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Real-Time Payments Form the Bedrock of a Modern Economy

September 28, 2022


Real-time payments in a fast-paced world

The benefits of RTPs range from secure transactions to enhanced cash management capabilities that make business operations extremely smooth. Read on to know all about the various advantages of real-time payments.

Every aspect of a business depends on money, and when there is uncertainty regarding incoming funds, the management of other functions suffers. Organizations need to be certain about their fund flows to avoid mismanagement. There are areas where a threshold of funds is required, such as the working capital requirement. Such a threshold is best monitored by employing effective forecasting techniques.

The payments industry is at the crossroads of a massive transformation. With the introduction of real-time payments (RTP), consumers can send and receive money instantly, which has led to a surge in the adoption of RTP technology. The allure of real-time payments can be understood by the possibilities it creates for businesses.

Faster & Streamlined Payments

Instant payments can potentially improve the speed and reliability of cross-border payments and enhance the tracking of payment flows. The need for quicker payments grows as businesses realize that time is money. Using real-time technology in banking and payments will mean a lot more benefits for customers. In addition, faster payments can help reduce transaction costs through streamlined processes and allow for quick dispute resolutions. This can be achieved by reducing manual steps in business processes by automating tasks like batching and reconciliation. The Federal Reserve is anticipating the launch of its FedNow payment network by 2023 to reap the benefits of an instant payment solution.

In an increasingly connected world where the average customer has multiple payment options, speed is crucial to providing an optimal customer experience and reducing the number of failed transactions. For example, customers can get more information about their accounts, transfer funds faster, track payments, and save time. This option might even attract customers who have been hesitant about online shopping due to security concerns.

Improve Liquidity Management

Simply put, liquidity is the ability of an organization to meet its short-term obligations in a time-bound manner without resorting to drastic measures like selling assets or going into debt. Liquidity management can then be seen as the process of ensuring that there is enough cash on hand to meet all expenses and that not too much money is tied up in assets.

How can RTP help here?

  • Real-time payments boost the capacity to manage liquidity by reducing transaction execution time.
  • A real-time solution can improve cash flow by enabling businesses to be more efficient with the sources and usage of their funds. This, in turn, helps with reasonable risk management and cash position.
  • RTP networks are different from traditional ones because they can support more dynamic business processes and relay messages via Internet Protocol (IP) over wireless or wired connections and voice over IP (VoIP). Cross-border payments benefit significantly from this shift, especially with different currency denominations.

More Financial Control

The main advantage of real-time payments is that you can better manage your cash flow. Real-time payments give you a more accurate picture of the financial standing of your business, allowing you to make better-informed decisions. For instance, let’s say you’re running a small business and need to make payroll today. However, you are not aware of how much money will come in, until later in the month. In that case, real-time payments can ease some of that stress by presenting precise information about the money that is coming in and going out of your business.

Additionally, because real-time payments allow faster transfers from one account holder to another, without any intermediary step (like batching)—businesses can see their funds sooner and thus have better access when needed. The most exciting element of implementing RTPs is the ability to build and put to work capabilities such as auto-posting and raising requests for payments with adequate data. All this leads up to the many reasons why there is a boom in the adoption of real-time payments. The RTP market is expected to reach $193.07 billion by 2030, growing at a CAGR of 34.9%.

Reduce Cost & Increase Transparency

Going by the PYMNT’s research, real-time disbursements accounted for 17% of all disbursements made in 2021. Real-time payments can reduce the cost and risk associated with payment processing and improve efficiency. This includes:

  • Cost reduction by eliminating manual processes, reducing costs for each transaction, and providing a better customer experience
  • Cost avoidance by making payment decisions more quickly and easily
  • Bilateral communication reduces risk through improved visibility into transactions and increased fraud protection via relevant authorizations
  • Reduced deployment needs for resources to carry out the standard tasks
  • JIT (just-in-time) payments simplify the process by decreasing credit cycles, increasing payment finality, and minimizing reconciliation efforts

Get Ahead of the Curve

Real-time payments are a hot topic in the financial industry. A unified standard would make it easier for organizations to embrace RTP as they would no longer have to worry about integrating with disparate technologies. This is especially important in a world where interoperability between networks, providers, and currencies continues to become more complex.

The future of payments is a bright one. Faster and more efficient payment rails will help businesses grow their customer base and improve their bottom line. They’ll also make our lives easier, eliminating the need to wait around for our money or track receipts when we want something from an online retailer. Real-time payment systems offer the prospect of getting everything done faster while saving everyone time and effort along the way.

Real-time payments give you more control, speed, and transparency. The industry is moving toward this new way of doing business, so it’s time for you to join the league and master the art.

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