There are dozens of real-time payment initiatives launching around the world that are accelerating efforts that began during the pandemic to get people and companies paid with speed and security.
ACI Worldwide Head of Real-Time Payments Craig Ramsey said in an interview with PYMNTS that although the U.S. has lagged behind other nations in adopting real-time payments, the country is quickly catching up to places that have had a head start.
Ramsey’s comments were part of PYMNTS’ new Connected Economy series that delves into the post-pandemic digital acceleration that saw 10 years’ worth of innovation jammed into the past 10 months.
Ramsey pointed to Venmo, Zelle and The Clearing House’s Real-Time Payments (RTP) network as drivers of real-time payments in the U.S. to date, while the looming FedNow initiative from the Federal Reserve is poised to bring more users to the real-time realm.
“We still need to see more merchants and more corporations engage,” he said. “Though P2P payments currently dominate, B2B payments still have a long way to go before they leverage real-time payments to the extent that’s possible even today. FedNow will give the B2B space an extra boost.”
In the meantime, the advantages and usefulness of real-time payments can be seen in the use case of Uber drivers who don’t want to wait overnight to get paid for the work they’ve done, said Ramsey. They want money paid out instantly so they can “reuse” those funds in service of the things that matter to them. Instantaneous settlement is needed in order to foster instant liquidity. The same benefits of instant liquidity can be extended over any number of scenarios, such as insurance or government payouts in the case of natural disasters, which then allow users to pay contractors or buy food immediately.
Just as the positive ripple effects of real-time, digitally enabled payments accrue to the individual consumer, so too do they benefit the merchants that depend on them.
“Think about the merchants that specialize in very expensive products,” he said. “The retailer can’t possibly carry a lot of stock in anticipation of demand because inventory is costly. But with real-time payments, they can take the money instantly and reuse it to get product shipped from factories the same day in a form of just-in-time supply chain management. That lightning-quick response improves the customer experience, and the customer will then reuse the retailer.”
Here in the U.S., reflected Ramsey, billers stand out as a group that has embraced real-time payments as they look for faster and more reliable ways to get paid.
“The biller’s nightmare is a failed payment; it costs a lot of money and time in the handling of the exception,” he noted.
Adopting real-time payments gives provides a more efficient way of being paid, boosts liquidity and includes the benefit of being cheaper.
The Data Advantage
No matter the use case, real-time payments have the advantage of carrying more data, which is instrumental in streamlining reconciliation processes. Messaging, such as through ISO 20022, which governs data interchange, can carry invoice information and other data, translating into fewer exceptions. Data can be used to create innovation on top of infrastructure rails, Ramsey said.
He likened this innovation to railroad buildouts centuries ago. People built railroads in order to draw communities together to move freight.
“The real-time rails, the domestic schemes that are being stood up right now… well, those are the rails,” he said. “And those are critically important, but ultimately it’s what you do with those rails that matters. So those innovations are happening on top of the rails.”
The banks will not be the only ones driving payments innovation; FinTechs and payment services providers will be part of that landscape of finding unique propositions for customers that ultimately rely on real-time payments.
At present, the U.S. is busy trying to drive requests for payments — where clicking buttons on a mobile device can accept, reject, defer or partially pay an obligation through a push prompt to the user. Requests to pay have been proving popular around the world and are now gaining traction here.
“I can see exactly what I’m paying for, and there is a lot of fraud protection,” noted Ramsey.
At a high level, as he told PYMNTS: “We’re seeing a digital revolution where more consumers, corporates and merchants are either adopting or preparing to adopt real-time payments.”