Real-time payments (RTP) is a payment system that allows for the immediate, online transfer of funds. Unlike traditional payment methods like checks or ACH transfers, which can take days to process, RTP payments are instant and typically settle within seconds. This makes RTP an ideal option for time-sensitive transactions, such as paying bills or splitting a restaurant check. RTP is also becoming increasingly popular for person-to-person (P2P) payments, as it eliminates the need to wait for a check to clear or for funds to be transferred from one bank account to another.
This topic in the Paypers is one that will be familiar with many readers since we cover it in research for members as well as ongoing commentary on these pages. The author of this piece is a senior at a payments fintech. The opening points compare real-time payments to credit cards, which the author indicates was the closest thing to real-time before actual immediate payments came to be. This is debatable, but in terms of a payment experience one can buy something and see the transaction accepted in real-time, although settlement with the merchant bank is typically one or two business days. The other drawback pointed out about cards is chargebacks, which is not a thing with real-time payments.
‘Risk reduction for the merchant is a big motivator for real-time payments, as RTPs cannot be reversed. Real-time payments also need to provide a high level of security and encryption. An important part for both the consumer and the merchant is knowing that if they put in their credentials, the transaction is safe, and their data cannot be breached. So, benefitting from high security is another appealing part of the product.’
The author goes on to discuss comparative faster and real-time systems in LATAM and the U.S. although for some reason ignoring RTP from TCH, which has been available since 2017. Other points touched include the beneficiaries of real-time payments, as well as the prospects for worldwide ubiquity in five years. Given the number of new immediate payments systems and the differences by country, having a smoothly operating inter-country experience is still an ambition, but one that is being worked on even now. The author even touches upon BNPL. Worth a quick read for those interested in the topic.
‘Real-time payment networks are local by nature, which means that if you want to accept real-time payments in Brazil, for instance, you need to integrate to PIX; if you want to access real-time payments in the US, you need to integrate to Zelle;similarly, if you want real-time payments in another country, you must integrate to another API. …Thus, the biggest challenge globally is that real-time payments are still very fragmented. From a merchant’s perspective that sells a product or service globally, they must build several integrations, with every API looking different. In other words, achieving global real-time payments will be a relatively large uplift from a technical integration perspective.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
