The emergence of the Internet of Things (IoT) has significantly transformed the digital payments landscape. Rather than serving as an add-on, payments have become integral to the fundamental operations of businesses. With each payment made, businesses engage in real-time interactions with customers to offer them delightful, on-the-go experiences. The implications of this shift are profound, and it is poised to revolutionize how we conduct business in the future. The era of change is upon us, and businesses must adapt to stay ahead of the curve.
Let’s explore the value of real-time payments in our fast-paced world and see what the future of payments holds for us.
A Radical Shift in Business as Usual
As the market for real-time payments (RTPs) continues to grow, so does its role in changing how people pay and get paid for goods and services. RTPs have proven beneficial across retail, banking, and governance processes.
Innovation in payments has ensured that all segments of society are catered to through push as well as pull payments for a seamless exchange of currency. A recent study by PYMNTs has found that 53% of businesses witnessed improvements in cash flow management, and 33% confirmed greater transparency by leveraging RTP rails for B2B settlements.
The proliferation of real-time payments has significantly impacted the payments landscape, benefiting both businesses and consumers. Here are a few examples:
- Real-time payments allow for instant settlements, which can improve operational efficiency. This is especially helpful for businesses that have inventory management issues or are involved in E-commerce sales. Right-sizing inventory helps keep the profit margins lucrative, as seen in the case of American Eagle Outfitters (AEO), who managed to reduce their inventory from a 36% excess to a mere 8%.
- Customers get to pay account-to-account (A2A), which reinforces the transparency of the payment option enabled by open banking. As predicted by the latest FIS report, this payment option will be used in 20% of E-commerce transactions in 2023.
But the need for better real-time payments infrastructure and regulatory compliance are crucial areas for the success of RTP payments. The system is only as good as its most vulnerable feature, which calls for robust infrastructure with high scalability, lightning-fast speeds, and low latency.
Efficient Liquidity Management
The real-time payment network comprises banks and other financial institutions, as well as payment service providers (PSPs) that provide processing services on behalf of merchants or acquirers, who also form part of the network. New-age payment facilitators (PayFacs) have emerged to take the collaboration among market participants to a whole new level.
The RTP Network provides an efficient alternative to the traditional cross-border clearing by allowing transactions to be settled in real-time at any given moment between any two parties involved in the transaction. This means they can be settled within seconds rather than days or weeks. This has resulted in a significant increase in liquidity availability across borders, and it has made international transactions cheaper, faster, and more secure than ever before.
The conversion of card settlement times from 3-5 days to real-time has revolutionized even the most routine local settings, delivering liquidity like never before. This shift has created a win-win situation for both merchants and consumers, enabling quicker payments and improving customer service while reducing the risk of fraud. The new payment methods are not only functional for the customers but also provide high-margin revenues to the merchants while still targeting high transactional volumes. As of 2022, the global real-time transactional volume has exceeded $100 billion and is expected to grow at a rate of 35.5% until 2030.
Innovative Deployment of Deep Data
Deep data is a collection of data that is not easily accessible or understood. It can be used to make better business decisions, improve customer experience, detect fraud, and improve security.
The deep data collected by payment providers may include the following:
- Customer transaction history (for example, spending habits)
- Location-based data (such as where customers live)
- Personal information like credit card numbers
The value of deep data lies in the ability to mine and analyze large volumes of unfiltered data for insights. For instance, it can be used to identify customer trends and predict future behavior. It can also help businesses improve their customer experience by providing new services or features based on user preferences.
Deep data is particularly valuable to payment providers because of the nature of their business. For example, they can see what items a user purchases at the store level, which can help brands create more effective marketing campaigns based on consumer preferences. AI has a significant role to play in gamifying analytics through intuitive dashboards for information dissemination that effectuates adequate planning and execution. The PayTech ecosystem has evolved to better monetize data for unique customer offerings that can be gauged by methods such as variable recurring payments. APIs help create mandates for such VRPs (Variable Recurring Payments) to incorporate greater flexibility in the automatic mode.
Payments Localization and Digital Lending Transformation
The RTP Network is built on an open-source software stack that allows PSPs to integrate their systems with the network to offer real-time cross-border payments. Real-time money transfer plays a crucial role in payments localization, as it enables payment service providers (PSPs) to offer these services without having access to their customer’s bank accounts.
The importance of payment localization cannot be overstated: it allows PSPs to serve customers in other countries who may not have access to local banking infrastructure or might even be unbanked due to high fees charged by traditional banks. In addition, if you’re on the lookout for financing but don’t want your credit history affecting your ability to get approved for loans—or vice versa—payments localization can help by giving users access where they need it most: locally!
The RTP Network provides the technology, infrastructure, and expertise needed to enable PSPs to provide payment localization services. Request-to-pay (R2P) has become a popular feature that has mustered much demand in the payments landscape, given they help the payor confirm the details of the payee and the transaction without any delay. Payment professionals globally are keen on leveraging this feature, with 89% of them inclined to use R2P for cross-border payments.
Integration of the RTP Network is Crucial
Integrating RTP into the existing payments ecosystem is crucial. It will help drive adoption, innovation, scale, and efficiency in all financial services. Integration also provides a secure way for consumers to make payments at any time of day or night.
RTP Network from The Clearing House is a blockchain-based payment network that allows for transactions to be processed in real-time. As such, it has the potential to revolutionize how payments are made by providing a secure, fast, and convenient way for consumers and merchants to transact. It is a core innovation in the U.S. payment space that complements ACH for multiple use cases, of which over 60% of the 5,000 plus U.S. banks are a part.
With a rich legacy in building innovative payment solutions, we are uniquely positioned to help you tap into the multifold benefits of RTP.
