INSIGHTS

The momentum of change and innovation in the payments market has accelerated the adoption of new technology and payment rails. Real-time payments have become ingrained in the fabric of the payment landscape and have spawned new expectations and demands from businesses to their financial services providers. Firms embrace innovative solutions that incorporate fast payments, more robust data and automation tools, and the providers offering those solutions are creating new market opportunities.

At this point, real-time payments are not going to decrease in significance. In fact, their significance will only increase exponentially as more businesses recognize the myriad use cases and benefits accompanying real-time payment capabilities. These include but are not limited to better cash positioning and reporting, improved working capital, operational efficiencies, greater customer loyalty, strong business partnerships and even more satisfied employees. The benefits of real-time payments are truly universal. Countries around the globe share a common interest and desire for more efficient and faster payments. This white paper is written for banks and the clients they serve that seek to better understand the usage, value proposition, use cases and future growth of real-time payments around the globe.

Explore the Methodology

EMERGING PAYMENTS:

SIX KEY TAKEAWAYS

Businesses are investing in payments

Ninety-two percent of businesses expect payments improvement to be a significant area of investment in the next 24 to 36 months. This represents an incredible market opportunity for financial services providers and businesses to improve payments processes and automation.

Businesses are seeking providers with real-time capabilities

About half of businesses globally have moved or will change financial services providers to be able to access real-time payments.

Real-time payment volume is growing

Regardless of region, real-time transaction volume is growing rapidly. Real-time payments, alone in the United States, are growing in the double digits quarter over quarter. Businesses that are not taking advantage of real-time capabilities will find themselves at a competitive disadvantage.

Real-time payments are not just for emergency payments

The number one reason businesses utilize real-time payments is to improve the customer experience. Businesses are recognizing that faster payments can equal customer loyalty, strong business partnerships and attract top talent.

Some businesses do not understand the value

There is an opportunity to educate businesses on how real-time payments work. For example, 43% of businesses not utilizing real-time payments believe that faster payments require too much manual processing, and 28% of those businesses believe that faster payments are too slow.

Cross-border payments are ripe for innovation

More businesses are transacting cross-border payments, and 80% of them believe they will have increased volume in the next 12 to 24 months. Removing points of friction is critical, as businesses need an experience closer to the efficiencies that are possible with domestic payments.

THE GROWTH OF

REAL-TIME PAYMENTS USAGE

More businesses are using a greater number of payment methods to pay vendors, employees and consumers than was ever possible before the emergence of faster payments. Legacy payment types such as bank transfers, wires, checks and cash remain important and are not being completely replaced. However, some existing payments and net new payments are moving to more efficient payment rails.

Globally, about half of all businesses are already utilizing faster payment rails to make payments. The following are not the only faster payment methods across the regions, but this sampling shows the high levels of penetration and usage.

It is important to recognize that the state of real-time payments has not yet even begun to peak. The number of businesses that utilize faster payments will keep increasing, and the volume and value of the transactions will also grow. There is still a large market opportunity in adoption as well as use-case expansion.

Even in the last 12 months, businesses are sending clear signals of expanded usage and a desire to incorporate real-time payments deeper into their payment strategy. All major real-time payment rails across North America, Europe and APAC have experienced incredible growth in the last year. This momentum is not expected to slow down in the next 24 to 36 months.

Real-Time Payment Usage Growth

Q. Thinking about the number of transactions, how has your organization's use of the following payment tools changed over the past 12 months?

(Among employees responding "significant or some increase" at midsize and large organizations that use each payment method)

WHY BUSINESSES ARE USING

REAL-TIME PAYMENTS

Real-time payments are becoming more mainstream and normalized for organizations and their clients, inclusive of individual consumers and other businesses. When real-time payments were first emerging, many use cases revolved around late payments or urgent payments with time-sensitive circumstances. While this is a good use case for real-time payments, it is actually only one of the minor use cases. About half of businesses still view this as a primary use case for real-time payments, but other benefits are expanding the potential use cases.

In addition to starting to recognize and realize the operational efficiencies of real-time payments, over two-thirds of businesses are utilizing real-time payments to provide a superior experience for the recipients of those payments. For businesses that are not already utilizing real-time payments through their financial services provider, there is a real risk of competitive disadvantage. This is because the satisfaction of recipients has become critical to healthy business partnerships.

While all payment types can benefit from incorporating real-time payments, the most common use cases of real-time payments are when businesses are transacting with individual consumers. This is because the notion and acceptance of real-time payments started with person-to-person payments. Having instant access to funds became an expected outcome of payments. The evolution from business-to-consumer to consumer-to-business and, finally, business-to-business payments is well underway, with use cases spanning all of these scenarios.

Real-Time Payments

Use Case Scenarios

There really are no limits to the expansion of real-time payments across the globe. What all these use cases have in common is that there is disruption or disadvantage associated with not embracing real-time payments and clear positive impacts with them.

Insurance Claims

Waiting on a check or ACH payment during a critical and urgent scenario is not ideal for individuals or businesses. It is an industry expectation for these payments to have immediate availability regardless of day or time of need.

Payroll

Businesses that can offer nontraditional payroll cycles, such as getting paid the same day as work is performed and having the ability to do things like spot bonuses or earned wage access, can attract and retain the most desirable talent.

Tips for Wait Staff

Within the restaurant industry, there is a danger in carrying around cash at the end of a shift. Real-time payments eliminate the need for this with an instant deposit into a bank account for tips.

General Contractor

The construction and skilled trade industry is just one more example of an industry impacted by labor shortages. A contractor that can pay subcontractors and tradesmen upon completion of work or instantly upon receipt of a customer payment instead of waiting for the end of a week will have the loyalty of the top talent.

Billing utility / telecom clients

Bill pay is a large market opportunity for real-time payments. Through request-for-payment (RfP), businesses and their customers acquire efficiencies and ease of payment settlement. Businesses can more easily digitize all parts of the payments process with more robust data, and payees can settle their bills instantly when they are ready to release the funds.

High volume of low-dollar checks

Generally, any business issuing a high volume of low-dollar checks (e.g., for breakage, refunds, rebates) can save significant money and time by shifting to real-time payments while creating a more pleasant recipient experience.

Real Estate

One of the key moments when purchasing real estate is waiting on the final settlement transaction. Real-time payments can remove much of the anxiety and wait time associated with this process, making it more available on an everyday basis.

Small business with liquidity challenges

Unfortunately, many small businesses shut down each year—not because of a poor product or service but because of liquidity challenges. Having the ability to receive real-time payments can significantly impact a small business’s financial health. Making just-in-time payments can have an equal impact and allow small businesses to have a positive cash flow.

Gain more insights

METHODOLOGY

This paper is based on an online survey of 1,037 employees of midsize and large businesses in eleven North American, European and Asia-Pacific (APAC) countries (Australia, Canada, France, Germany, Italy, Japan, India, Singapore, Spain, the U.K. and the U.S.) that Datos Insights undertook in Q3, 2023. Respondents are employed in operations, finance, accounting, payments strategy or treasury/control and are knowledgeable about their organizations’ finance, treasury, payment operations, methods and processes.

Organizations represented in the pool of respondents generate annual revenue/turnover of at least $20 million or the equivalent in local currency. Datos Insights estimates that the data for the total sample have a 3-point margin of error at the 95% level of confidence.

INSIGHTS

The Current State of Play of

The Evolution of Public Asset Owners

Improving Financial Services Through Faster Payment Rails