If 2021 is the year of digital payments, it is also when real-time payments got ready for their closeup, to steal a classic movie line.
FIS Executive Vice President of Global Real-Time Payments Raja Gopalakrishnan told PYMNTS’ Karen Webster that the key to 2022, and the continued adoption of faster payments, can be boiled down to one word: simplification.
“Adoption has just shot up,” he said.
Exactly how much isn’t clear yet, but Gopalakrishnan said that indications are that real-time payments volumes globally are up at least 40%, with values surging by at least 30%.
And yet the market is still largely untapped. He noted to Webster that 80% of global real-time payments, about 55 billion transactions, are still tied to five countries: India, China, South Korea, Thailand and the U.K. That’s only a sliver of the roughly 56 countries that have laid the groundwork for at least some form of payment method.
The projections dovetail with PYMNTS’ own findings on consumer demand for faster payments. In 2021, three times as many consumers received instant payments across a variety of use cases than in 2020.
Read more: Rising Consumer Awareness Sparks Tripling of Instant Payments
Gopalakrishnan said that growing consumer awareness is starting to overcome the biggest barrier to adoption: to receive a real-time payment, someone has to send one to you. But worries about fraud also remain top of mind, and he stressed the need for stronger regulations — especially in markets where real-time payments are in their nascent stage.
“Regulation that we have today in the marketplace is still connected to legacy systems and is not keeping pace with new technologies and new use cases,” he said.
Consider the fact that limits on wire transfers are different from ACH, while limits on ACH will likely be different from real-time payments. A coherent, cohesive regulatory framework will do much to eliminate that fragmentation.
Payments infrastructure, itself, has to keep up, too, and central banks are helping upgrade the tech conduits for faster payments, setting the stage for central bank digital currencies (CBDCs) and other disruptive, speedier offerings.
Gopalakrishnan detailed the two real-time payments ventures launched by FIS this year. One is RealNet, a global money transfer Software-as-a-Service (SaaS) platform that enables account-to-account (A2A) transactions domestically and internationally for merchants and other businesses. The second venture, RealNet Central, provides a full stack of payments infrastructure for clearing houses, central banks and commercial banks around the world, enabling them to modernize their legacy infrastructure and adopt real-time payments.
“Businesses and governments have all used and adopted faster and more efficient payments, and they’re getting to see firsthand what the benefits are like,” he said.
A variety of uses cases spotlight the positive impact, and he offered a few. Humanitarian and charitable payments have been able to speed around the globe in real time, benefitting those in need during the pandemic. And in a nod to real-time payments’ movement toward (eventual) ubiquity, employers are finding value in real-time payouts to their employees.
Real-time payments have also enabled commercial B2B relationships to survive and even thrive in a world where supply chain snarls have become the norm. Moving money faster has helped firms secure their inventory and build relationships with new suppliers while lowering the cost of those payments.
As real-time payments use gains momentum, Gopalakrishnan said he sees two different business models emerging.
There’s one school of thought that says firms can charge more for faster payments, in effect monetizing speed. There’s another approach that contends that real-time payments should be free, or almost free, as a utility, much in the way businesses offer Wi-Fi for free. Providers can then levy charges on value-added services, rather than charge for the underlying “transport” layer.
Gopalakrishnan told Webster he stands within the camp that sees faster money movement as a “great tool” for financial inclusion and the democratization of financial services, moving toward commodification, with monetization possible depending on extra services layered on top of the basic payment itself.
The B2B Opportunity
Elsewhere, he said, in supply chains, buyers can monetize their relationships with suppliers, with the ability to pay invoices quickly, ahead of terms, but for a discount. That latter use case is especially valuable against a backdrop in which as much as $1.2 trillion of revenue for small businesses in the U.S. comes in the form of late payments — and 30% of invoices are late by a month or more, as PYMNTS noted.
Looking ahead, he said that for the next several years, we’ll see real-time payments volumes increase at a 20% to 30% clip, likely led by B2C activity.
In 2022 and beyond, he predicted, we’ll see a trend toward the simplification of real-time payments. Gopalakrishnan said application programming interfaces (APIs) and a great user experience — with a one-click, Amazon-like process — can further deepen real-time payments’ tailwinds.
“That’s the simplification that we want to see and that we’re striving to achieve,” he said.
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