Real-time payments have held the attention of financial industry insiders for years yet are now gaining the interest of a larger audience in today’s growing digital marketplace. As the 2022 edition of The Global Payments Report indicates, real-time payments have achieved greater adoption in recent years with consumer and retail applications paving the way for business and government use cases. Fast and efficient, real-time payments fulfill that near-universal desire for instant gratification.
What are real-time payments?
A real-time payment is an inter-bank, fully electronic payment system in which irrevocable funds are transferred from one bank account to another, and where confirmation back to the originator and receiver of the payment is available in one minute or less.
Real-time payments are attractive to businesses and consumers because they are cheaper, faster, more efficient and a potentially lower-risk means of moving money compared to traditional methods.
Because the entire payment process occurs seamlessly and immediately, real-time payments enable frictionless commerce. It’s the root service that is driving consumer, merchant and corporate adoption around the world.
How do real-time payments work?
Real-time payments use payment rails based on digital infrastructure to move money from end-to-end in real time. They’ve been part of the financial industry since the inception of Zengin, Japan’s real-time payments system, in 1973. Today, the combination of open banking and real-time payments infrastructure is creating additional payment options for consumers and new ways for merchants and corporates to accept and make payments and to create new customer experiences and services to compete in the market.
Real-time payment options are also critical to reducing the cash economy, which increases financial inclusion and spurs economic growth. Research shows that economies that switch from cash payments to digital payments can boost annual GDP by as much as three percentage points. And countries are getting on board—The Global Payments Report indicates that some APAC countries will soon reach 70% digital payments.
What is a real-time payment system?
A real-time payment system facilitates payments that are initiated and settled nearly instantaneously at any time, any day of the year. Since Japan introduced the Zengin system, other countries have developed their own infrastructure to support real-time payments. This includes The RTP® network from The Clearing House in the US, The Faster Payments Service in the UK, PIX in Brazil, Unified Payments Interface in India and many others.
Real-time payments started as primarily for retail/consumer, but now business, corporate and government payments are taking advantage of the benefits. Adoption has accelerated in the last several years. In 2014, only 17 countries were live with real-time payments, but now up to 72% of the world has a live real-time payments infrastructure or is planning to launch one soon. We expect almost three-quarters of world population to have access to real-time payments by the end of 2022.
We’ve been tracking the evolution of real-time payments since 2014. Discover the latest trends and insights by downloading your free copy of The Global Payments Report.