• October 13, 2016

Click, Cha-Ching: Real-Time Payments Are Here

The financial services industry better prepare.

They say cash is king. But as real-time payments become a reality around the world, that may not be the case for long. That’s because real-time payments—which allow money to switch hands between banks, businesses, and individuals in mere seconds and at the click of a button—could soon be as good, if not better, than cash.

The State of Real-Time Payments

To understand why, we need to look to those countries where real-time payments are currently a reality. That includes the U.K., Japan, Brazil, China, South Africa, Sweden, and about a dozen others. Thanks to their investments in real-time payment technologies, these countries enjoy an array of benefits, including heightened security, increased data and insights, and greater user satisfaction.

On the other hand, in countries where real-time payment infrastructures are currently being explored or actively built out (see the U.S. and Australia, respectively) or, worse yet, aren’t being considered at all (see Russia), these benefits don’t currently exist. Instead, people have to deal with the reality that clearing and settlement are typically surprisingly slow processes that are fraught with pain points. In the best cases, it can take hours; in the worst, days. Plus when these transactions are disputed, tracking them down and trying to figure out what happened can be a painful process.

The delays in settlement, in particular, can have a number of implications. For businesses, it can lead to liquidity issues as they wait for revenue to arrive. For individuals, it can mean that even though they’ve deposited a check into their account, they don’t yet actually have access to their funds.

Looking Ahead

Around the world what all of this means is that the financial services industry needs to be prepared for the growing adoption of real-time payments. In the U.S., for example, despite the fact that adoption has been slow, there’s still plenty of work that needs to be done in preparation.

When real-time payments do arrive, they will have implications on everything from banks’ product offerings to their infrastructure and technology, to how they approach risk management and fraud control. Getting ahead of all of that is key.

To better prepare for the implementation of real-time payments, financial institutions should consider how to:

  • Refine pricing strategies and business models for offering real-time payments
  • Update fundamental systems and mobile and internet channels for smoother integration with new transaction processes
  • Develop new product differentiation and marketing strategies to enhance usage of real-time payments
  • Provide customer education about the adoption and potential benefits of real-time transactions

Financial institutions in countries without real-time payments would be wise to look to their counterparts in those countries with mature real-time payment systems for lessons learned. Because despite all of the opportunities that real-time payments can bring, if you’re not prepared for them, they will only lead to delays, lost revenue, and frustrated customers.

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