Authored by: Raja Gopalakrishnan
The world of payments technology seems to have two speeds at which it operates: glacially slow and sudden bursts of rapid innovation and change.
With the global pandemic redefining accepted norms for how we collectively work, interact and connect, it’s clear that we’re in a moment of rapid innovation and adoption, especially when it comes to real-time payments.
Six countries have seen more than a two-fold increase in the number of real-time payments processed over the past year, and four have seen more than a two-fold increase in the monetary value of real-time payments transactions.
We’re just at the beginning of what will be a period of significant, lasting changes to the world of real-time payments.
Here are four radical shifts that you can expect to see in the next three years: 1. There will be more collaboration between countries when it comes to real-time payments.
The influence of COVID-19 has accelerated the need for more cooperation among nations for services like cross-border and supply-chain finance. The old ways of doing business are no longer sufficient, and archaic systems slow down the speed at which international entities can move money.
Having systems that can easily “talk” to each other are being borne of necessity: as the pandemic forces us all apart, digital technologies are required to keep us together, even across borders.
This will also lead to more harmonization of rules and regulations globally and significantly reduce global trade friction. Where digital commerce friction remains, governments will start to align on international policy and standards to make a more seamless global economy.
2. The world of payments and banking will become more converged for retail, commercial and wholesale.
As end-user behavior and adoption of real-time payments undergo a massive shift across the board from the average consumers to back-office managers, the systems will converge.
There are a growing number of use cases for real-time payments spanning B2B Treasury payments, person-to-person real-time cross-border payments, emergency insurance remittances, and many more, all of which are fueling real-time initiation, clearing of funds, and the overall economy.
To accommodate real-time processes, we can no longer have siloed systems. The lack of standardization in the past created a cluttered and confusing client experience.
Now, technology and service providers will bring clarity and consistency to their product offerings by focusing on client experience and the technology behind it.
3. There will be a stronger emphasis on creating financial products underneath innovative, customer-centric technology from big tech companies.
The past few years have seen big tech becoming involved in several financial products that span deposits, loans, and credit cards. That trend will come to the world of real-time payments.
Google plans on launching a consumer bank account in collaboration with Citibank because they are interested in sitting on top of their financial infrastructure and expertise with their Google Pay technology.
In 2019, Apple debuted a credit card created in partnership with Goldman Sachs. Like Google, the company has left much of the financial legwork to its bank partner while designing the card and integrating it with its digital wallet app.
We’ll see this infiltrate the real-time payment space: big tech players will focus on maintaining the customer relationship, experience, and capturing more customer activity, searching and buying behavior, but will remain a distributor, essentially leaving the business of payments products to financial institutions.
4. Data will be the core driver of value.
I can’t say this one enough: we’re going to see the data economy mature further, removing the emphasis on payments products or services.
Data will become the core driver of value in two key ways for payment systems: predicting user behavior and optimizing recommendations for payment services. These analytics can help payment providers plan and prioritize future product roadmaps.
As the number of payment vehicles and schemes continues to grow, they add to the already cluttered set of choices a customer has to make. Most personal and corporate users lack the expertise to decide which payment scheme is best to use.
An intelligent payment platform can use a rule-based engine, data analytics, and other intelligence tools to help route transactions to either the lowest cost or fastest payment scheme available.
While there are differences in actual implementation across markets, the goal remains the same: to improve the speed in which funds move from account to account.
Increasing real-time payment adoption rates and continual development and evolution of real-time infrastructures worldwide speak to the staying power of real-time and indicate the true potential that is just beginning to emerge.
—Raja Gopalakrishnan, EVP, Global Real-Time Payments, FIS. The views expressed are personal