The pandemic has accelerated the growth of real-time payments (RTP), as banks, merchants and consumers seek ways to send and receive funds nationally as well as across borders quickly and easily.
According to a recent report from PYMNTS, more than 70 billion real-time payments were processed globally in 2020, a jump of 41% year-over-year. The trend is expected to continue in the coming years, with a predicted compound annual growth rate (CAGR) of nearly 24% for the RTP between 2020 and 2025.
This growth has been a big factor in why, earlier this year, the leader in FinTech FIS launched RealNet, its cloud-based platform that enables businesses, consumers and governments to transact over network networks. real-time payment.
As the global real-time payments infrastructure continues to evolve, RealNet also relies on an intelligent routing decision engine that identifies the fastest, most profitable payment option for a given transaction – what It’s an Automated Clearing House (ACH), Same Day ACH, Threads and RTPÂ® – and automates the process end-to-end.
Read the PYMNTS RTP report: Bank Independent Uses Real-Time Rails To Compete With Big Banks
According to Bernd Richter, senior vice president of real-time global payments for Europe and UK at FIS, there are now more than 50 countries with RTP capabilities, a number that will continue to grow significantly in coming years.
Western countries may have a head start when it comes to transforming their markets in real time, allowing connected economies to move money faster, but many other geographies and countries are starting to adopt. RTP as an essential part of the economic infrastructure to enable businesses, small and medium-sized enterprises (SMEs) and consumers to thrive.
In Europe, for example, real-time payments have become the norm – “almost like a commodity”, and gradually market players are creating new use cases or adopting their value chain to leverage RTP for consumers. businesses and consumers, Richter told PYMNTS. in an interview.
However, upgrading existing systems with newer technologies comes with complex changes and high costs, which is why not all of the more than 5,000 financial institutions (FIs) in Europe have adopted RTP, a- he declared. Sometimes for small banks, “the business case just isn’t there,” he added, indicating that it will be some time before the region becomes “the payments on time.” real fully activated â.
But even though widespread adoption has been slow, European regulators have played a key role in advancing RTP adoption and promoting payments innovation more broadly.
Richter cited the Single Euro Payments Area (SEPA) launched in 2014 as an example of a regulatory regime establishing a set of rules and standards for making cashless cross-border euro payments – by transfer and direct debit – as simple and effective. as national payments.
He also highlighted how the open banking system, which is part of the revised Payment Services Directive (PSD2) which entered into force in January 2018 in the UK and Europe, has opened up the banking sector to new players. , promoting innovation and competition, while creating new products. and services to improve the customer experience.
That said, while regulators are doing their part, Richter believes more needs to be done to standardize systems like open banking.
For example, the regulator introduced PSD2 without providing details on how it should be implemented, he said, leading to a less than ideal situation involving the creation of multiple standards and different modes of implementation. implemented.
The UK, however, has a head start in this area, he said. The country has created bodies like the Open Banking Implementation Entity (OBIE) which brings together banks, FinTechs, regulators and businesses to discuss how open banking should be implemented, using software standards and industry guidelines to drive innovation in the UK retail banking space.
RTP and De-Fi systems
The ability of RTP systems to interact with the decentralized finance (De-Fi) world is a hot topic today, but Richter said that because De-Fi is generally unregulated and unintegrated. in the regulatory frameworks of most countries, this interaction will take some time. materialize.
“But I believe he [RTP] will have a place because decentralized finance is just too interesting to be overlooked by banks, businesses and treasuries in the future, âhe noted.
This does not mean that it will become the new normal, but rather an important aspect of the overall mix of centralized financing and De-Fi, he said, adding that the banking system would find many opportunities to âenrichâ De- Fi, he said. Fi with centralized services such as Know Your Customer (KYC) and Anti Money Laundering (AML) that are currently lacking in this space.
He went on to say that De-Fi, stablecoins and cryptocurrencies will interact with each other, and while there is a need to educate the masses on these technologies to boost their adoption, it is important to ” create clear rules and regulations to protect consumers and their interests.
Going forward, Richter said more central banks will build new clearinghouses for RTP, and as China moves directly from credit cards to mobile payments, countries without an existing RTP infrastructure can take the plunge to implement. open banking operations much faster with the latest RTP technology, avoiding the complex and time-consuming process of upgrading an existing infrastructure system in the process.
âThey can start with a green field, go much faster, and use the latest technologies and standards, even making it cloud-ready from day one,â he said.
Richter added that interoperability between different systems will also be at the top of the agenda as countries implementing RTP or upgrading their infrastructure look for new ways to improve service quality, speed and costs. .
And as the Bank for International Settlements (BIS) experiments with the interoperability of central bank digital currencies (CBDCs) by forming multi-CBDC agreements to make cross-border payments more efficient, Richter said things are moving in the right direction. , and this is an indication of a “huge wave of innovation” emerging in the payments space.