Real-time payments (RTP) are transforming how money is moved and managed globally and are emerging as a pivotal innovation in financial transactions.
It is not just a trend but a fundamental change in the financial ecosystem to move towards instantaneity and efficiency. With real-time payments, businesses, governments, and individuals can make payments more quickly with funds immediately available. The Centre for Economics and Business Research estimates that $78.4 billion is the scale of GDP supported in 2021 by real-time payments across 30 key countries worldwide.
This article will explore how RTP facilitate seamless money movement without intermediaries, enhance cross-border payments, provide quicker processing times, and fit different RTP networks for diverse markets.
The intermediary-free movement of money
RTP networks have redefined traditional money transfer mechanisms, enabling individuals and businesses to move funds from their accounts directly to the recipient’s account in real-time. This immediate transaction capability mitigates the need for intermediaries, streamlining the process and reducing the associated costs.
In essence, real-time payment systems circumvent the layers of banking bureaucracy, ensuring that any real-time payment received by the recipient is prompt and efficient. This process not only saves time but also significantly cuts down transaction costs, fostering financial inclusivity and efficiency.
Cross-border payments made easy
The advent of RTP has been a game-changer for cross-border transactions. Traditionally, international money transfers have been cumbersome, slow, and expensive and included intermediary fees and currency exchange complexities. Moreover, various national payment systems restrict cross-border payments by individuals, such as remittances to a bank account in another country, and businesses, such as payments to international suppliers.
Real-time payments, however, have paved the way for swift and cost-effective cross-border transactions. For example, the UK’s transition to real-time payments and P2P mobile banking has seen a significant shift since the introduction of Paym in 2014, which simplified the payment process from requiring account details to just a mobile number, resulting in a 259.22% growth in payments using the service from 2015 to 2016
Contrastingly, Thailand’s journey towards digital payments started from a cash-heavy economy, with 30% of the population unbanked in 2014, yet with a mobile penetration of 137%. The 2017 launch of the National e-Payment Master Plan, including the PromptPay service, marked Thailand’s aggressive push towards real-time e-payments and digital transformation, capitalising on high mobile usage and driving significant growth in mobile payments by 110% from 2016 to 2017 while boosting sales for SMBs by 17% and 22% respectively.
As a result, RTP in banking has evolved to accommodate international transfers, ensuring that real-time payments by country are seamless, regardless of geographical boundaries. This has immensely benefited businesses engaged in international trade, enabling them to manage their finances more effectively and build global partnerships without being hindered by financial bottlenecks.
Different RTP for different markets
The global financial landscape is diverse, and so are the RTP systems catering to different regions. Each market has its unique RTP network tailored to meet the specific needs and regulatory frameworks of that region.
For instance, the UK operates on the Faster Payments Service, while the European Union utilises the SEPA Instant Credit Transfer system.
Similarly, India has embraced the Unified Payments Interface (UPI), and Brazil has adopted the Pix system. This fragmentation in RTP systems is not a hurdle but an opportunity for third parties, like Trust Payments, to innovate and create interoperable solutions that bridge these systems, fostering a more connected and efficient global RTP network.
The adoption of real-time payment systems is not confined to specific regions but is a global phenomenon, with numerous countries embracing RTP for domestic and international transactions. Real-time payment systems worldwide have become the backbone of modern financial infrastructures, ensuring that real-time instant payments are a reality, regardless of where the transaction is initiated. This has set a new standard in the financial world, establishing real-time transfer as the norm rather than the exception.
Real-time payments limitations
While RTP systems are designed to facilitate instant transactions, there is often a cap on the maximum amount that can be transferred in real-time. The real-time payment maximum limit varies across different RTP networks, ensuring that the system remains secure and robust while catering to the diverse needs of users. Despite these limits, there are myriad examples of real-time payments being used to expedite transactions in various sectors, ranging from retail and e-commerce to utilities and government services.
Real-time payments limitations
Real-time payments represent a monumental shift in how money is moved and managed globally.
By eliminating intermediaries, reducing costs, and ensuring faster processing times, RTP networks have set a new standard in financial efficiency and accessibility.
As different regions continue to develop and adopt their unique RTP systems, the opportunity for third-party innovation grows, paving the way for a more connected and efficient global financial ecosystem.
Real-time payments are not just a technological advancement but a financial revolution, ensuring that money moves at the speed of life fostering economic growth and financial inclusivity globally.
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