The Future of Payments is Real-Time

Real-time payment networks work around-the-clock and offer many benefits, from flexibility to security. Instantaneous payments are already bringing vast improvements to the financial services ecosystem, as traditional payment methods like checks or ACH transfers have historically been inefficient and carry an increased risk for fraud incidence.

There are several real-time payment channels that businesses and financial institutions can choose from to make their transactions more efficient. The Federal Reserve’s summer launch of FedNow signals that real-time payments adoption is skyrocketing, as the market for B2B payments is 10x larger than the consumer market, reaching  $50 Trillion.

While legacy financial institutions are just debuting real-time payment solutions, several private providers have been offering real-time payments for years. Given their speed and efficiency, the vast majority of businesses and financial institutions are looking to leverage real-time payments to drive digital transformation and provide a more efficient experience for their customers and partners. 

As the technology rapidly evolves and businesses are eager to harness the advantages of real-time payments, a deeper understanding of how these systems function becomes imperative.

What technologies power real-time payments? 

Real-time payments are changing how companies do business, allowing payments to be sent and received instantly 24/7/365. This new payment infrastructure provides near-instant access to liquidity, making business and personal transactions faster than ever.

A key technology enabling real-time payments is private permissioned blockchain, which operates in sharp contrast to traditional payments platforms. Legacy rails are limited by 9-to-5 hours of operation five days a week, high transfer fees, transaction size limits, and lengthy time delays. 

On the other hand, payments made using private permissioned blockchain enable banks to offer their corporate clients secure, instantaneous transactions of any size around-the-clock and at a fraction of the cost. This technology also allows FDIC-insured banks to provide customized payments and financial services for every industry and businesses of all sizes.

This technology is especially relevant for businesses and industries that transact globally. Take the cargo shipping industry, for example. Most cargo businesses handle shipments outside the United States and execute a large percentage of their transactions outside of traditional business hours. Traditional forms of payments like ACH and checks open up a myriad of possible process breakdowns, considering they don't process on weekends and the time it takes for payments to clear. 

With real-time payments technology executed on a private permissioned blockchain, cargo shipping businesses can connect all of their freight partners with secure, instantaneous payments and lower processing costs. This can be a force multiplier for a firm's business development and client acquisition goals. 

Are real-time payments highly susceptible to fraud?

Legacy payment rails like ACH transfers and paper checks have historically been highly susceptible to fraud incidence. In recent years, reports of check fraud filed by banks nearly doubled to 680,000 instances, up from 350,000 in 2021. 

More than 40% of all B2B payments still use paper checks, and virtually all B2B payments involve Email communications, both of which account for the majority of fraud incidence. Fraud losses cost banks more than $9B annually in out-of-pocket expenses, with a large percentage spent preventing and investigating fraud to say nothing of the costs and frustrations for bank customers.

In contrast, real-time payment technology like private permissioned blockchain is only accessible to authorized users, dramatically reducing fraud incidence, which correspondingly reduces the costs to prevent and respond to fraud cases. This is especially beneficial for businesses and banking institutions that lack inflated budgets for fraud investigation. 

How can banks and businesses implement this technology safely and securely?

With around-the-clock availability, real-time payments technology empowers banks to meet customer expectations for speed and convenience which will ultimately build relationships with their customers and increase deposits within accounts.

Real-time payments are also critical for banks to gain an edge of their competitors. While adoption is growing, most corporate clients have limited opportunities to leverage instant payments. As more institutions level up their infrastructure and fintech partnerships, competition will continue to improve access for businesses and banks alike. 

Partnering with specialized payment technology service providers can also help banks ramp up faster payment capabilities at a fraction of the cost. Extensive testing before launch allows banks to iron out any integration issues and provide a seamless customer experience. 

Benefits of Real-Time Payments 

Real-time payments have the potential to transform the banking industry as we know it. The largest banks are investing significantly in the digital technology powering instantaneous payments.

Commercial banks can utilize real-time payment technology to provide corporate clients with the ability to quickly access funds to pay bills, reimburse vendors, deposit earnings, and make time-sensitive purchases 24/7/365. 

Real-time payments represent the future of money movement in banking. While the transition will take time, real-time is on its way to becoming the new normal. Offering these capabilities provides better customer service and flexibility in an increasingly digital economy. As real-time payments gain wider adoption, financial operations will become faster, smarter, and more efficient.