Educate Your Clients About Real-Time Payments May 26th, 2022
Waiting for funds to be deposited is becoming a thing of the past.
The sooner your clients can see funds in their accounts, the better. Traditionally, it’s taken a few days, and in some cases, longer, for transactions to result in a deposit. Although smooth cash flow is always important, the delay can be particularly detrimental to businesses recovering from the pandemic while operating in the red. Real-time payments have the potential to address this pain point.
Real-time payments clear and settle digital payments almost instantaneously, including on weekends and holidays. Almost as soon as a customer initiates a payment, a merchant or B2B company knows the funds from that transaction are available.
For example, Faster Payments in the UK explains that when a consumer initiates a payment the consumer’s bank performs usual authentication and validation and checks for sufficient funds. That bank then sends the transaction through the real-time payment platform to the receiving bank that validates the recipient’s account and sends a message back that it has been accepted or rejected. Then, the sending bank confirms the transaction.
Making Real-Time Payments Work
Real-time payments meet the need for quick transactions in a highly connected world where removing friction from digital transactions is a priority and minimizing risk is essential. Enabling real-time payments requires a highly interconnected system, including:
Connection to a real-time payments rail (i.e., a platform that enables payments) available for transfers 24/7/365
Open-loop payments connected directly to customer accounts rather than to prepaid cards
Adherence to a messaging standard, i.e., ISO 20022, that enable quick error resolution and strong security
Research shows that more players across payments connect and provide real-time payment convenience. ACI Worldwide Research found that 70.3 billion real-time payments were processed in 2020 – 41 percent more than 2019. Additionally, ACI predicts a 23.6 percent CAGR for real-time payments through 2025.
ACI also points out that peer-to-peer (P2P) payments are currently the biggest focus for real-time payments. However, as consumers become accustomed to the convenience and speed of settlement, they’ll expect to use them for e-commerce, in-store payments, and other use cases, such as paying for municipal services or receiving funds from the government.
Remember that “real-time payments” aren’t necessarily the same a mobile payment apps. Although P2P and payment apps are quick and easy for the consumer, payment apps can be closed-loop rather than directly connecting to the consumer’s account. This means they utilize different platforms than real-time payments, and although your client may receive money quickly, the payments mechanism is different.
Also, keep in mind that wire transfers, which are usually reserved for high-value transactions, settle immediately as well. However, a fee is typically involved, while real-time payments are generally low-cost or free.
Your Role as a Trusted Business Advisor
Although VARs and ISVs can’t implement real-time payments directly for clients, you can educate them. As a business advisor, you can make them aware of this growing trend, educate them on how they work, and keep them up to date on banks in your region that enable these services.
Additionally, as the real-time payments space is relatively new, monitor advances for your clients and let them know when new services become available, such as B2B payments or cross-border payments. One area of innovation to watch is innovation on top of the SEPA Instant Credit Transfer (SCT) scheme, which became operational in November 2017, laying the groundwork for transactions that take less than 10 seconds.
You can also ensure that you are working with a payments partner that provides all the payment functionality your clients need today. Ensure you are equipping them with omnichannel payments, contactless EMV, mobile payments functionality and more while waiting for new payment options that are on the horizon.