daily, making it the global leader in RTP.
- UK and the European Union (EU): New UK and EU regulations require banks to provide third-party providers with open access to bank accounts. This has led to open banking. Businesses can accept and credit payments directly to and from their customer's bank accounts in real time.
- US: FedNow is the Federal Reserve Bank's new real-time payment network. Along with The Clearing House, this new service enables financial institutions to provide RTP 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.
Customer and employee expectations
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 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."
A new poll of more than 1,000 US workers found that 83% of those between the ages of 18 and 44 want access to their wages at the end of each workday. And 80% said they would prefer their pay automatically “streamed" into their bank accounts as they earn it.
Benefits of real-time payments
A recent PYMNTS study found that 86% of US businesses generating $500 million to $1 billion use real-time payments. That's because real-time payments offer many advantages to businesses, including:
- Faster access to funds. Payments happen instantly and don't require days to process or transfer.
- Better cash flow. When you speed up your payment turnaround times, you have more cash available to invest in innovations and grow your business.
- Better financial management and forecasting. Fifty-three percent of PYMNTS' respondents said real-time payments improve their financial management. When payments fund faster, you can forecast and manage your operations more efficiently.
- Greater transparency. Thirty-three percent of PYMNTS' respondents reported that RTP offer more transparency in their payment process. If there's an error, your business can correct an invoice immediately. And your transactions are visible and downloadable in real time.
- Improved relationships. Pay your employees and vendors instantly with RTP B2B payments and employee payments. Their funds will be available in their accounts within seconds, helping you retain and recruit employees and improve your relationships.
"Real-time payments enable new use cases for consumers and businesses," says Ron van Wezel, strategic advisor for Aite-Novarica Group (now known as Datos Insights). "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?
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