Getting Ready for Real-Time Payments

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Real-time payments are here to stay. However, connecting to a real-time payment network can be difficult. Financial institutions need flexible architecture that allows ease of integration through a low-code, drag-and-drop interface.

To learn more about the state of real-time payments and how financial institutions can prepare, PaymentsJournal sat down with Matt Nilles, Senior Director of Global Products and Solutions at Euronet Worldwide, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

RTP at home and abroad

Real-time payment networks have grown in Europe and Asia, and the U.S., along with many other parts of the world, is starting to catch up. “We’ve seen it grow – really, quadruple – from about 15 networks five years ago to approaching 70 today,” said Nilles. Africa and Latin America are also implementing real-time rails, and the U.S. is looking forward to the launch of FedNow in 2023.

Financial institutions have also been investing in faster payments, both among big banks and smaller FIs who see payments as a real differentiator. “A Faster Payments Council report that came out fairly recently said the vast majority – over 80% – of financial institutions in the U.S. have some form of a faster payments solution,” Grotta noted.

Potential pain points

Change is difficult, and the move to RTP is no exception. Nilles pointed out four potential pain points regarding the onset of real-time payments:

1. General hesitancy – With any proposition that involves a learning curve, there is a choice between being an early adopter and waiting to see how others in the field react.
2. Brand new situations – Everyone is trying to get up to speed with an all-new countrywide network, between the clearinghouse or government initiating the network, to the participants, merchants, and consumers.
3. Due diligence – FI or fintech staff will need to learn about ISO 20022, the high-visibility and data-rich messaging standard on which most new networks operate, and they may need to convert or adapt a legacy solution since many currently work on ISO 8583.
4. Future use cases – Real-time payments began as P2P-based, but have since grown to include business and consumer use cases; without knowing exactly how RTP will evolve next, staying competitive means keeping an eye on the future.

Preparation, preparation, preparation

Even if FIs don’t feel ready for RTP implementation right now, or are perhaps saying that their customers aren’t asking for this kind of change, the fact is that real-time payments are just around the corner. “Once it is widely available, that means that [customers are] going to be looking to their financial institution for that capability as well,” Grotta predicted. Therefore, it behooves financial institutions to start preparing now.

Familiarity with ISO 20022 will be the top priority. “We’re seeing it become more prevalent around the world,” Nilles explained, “and most of these networks, well in advance of going live, are releasing the specs around the messaging.” Building requirements for development teams to prepare their tech stack for RTP solutions will be paramount, as well as using APIs or direct access to allow solution providers room to help.

FIs and fintechs can also differentiate themselves with digital overlay services. “What you need to do is find that right mix that’s going to really meld with your customer base and start to separate you from the competition,” clarified Nilles. “At the end of the day, it’s all about customer experience.” Ultimately, a seamless and high-value RTP experience will strengthen the relationship between bank and customer. Even if the transition does not happen in one fell swoop, each new use case is opportunity for new and positive inroads.

How Euronet can address these issues

REN Connect, a product from Euronet, helps FIs and fintechs join real-time payments networks quickly and easily, along with easing the burden of network integration with existing back-office systems. “REN is an enterprise-level payments platform where we can address real-time payments from a number of different directions for our clients,” said Nilles.

REN offers four key services:

1. Establishing connection to the network itself, either via clearing house or government.
2. Offering message translation services, i.e. from ISO 8583 to ISO 20022.
3. Handling the requirements of the network itself, such as stipulations that transactions must occur in X number of seconds with a limit of Y dollars.
4. Identifying overlay services such as request-to-pay proxy services, bulk payments, QR payments, and more.

At bottom, Euronet can help find the best mix for each particular institution looking to join each particular RTP network. “We really handle everything from the connection to the message translation, to the monetization of the real-time payment rails, through those overlay services also,” Nilles concluded. No matter how you slice it, real-time payments are coming, and with the help of Euronet, FIs and fintechs can rest assured that they will be ready.