Real-time payments technology is moving forward at a pace that could push it into retail settings in the near future, with several countries already using systems that could become models for the U.S.
Based on its nearly 2 billion real-time payments processed last year, North America will be the highest growth region by 2025,
More than 70.3 billion real-time transactions were processed globally in 2020, marking an increase of 41% compared to the previous year. Currently, real-time payments technology focuses on cross border B2B, domestic B2C transactions or domestic P2P networks.
In compiling its 2021 real-time payments annual report, ACI Worldwide and GlobalData monitored developmental stages and the various dynamics regarding systems in 48 markets globally. ACI acknowledged the report did not establish a list of all markets with real-time payments in place, but covered the broadest and most diverse markets currently operating.
The report cites the shift in merchant offerings and consumer payment habits during the COVID pandemic, from both ACI's own customers and market information, indicating the
"Cash use declined in favor of card, and swipe/dip use declined in favor of contactless," while digital payment volumes rose because of online activity, said David Grindal, head of solution consulting for ACI Worldwide.
When the discussion shifts from card to digital non-card payments, there are many more factors than just a COVID effect, Grindal said. "This is more a discussion around innovation, consumer shifts, new players jockeying for position and so on. There is — and there will continue to be — a movement toward digital payments in retail."
The change will come in "fits and starts," Grindal added. "There will be successes like Starbucks, as well as failures. What helps any one of these to succeed will depend on the nature of that particular innovation."
The pieces are in place for real-time payments in retail, though some form of standardization around initiating a payment needs to be established, whether it comes from QR codes or a Request for Pay option, especially in e-commerce, Grindal noted.
Security is rated high, as Request for Pay comes through channels with bank-grade security, the report noted. Plus, they come from billers and merchants who have passed a bank's background checks. The payer chooses which method or account from which to pay, and there is no need to submit payment credentials at the time of payment.
Widespread adoption of real-time payments will be achieved through "a thousand small successes," Grindal said. "Payments are too ingrained a process for any one dramatic innovation to disrupt in an instant."
Consumer awareness will continue to grow with government-issued real-time disbursements for welfare, Social Security, Medicare, tax returns and payments to vendors.
"Financial incentives will be necessary at some point," Grindal said. "We recognize that retail payments today are a quick, relatively seamless and low-cost process. There is no reason for a consumer to change unless the alternative delivers some incremental benefit — and not some marginal one either."
It's not likely that consumers will be demanding RTP because "they don't know it exists," Grindal added. "It's kind of like Henry Ford — and consumers asking for a faster horse."
In breaking down real-time payments by market, ACI cited India at the top with nearly 25.5 billion transactions, with China next at 15.7 billion. Of the top 10 countries for transaction amount, the U.S. was ninth with 1.2 billion transactions.
India's real-time payments engine is boosted by the country's move over the past five years to reduce cash, the promotion of digital payments and the deployment of biometric identification. By 2017, 80% of adults in India reported having a bank account. ACI forecasts that over the next five years, India's number of real-time payment transactions could grow to 60 billion, or a 25% increase. At the end of 2020, PayPal's international remittance service
India is providing a lesson for other markets on how a vibrant and open ecosystem can allow the private sector to drive innovation, and lower costs and risks for central infrastructure owners, the report stated.
The 1.2 billion real-time transactions in the U.S. nearly doubled the rate from the previous year, ACI said. For the past year, the percentage of adults who have a mobile wallet and used it was at 41% in the U.S.
Canada recorded 30% growth in RTP with 665 million transactions, and mobile wallet adoption increased 33%, a COVID-induced uptick from the 25% of consumers using them in 2019.
In Asia, China's Internet Banking Payment System was stymied in the first half of 2020 by the pandemic, but was showing signs of recovery by year's end. The report also noted that, despite its acceleration toward digital and mobile payments, China continues to support the use of cash. ACI predicts real-time payments in China will grow at a 13.5% clip over the next five years, with nearly 30 billion transactions expected annually by 2025.
Overall, the change in work and lifestyles because of the pandemic fueled mobile wallet adoption across all markets to what ACI termed an historic high of 46% in the past year.
"I think the commonality in real-time payments is that in every region, the path to success is and will be different," Grindal said.
When the government supports and fully mandates a system, as it did with the U.K. Faster Payment System, the switch to real-time payments will be a success, Grindal added. "In regions without mandates, there are different success stories everywhere."
Systems that became successful through continual improvement and strong marketing to consumers and businesses include
The end result, and most interesting aspect of the report, Grindal noted, is that explosive growth occured "when a well-defined solution met a ready market" and consumers found it secure and easy to use.
