Real-Time Payments in a Digital World

Real-time payments are delivering significant benefits for businesses and consumers. We explore the latest trends in real-time payment technology, the advantages of moving money in real time, and opportunities for the future.

Real-time payment (RTP) is a technology designed to provide the near-instantaneous transfer of funds between two parties. This might be for an employer paying a worker, for a consumer buying a product, transferring money to family and friends, or for a vendor settling their invoice with a supplier. We’ve explored RTP before, and it’s worth digging into the latest trends to understand how businesses, consumers, and others are taking advantage.

The Benefits of Real-Time Payments

Real-time payments are big business, with the industry predicted to grow between 50 and 80 percent per year. A Mastercard report highlights benefits to various parts of society:

  • For consumers: 24x7x365 instant payment services, zero-friction payments, and the ability to transfer money to family and friends in an instant, including cross-border transactions.
  • For businesses: Efficient e-invoicing and billing, better liquidity management, and improved customer service.
  • For employees: Immediate access to earnings without having to wait for payroll to clear.
  • For government: Anytime, traceable benefit programs and increased taxation income from GDP growth.
  • For the economy: Increased velocity of money through financial systems, GDP growth from higher payment volumes, and market efficiencies from competition
  • For society: A reduction in crime and security issues from cash handling, reduced systemic risks, and a 24×7 service culture.

“Real-time payments can benefit financial institutions (FIs), merchants, consumers, and society by offering enhanced visibility into payments, by enabling better cash management and by helping businesses better manage day-to-day operations by improving liquidity. The liquidity improvement can be especially impactful to small merchants who may be used to waiting days for their settlement, possibly creating a positive impact on their cash flow and daily sales outstanding.“—Deloitte, Real-time payments are changing the reality of payments

Credit Cards Increasingly Allow for Payments in Real Time

The credit card networks are embracing real-time payments for cardholders and merchants. Visa has invested heavily in its Visa Direct program, while Mastercard’s purchase of Nets is making RTPs over card networks a reality. 

Some of the credit card RTP benefits include:

  • Allowing consumers to pay off their credit card balances almost immediately, reducing the likelihood and cost of late payment interest and penalties.
  • Transferring money from a consumer’s credit card to a merchant account providing a vendor with reassurance that they have received payment for goods or services.
  • Lowering the potential costs of credit card processing through a modern, flexible, fast system.

These benefits apply to businesses of all sizes, from international enterprises using omnichannel approaches for selling, to solo businesses selling locally or on an ecommerce marketplace.

Immediate Payment Cards Provide Payroll Funds Access to Employees

Earned-wage access is becoming increasingly important to employees, especially those living paycheck-to-paycheck. Payroll departments can combine RTPs with payroll debit cards to give employees immediate access to their wages—this can even be expanded to cash advances or instant payments after completing a shift.

Some of the Employee Wage Access RTP benefits include:

  • Allowing employers to load funds directly to an employee’s card account.
  • Providing a “virtual” debit card for wage distribution until an employee gets a physical card.
  • Providing employees with immediate access to their wages, on a day-to-day, shift-to-shift, week-to-week, or other regular basis.
  • Helping employees to budget more effectively, reducing stress and anxiety from not having funds to pay bills or buy essentials.

“The growth of the gig economy is one of the major factors impacting how and when employees get paid, as gig economy-supported platforms are renowned for offering workers the ability to be paid immediately for work performed. Evolving technology is also playing a leading role in this shift, as is the fact that 78 percent of Americans live paycheck to paycheck (according to a CareerBuilder survey)—that’s a major portion of the population who may benefit from an alternate payroll frequency than the bi-weekly or monthly norm. Ultimately, employees who are happy and fulfilled in their personal life – which includes financial well-being—are more likely to be engaged in their work.”—HR Technologist, How Faster Payments Are Impacting the Future of Work

Real-Time Payments Make it Much Easier to Send Money to Family and Friends

Domestic and international money transfers are also benefitting from real-time payments. Consumers can take advantage of this in how they transfer funds to family members and friends. Popular payment transfer services like PayPal, Venmo, and Zelle are making use of RTP systems to manage payments, including across borders.

The benefits of RTPs for family and friend money transfers are:

  • Providing the recipient with immediate access to money, very helpful for emergency situations.
  • Removing some of the complexity from currency transfer and making it super-fast and easy.
  • Integrating with existing peer-to-peer money transfer apps to make the process transparent to the end user.

“Due to their integration with The Clearing House’s RTP network, multiple P2P payment apps can transfer money instantaneously from the app to a bank account. For instance, instant transfers routed through the TCH RTP network became available on PayPal’s Venmo in August 2019. Meanwhile, in February 2021, Early Warning Services and The Clearing House announced that Zelle transactions can officially be cleared and settled over the RTP network. Bank of America and PNC Bank were the first to send Zelle payments over the RTP network.”—Payments Journal, Real-Time Payments: Everything You Need to Know

As you can see, real-time payment technology is advancing rapidly—both in terms of its convenience and in its adoption around the world. It’s time to adapt RTPs into your business, and enjoy the benefits it brings to your customers and employees.