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In the recently released FIS Flavors of Fast report, 54 countries are now identified with active real-time payment programs. This is up from 40 in 2018 and nearly four times as many named in the inaugural 2014 study. While continuing growth in faster global payment schemes is good news for the industry, the real-time payment revolution is very much in its infancy with more investment required to make the global transition to real-time payments.
So, what’s next for real-time payments? With the real-time payment rails largely in place, banks can now focus on the things that will make the funds transfer experience more valuable, primarily the user experience, which is now of even greater importance given the use of mobile phones for moving money
To keep pace with the industry movers and shakers, here are five trends you will want to consider helping guide your decision-making:
1. The growth in overlay services will continue to justify real-time payment rails
With open APIs enhancing imaginative overlay services, the payment itself becomes a frictionless element in the process. Consumers demand ease of use, transparency, certainty and immediacy when moving their money. Going forward, more complex overlay use cases for small business, corporate and government payments will grow quickly. The most common overlay services being worked on today include Request to Pay, aliases and P2P payment services and we can expect to see more like these to come to market in the year ahead.
2. Real-time payment growth for business use will become a reality
The promises of faster cash flow, minimal exceptions, and automatic reconciliation are appealing to businesses. A handful of leading companies are already moving ahead with real-time payment solutions and we expect to see some high-profile examples that prove the value of B2B real-time payments by next year that will ignite demand. Once the value is shown, this sector will catch fire and the financial services industry will need to quickly be able to respond with new solutions. Financial institutions and fintechs should look at pilots and sandboxes, and test with more innovative businesses to ensure readiness.
3. Improved information and data flows will further streamline real-time payments
With most real-time payment schemes based on the international ISO 20022 standard, payment transactions can now be sent with additional information that aids reconciliation and increases transparency. ISO 20022 simplifies message exchange between international and domestic payments with enhanced data quality. It also improves regulatory compliance, optimized payment reconciliation, increased straight-through processing, and easier cross-border payments. By embracing the new data capabilities, banks can create added business value along the entire payments value chain. In the near-term, data will be the new battlefield for competitive differentiation.
4. Cloud-based processing services will further decentralize payment processing
Accessibility of payments infrastructure is central, and cloud-based processing services are a powerful option to decentralize processing and inspire innovation. The benefits include lower costs, compliance maintenance, improved agility and flexibility to adapt to new services, and the ability to change volumes quickly. As a result, new entrants can hit the market quickly and open doors to wider participation by third-party developers. Real-time payment volume fluctuations can be accommodated quickly and easily without the need to invest in new infrastructure. Open API accessed services expand the participation of third parties, improving adoption rates exponentially.
5. The changing face of the industry will continue to impact real-time payments
As the number of participants in the payments value chain increases, retailers and fintechs are embracing open payments initiatives with innovative ideas to extract more value from payments. Credit card companies continue to embrace the benefits of real-time payments with numerous investments and acquisitions by MasterCard and Visa. The card schemes have also released APIs for developers to help their clients implement the technology. Tech giants Amazon, Facebook, Alipay, WeChat, Baidu, Google, etc. continue to expand their presence in real-time payments. Going forward the tech companies will look to own more of the payment process because of the opportunity for high-frequency, low-margin revenue and the ability to capture purchase behavior and data.
Real-time payments are the new frontier and it is all up for grabs. Investment in ‘Paymentech’ has never been higher with venture capitalists betting big on payment entrants in the $1.9 trillion industry. The greater the industry consolidation and investment, the faster we will see real-time payments accelerate in adoption, value and volumes.