According to a survey by FIS Global, India has surpassed the United States as the global leader in real-time payments, handling 41 million transactions per day. Real-time payment in India has been revolutionized by the Immediate Payment System (IMPS) and the Unified Payment Interface (UPI). The Reserve Bank of India (RBI) has invited private players and allowed payment gateway charges to form a PAN-Indian New Umbrella Entity (NUE) for retail payment systems.
The National Payments Corporation of India (NPCI) has successfully democratized digital money transactions over the past few years, especially with the launch of UPI. In the article below, we will be examining the future of the real-time payments ecosystem from a broader perspective.
What are Real-time Payments?
Payments that are initiated and settled in an instant are known as real-time payments (RTP). They are one of the most critical financial advances in the previous ten years.
The digital infrastructure that allows these real-time payments is a real-time payments rail. Real-time payment networks like Zaakpay are ideally accessible 24 hours a day, seven days a week, 365 days a year, which implies that they are always available to execute transactions; weekends and holidays are included.
Real-time payments are divided into three categories:
- Instant bank transfers using account numbers (the traditional method)
- Real-time payment transfers made from one bank account to another, using an alias such as a mobile number or a unique identifier.
Key Players in the RTP Space
The concept of real-time payments is not new. In fact, the first RTP system was built in Japan in the 1970s. Other countries, such as the UK, China, and India, had their own RTP rails by 2010. 54 countries had implemented real-time payment systems in 2019. Over the last year, India had a 213 percent increase in the number of real-time payments processed, while Bahrain, Ghana, the Philippines, and Australia saw quicker growth. China, South Korea, and India rounded out the top three countries in the Asia-Pacific region.
The Value that Real-time Payments Bring
Real-time payments are advantageous in several ways:
- Extremely Quick: Payment gateways that allow instant access can be a game-changer for individuals or businesses who require funds right away. Zaakpay is one of the quickest processing payment gateways in India, working under nominal payment gateway charges.
- Irrefutable Payments: Payments made through a payment link are irrefutable, which means that once received, they cannot be reversed or retrieved by the sender.
- End-to-End Communication: End-to-end communication is also possible with real-time payment rails. However, communication has traditionally flowed in only one direction, i.e., from the payer to the payee. If the two parties want to exchange information, they must do so outside the system. Communication might also be hampered by lag times and a lack of transparency surrounding the arrival of funds. Overall, a confusing communication process poses issues in areas such as business flow, liquidity, and risk management. Fortunately, real-time payments with Zaakpay eliminate these issues.
A more efficient payment journey is achieved by bilateral communication via integrated information flows, quick payment confirmation notifications, and settlement finality. Financial control, cash positioning, and liquidity management are now possible thanks to real-time payments.
Trends Driving Real-Time Payments
The following are some of the rising trends concerned with real-time payments.
- Real-time payments are valuable to all types of businesses: According to Ovum and ACI Worldwide’s 2018 Global Payments Insight Survey, 80% of merchants, retail banks, and billing organizations prefer real-time payments and open banking. Real-time payments are expected to improve customer service for 84% of regional businesses, retail banks, and billing organizations.
- Tech companies use existing capabilities to develop new products: Big internet companies use their current infrastructure and client base to develop new financial solutions. The RTP infrastructure also produces an ecosystem where third-party enterprises deliver novel goods to customers.
- Real-time payments fuel technology innovation: Banks and financial institutions realize the business benefits of updating their systems. They’re leveraging their gathered information to develop client insights and provide customized services. Many people are also experimenting with cryptocurrency and blockchain-based solutions.
- The implementation of no-touch quick payments has accelerated due to COVID-19: Real-time payment systems are proving to be beneficial, particularly in businesses with a high number of client touchpoints, such as retail, restaurants, and the movie industry.
What does the future of real-time payments look like?
The success of RTPs will be determined by how quickly and efficiently the ecosystem is standardized globally. It will also be determined by the kind and range of RTP-related payment links made available to clients. The following are the primary areas of focus that we anticipate.
- Better infrastructure is being invested in: The small ticket size and high volume of RTP transactions will strain banks’ existing infrastructure and ability to process transactions. To handle these transactions, banks will need to improve their infrastructure.
- Integrating: While some customers prefer cash, banks should incorporate RTP systems as soon as possible to avoid losing business to fintech corporations and specialized shops.
- Effective modernizing: Banks and financial institutions must update their systems to allow for easy API integration, the creation of user-friendly payment apps, and other features.
- Connecting: Regulators will advocate implementing offline payment options in rural and remote locations with limited connection.
- Putting the consumer first: End-to-end digitalization of the customer journey, quick onboarding, transaction security, integration, and acceptability across numerous customer touchpoints, are all opportunities to make the customer experience more fluid and intuitive.
In conclusion, RTP integration is the need of the hour currently. According to ACI Worldwide’s analysis on real-time payments growth, real-time payment transactions are expected to expand at a 23.4 percent CAGR from 2019 to 2024. This clearly shows the direction in which we need to move. In five years, more than half a trillion real-time payments transactions will be processed across 30 global markets. As a result, consumers are increasingly opting for rapid, simple, and mobile payment options with payment gateway charges.