Real-Time Digital Payments: A Global View

The payments industry is always looking for new ways to streamline processes, reduce costs, increase security and most importantly, improve the customer experience.

However, when it comes to real-time or instant payments, it will take more than simply modernising existing Automated Clearing House (ACH) rails to drive forward the adoption of new innovative digital services and products - such as digital wallets. Instead, real-time payments will need to enable digital channels.

So, what’s in store for real-time digital payments across the world? Here are some of the ways this is playing out in different regions:

India

India, the world’s biggest real-time payments market, remains the benchmark for what’s possible when it comes to the adoption of new digital services enabled by a robust real-time payment infrastructure. Take its Unified Payments Interface (UPI) - currently leading the already-growing digital payments segment in India, with transaction volumes and values growing month by month.

According to the Reserve Bank of India (RBI) data, the digital payments ecosystem in the country has increased at a compound annual growth rate (CAGR) of 55.1% over the past four-five years between 2016-2020.

The global payments industry is full to terms with the sustained high growth of real-time and digital payments in India. So much in fact, that the country's hugely successful approach is rubbing off on the ongoing development of real-time schemes around the world.

UK and Europe

A Request to Pay (R2P) approach dominates much of the UK’s real-time strategy. R2P drives real-time payments usage through digital form factors and is a digital request that the payer receives on their mobile device, usually on a banking application or third-party FinTech application. Following this, the payer will then either approve or reject the request. If this is approved, it will automatically initiate a real-time credit transfer to the payee.

Real-time payments have been available in the U.K. for nearly fifteen years. And growth is anticipated to accelerate up until 2023, before leveling off again past 2025. This would show a five-year CAGR of 11.6%. But these payment schemes sit separate from the real-time payment schemes as it enables a digital customer experience “overlay.”

Underlying payments rail for R2P could also take the form of a card, whereas across the EU, systems are being developed for real-time payments only. In Europe the European Payments Initiative (EPI) is being studied to compete with existing card schemes. As this is in addition to real-time payment schemes that are currently in action across the continent, it leverages digital methods and PSD2 APIs to ensure adoption.

USA

The US has R2P on the The Clearing House (TCH) RTP rails, and they also have Zelle, a person-to-person overlay moving to TCH’s RTP rail. Zelle is examining how to enable an R2P bill pay experience, so that it can rival Mastercard’s launch of BPX, which also rides atop the TCH RTP rails.

FedNow is also currently being piloted by the Federal Reserve and is expected to launch in 2023. FedNow will enable Peer-to-peer (P2P), Business-to-business (B2B), Business-to-consumer (B2C), Consumer-to-business(C2B) and Government-to-consumer (G2C) payments. Its aim is to facilitate real-time payment services for all-sized banks in the US. This will enable the establishment of a wider presence than is possible with the other available networks.

South America

In 2020, the Brazilian PIX was launched, combining both real-time rail and digital overlay capabilities. The Brazilian central government became the first user of this new method, and it is estimated that the volume of transactions in Brazil expanded by almost 50% between May 2019 and April 2020. PIX has enabled Brazil to go up a level when it comes to real-time payments.

The Argentines have two real-time payment schemes in place; Pago Electrónico Inmediato (PEI), launched in 2016, and DEBIN, launched in September 2017. As both are still in the development stage, their transaction volumes remain low. But this may not stay the same. With growth of 145% year over year and strong adoption forecast, real-time payments have a lot of potential in this market.

China

The Chinese have a very strong real-time payments market - in 2020, real-time payment transactions alone approached 16 billion. China’s scheme is IBPS, launched in 2010 by the People’s Bank of China (PBC). It offers two types of real-time payments: single instance and recurring. It also offers two initiation methods (bank account and/or mobile number). The scheme integrates and utilises the operations of the online banking capabilities of most of China’s domestic and foreign banks. This enables customers to make online transactions in real time.

Meeting modern demands

Globally, the industry has transformed to meet the demands of a modern society. Not just consumers, but businesses and institutions now expect the slickest digital experiences in all walks of life.

While global real-time payments innovation ramped up just over five years ago, the shift towards real-time and digital experiences will see real-time payment volumes rise dramatically. We’ll also see the market move its focus away from traditional card schemes to digitally native, real-time, and secure modern payment methods. And these will be delivered by national infrastructures with global interoperability.