The boom in real-time payments is reverberating across the world, and by 2026 they will make up 25% of all electronic payments. Market forces and the global pandemic accelerated adoption to new levels, providing consumers and businesses cheaper, faster and more efficient ways to pay — and there’s no looking back.  

And as more and more countries launch schemes often mandated by governments and regulators, transactions are set to rise further. But the success of real-time rails ultimately depends on the overlay services that these countries and their stakeholders develop.  

While instant payments are increasingly embedded into non-financial digital apps and services to provide a more hyper-connected experience, modernising these payment processes depends on the decisions of individual financial institutions. To win in this expanding competitive landscape, many are now reinventing operating systems for a new real-time, cloud-first and data-centric business environment. 

The fintech effect  

As open banking matures and related innovations allow for direct connections to the payment rails, countries that allow and push an open banking system and take advantage of new market services are coming out on top when it comes to real-time-transaction volumes. 

The 2022 report by ACI Worldwide and the Cebr, which looks at the growth and impact of real-time payments (RTP), reveals they can generate a tangible economic multiplier effect. The world’s five top RTP markets — India, China, Thailand, Brazil and South Korea — made 92.9bn real-time payments in 2021 which helped facilitate US$54.6bn of additional economic output; a figure forecast to climb to US$131.1bn in 2026.   

Asia continues to be the region of innovation for instant payments as fintechs simultaneously gain real-time market share. India’s wildly successful UPI service (Unified Payments Interface) processes more than 7.5 billion transactions per month. This is now extending to cardless cash withdrawals and support for the country’s digital currency, the e-RUP. Singapore also has two well-developed real-time payment systems, FAST and PayNow, while Thailand’s PromptPay service enables citizens to easily receive and transfer funds using their ID or mobile phone number.  

Brazil is another RTP success story. Its payment transfer system PIX had over 100 million users by July 2021 and was processing 1 bn transactions per month by October that same year. Incoming new features such as PIX Withdraw and Change, which enable customers to withdraw cash at any participating retailer, and Request to Pay, using QR codes, will further accelerate growth and increase the average transaction value. 

A combined solution  

The surge in real-time payments to meet evolving consumer and business needs has put increasing pressure on financial institutions to look for digitally-focused solutions. This need has led to the emergence of a completely new ecosystem, one that is more diverse and where fintechs and smaller banks take an increasing share of the real-time market.  

By flipping traditional infrastructure procurement on its head and standardising related operational and security capabilities, the cloud is inescapably reshaping the payments market. To cut through, financial institutions should work with fintechs to deploy cloud-ready infrastructure to provide admin-busting insights or automations around stock and inventory, sales performance, reconciliations and reporting. 

A modernized system will also, as we have seen, deliver an enhanced experience for customers looking for a hyper-connected, frictionless experience. Harnessing RTP networks has further enabled banks to launch new services such as real-time notifications on app spending to customers, making managing personal finances easier. Banks can also use this data to upsell products to existing customers, such as giving those with a good credit score an extended overdraft or credit card. 

Other benefits include augmented in-store and online payment options and peer to peer lending, as well as monitoring and tracking potentially fraudulent account activity via AI software (rather than taking a reactive approach). All of which can only contribute to banks building better trust and increasing confidence levels with their customers.  

Existing infrastructure doesn’t automatically need replacing, then, but it must be kept relevant and combined with hosted solutions and managed services. The result will be a hybrid architecture of best-in-class services and infrastructures that will enable financial institutions to design a real-time payments strategy around outcomes and experiences.