Real-time payments (RTP) have been surging forward at an accelerated pace with heightened awareness and increasing adoption in 2020. In this post, we take a closer look at the state of RTP at the start of a new decade. Last year, we discussed how faster payments have developed in recent years, from major initiatives in 2017 and 2018 by NACHA and The Clearing House to the widespread use of P2P platforms like Zelle and PayPal.
As RTPs enter a new decade, the trajectory is clear: industries are finding more and more use cases for real-time payments. PYMNTS.com, in collaboration with Mastercard, recently released a report that found that 85% of US business firms are planning to implement RTPs over the next three years. Nearly 40% are currently in the process of implementing RTP solutions or will be in the next 6 months.
Several weeks ago, The Clearing House (TCH) announced its intention to raise the RTP transaction limit by 400%, from $25,000 to $100,000, effectively February 1. Senior vice president of product strategy and development, Steve Ledford, cited “demand” as the primary reason for the change. TCH has been receiving numerous requests to raise the limit and the network has a whole has been reportedly growing 20% month-over-month.
As technology evolves, it’s become essential for financial and banking industries to prioritize faster payments in the face of new digital solutions and virtual currencies. Widespread digitization and the ever-increasing gig economy demand easy, convenient payment solutions.
RTP applications can be implemented across a myriad of industries, offering immediate bill and invoice payments, account-to-account transfers, and quicker resolutions to insurance claims. Institutions like J.P. Morgan Chase have already jumped on the RTP bandwagon with an instant ACH transfer option available to checking account customers within the past year.
New opportunities and applications contribute to awareness, which leads to higher levels of adoption. According to the PYMNTS/Mastercard report, over 66% of firms are very aware of RTPs and nearly 72% are “very” or “extremely” interested in its performance and abilities. This represents a significant increase in awareness over the last few years. While 51% of businesses cited lack of awareness as an impediment to their adoption of RTPs in 2018, that number dropped to just under 38% in 2019.
Despite growing interest, customers and businesses alike may still need to overcome several potential hurdles to nationwide adoption. The PYMNTS/Mastercard report found that technological and resource constraints are still a concern for 40% of businesses and fraud for over one-third (37%).
Digital payments has become a highly competitive market. Many businesses may struggle with the challenge of producing or implementing sufficiently advanced and user-friendly solutions for their customers.
Without a complete out-of-the-box solution, companies fear facing major overhauls and costly changes to their staff and software. While a period of transition is inevitable, major institutions like Mastercard and Bank of America are beginning to offer intuitive merchant services for businesses of all sizes.
And as the US Federal Reserve makes plans to launch a second RTP rail, the FedNow℠ Service, by 2024, businesses may look forward to more comprehensive support as they shift into a digital age.
RTPs can still be exposed to social engineering attacks such as account takeovers, invoice fraud, and application fraud. Vulnerabilities in P2P platforms can make it easy for cybercriminals to hack into accounts or facilitate false transfers. Services like Zelle, whose users made approximately 433 million transactions totaling nearly $120 billion in 2018, have to be particularly watchful.
But with the advent of newer AI and machine learning (ML) technologies to complement RTP solutions, transaction risks can be analyzed and assessed without human error or manual investigation. AI and ML fraud prevention strategies help support the irrevocable nature of real-time payments while protecting originating institutions.
Businesses of any size and industry can benefit from the use of real-time payments, whether it be to offer a more streamlined customer experience or provide internal efficiency. Early adopters and larger institutions will pave the way for small and medium-sized businesses and AI-based solutions can provide an unmatched level of fraud protection and security.
As more companies begin RTP implementation in 2020, careful consideration of available technologies and resources will be key.