Real-Time Payments: Re-defining the Payments Landscape

The real-time payments system is a money transfer innovation that offers instantaneous payments, real-time communication, ubiquity and extensive data transfer between banks and banking systems. Payments can be made and received 24/7, 365 days including holidays and weekends. Together with the rapid improvements in mobile technology and digital commerce, the payments atmosphere required safer and faster transactions which eventually lead to the spread of real-time payment (RTP) network among financial institutions to ensure an enhanced and an effective digital services for their customers. In comparison to regular money transfers, RTP puts forwards extra benefits such as improved data and messaging possibilities, enhanced security and instant accessibility to funds. These capabilities eventually support all the stakeholders in the payments ecosystem with better cash flow, customer experience, operational efficiency, transparency and precision.

Drivers of transformation

There are a couple of reasons to be taken into consideration that accelerate the introduction and spread of real-time payments. One of them is the regulatory pressure; however, the key drivers of change are related to the requirements of improving overall efficiency, remaining in-line with the recent technological developments, reducing risk and meeting market demands.

Various limitations and frictions in the regular payments systems are one of the main problems that hinder the efficiency and smoothness of the payment processes. Scenarios that include insufficient details about the payment or emergencies in cases of catastrophes mostly result in long calls with customer services, a special procedure, extra research and finally postponement in the process. What is the main lacking component in the payment executions with a banking system is the end-to-end process because the communication in a regular payment process is only one way (payer to payee). Also, the lack of transparency about the location and time of arrival of the payment is another opponent that challenges the efficiency of the whole process. These frictions eventually affect the important business elements such as risk management, liquidity, cash positioning and forecasting.

Drivers of growth

Ever-evolving technological innovations: The technological improvements and new market players cause a rapid change in the payments industry and require tremendous attention. As the mobile phone usage is increasing every day, in some developing economies, smartphones have already started to be preferred as the payment methods, replacing cash and wallets. With the introduction and fast distribution of digital currencies, social platforms and NFC (near-field communication) payment methods, the number of domestic person-to-person (P2P) payment providers are growing at a fast pace.

Competitive nature of the industry: Together with the introduction of new players such as the FinTech start-ups, spin-offs and partnerships as well as the new business models opening up new payment options which are faster and also safer, the traditional ways of doing payments are becoming unpopular. Especially the focus on mobile payments required better payment services with more successful fraud detection and ID authentication which in turn ensure better customer experience. In the new payments system, small businesses can benefit from rapid availability of funds as soon as their credit lines are approved. In such a competitive nature, full of possibilities, what is to be improved is to figure out the most efficient ways to incorporate real-time payments in the service delivery.

Meeting expectations of the merchants: Another important value of the real-time payments is the ability to offer better cash flow management, more secure payments environment with high levels of fraud detection and enhanced customer satisfaction for the small businesses and big retailers. On top of these, payment assurance and reduced transaction fees can also be counted as the advantages.

Meeting expectations of the consumers: Mobile and real-time services are what the customers are used to in the era of rapid technological changes. Therefore, the expectations are shaped around the availability of everything in seconds with simple one or two clicks. However, the payments industry were staying behind this trend. The real-time payments are actually filling an important and big gap in providing the customers with their expectations to access their funds in real-time.

Regulatory framework: Regulatory changes are in favor of the real-time payments as the goal has always been to improve payment infrastructures and accelerate payment processes. Banks and the regulatory bodies are working hand to hand to make the real-time payments mainstream as soon as possible because they are well aware of the fact that RTP can actually do good both for the consumers and the government by enabling effective traceability of the activities and increasing the liquidity of the economy.

Globalization: The concepts of mobility and rapidity are the natural consequences of globalization and increasing integration of technology in our daily lives. Occasionally, customers and firms are making no difference between the services they get and offer locally and globally, expecting the same simplicity and availability.

Key benefits of Real-Time Payments

Both the overall efficiency in business processes and communication around the payments can be improved with different advantages RTP brings into the payments eco-system. One of the prominent benefit is about the financial management and control both for the consumers and the institutions. Instancy in the payments permit better management of funds. This is also related to another benefit, which is cash positioning. Since the increased clarity in the payments makes it possible to monitor the real-time cash positions, lag reporting and forecasting are no longer needed. Improvement in the liquidity is another effective benefit of the RTP. Companies are able to operate their payments and liquidity in a more accurate way as the payments have become more immediate and predictable. The two-way communication within the RTP system is highly valuable both in terms of payment confirmations and requesting payments.

What Fineksus can offer to improve Real-Time Payments

PayGate™ Maestro is a financial messaging management system, which has a flexible business rule engine to support higher STP rates. It provides advanced features for users and businesses to enrich their messaging systems such as case management, reconciliation, API for integration, GPI support, message validation, and modification. Maestro acts as a powerful central application to integrate financial transactions between systems and provides users with endless opportunities. This is due to its dynamic flow control and software infrastructure which is open to endpoint development. Recently, PayGate™ Maestro has been acknowledged by SWIFT as CBPR+ ready to ensure a tremendous contribution to ISO 20022 migration. CBPR+ is a process that enhances efficiency of Cross Border Payments and Reporting as an essential step to contribute to the migration of ISO 20022, and ultimately makes Real Time payments available as soon as possible with future endeavors of the financial messaging platforms. PayGate™ Maestro has successfully completed the self-attestation for CBPR+ processes, hence will be able to provide more modules to support Real-Time Payments in the near future.

Do you need more information? You can contact us. We are ready to share our expertise and answer any of your further concerns.

Serkan Arslan, CAMS, Head of Sales, MENA