The progress in real-time payments (RTP) has been significant over the last few years, and the momentum is showing no sign of slowing down. Today, there are
around 96 RTP systems operational globally, with more and more countries building out their payments landscape. The economic impact of real-time payments is significant. In 2023, 266.2 billion real-time payments transactions were recorded around the world,
signifying a 42% increase YoY.
Companies everywhere are embracing the potential that real-time payments offer in improving the efficiency of the payment infrastructure, reducing costs, and unlocking working capital. The growing number of use cases is one of the main drivers of RTP growth,
and there are several ways in which organisations can adapt to take advantage of the new opportunities on the horizon.
Finextra spoke to Peter Reynolds, executive vice president of real-time payments at Mastercard, about what the future of RTP holds and why everyone should be thinking about what’s coming next in payments.
The current state of real-time payments
The adoption of RTP systems has grown rapidly over the past decade with the number of real-time transactions expected to reach
575 billion by 2028, which would account for 27% of all electronic payments.
Whether it be paying friends or family, topping up digital wallets or paying employee salaries and gig workers in a secure and reliable way, Reynolds explains that many countries have their RTP systems in place. As we’re stepping into the next wave of real-time
payments, growth is being driven at different speeds depending on whether we are looking at mature or emerging markets.
“There is a series of markets that are really soaking up cash and real-time payments are soaring. They're using their RTPs to drive financial inclusion, bringing people into the financial ecosystem.” he explains. “For example, Thailand, Philippines, India,
and Brazil all show very rapid growth of RTP transactions”.
Many of these countries have started with person-to-person (P-P) payments (typically done by bank application), and then extended to person-to-merchant (P-M) using QR codes, enabling payment by electronic wallets, and more recently enabling cross-border
payments.
The
numbers agree – Thailand experienced a 38% YoY growth in 2023, recording
20 billion real-time payments over the course of the year. The Philippines’ real-time market also thrived, growing
24% YoY.
On the other side, we can observe that mature markets, like the UK, USA and the Nordics, are nearly cashless already. These markets are often well served by cards, and real-time payments offer greater choice on how to pay (and be paid), with new growth being
driven by greater digitisation, including electronic bill payment and open banking.
These markets are growing at around 12%-20% YoY, and while this growth might be slower, they have paved the way for many years and continue to be at the forefront of payments innovation.
ACI Worldwide predicts that, by 2028, real-time payments will account for 13% of all electronic payments in Europe, up from 8% in 2023.
Boosting participation through partnerships
“In successful schemes, we see ubiquity of access with participation of all the banks, as well as enabling access for fintechs, corporates and other money service providers. However, this needs to be done in a way that ensures integrity of the whole system. So
getting the right partnerships between central banks, financial institutions, fintechs, and the scheme operators is super-important,” Reynolds emphasises.
In multiple markets, central banks are taking a bigger role in setting the payments strategy to help drive volume and participation. In Europe, all PSPs must comply to legislation, enabling the sending and receiving of SEPA (Single European Payment Area)
Instant Credit Transfers by October 2025 in the Eurozone. All SEPA, non-Eurozone PSPs must comply in 2027.
Thailand is another great example of this. As part of a major digital transformation program driven by its government, PromptPay was launched with Mastercard in 2016 and is now one of the
fastest growing services globally. With
19.89 billion real-time transactions in 2023, it’s on the same trajectory of exponential growth as we’ve seen with India’s UPI or Brazil’s PIX schemes. This growth is supported and sustained by government payments making use of the real-time payments system,
which helps drive up participation and financial inclusion, as well as strong collaboration between the banks and the scheme operator, ITMX.
RTPs are “increasingly being used to seamlessly top up ‘stored value’ electronic wallets from a nominated account using Request-to-Pay functionality, as seen in the Philippines. Alternatively, RTPs are also enabling ‘open loop’ wallets, where you can pay
with one centralised digital wallet, rather than wallets for each brand or retailer, simplifying the user experience,” Reynolds explains.
Success for real-time payments means finding the right partnerships, deploying the right use cases, and then setting this on the journey to boost greater participation beyond just the banks. Considering this will help create a vibrant ecosystem of players
that can build on top of the existing infrastructure – which leads into the inevitable consideration: security.
A strong response to fraud
With faster payments comes faster fraud, so enhanced fraud prevention, with robust authentication and authorisation standards, is crucial for any RTP system.
According to the UK Payments System Regulator (PSR),
£459.7 million was lost to authorised push payment (APP) scams in the UK alone over the course of 2023. Due to these staggering numbers, they have introduced a new
APP fraud liability scheme, which will come into effect in October 2024, to tackle this issue.
Reynolds mentions that providers like Mastercard have already made significant steps to address fraud by developing AI solutions with advanced fraud detection capabilities that can help stop suspicious transactions and track down money mule accounts when
required.
“More needs to be done to protect consumers, and that’s why we have developed robust AI-powered solutions like Consumer Fraud Risk to detect and stop fraud in milliseconds. In combining these advanced solutions, government policies and consumer education,
we can build an even safer payment system,” Reynolds comments.
TSB reported that the amount of scam payments prevented over a year would equate to almost
£100m saved across the UK, if all banks were to use protections like Mastercard’s Consumer Fraud Risk.
What will the real-time payments landscape look like in five years?
The potential of real-time payments is vast – coupled with innovation, enhanced security, and strong partnerships, RTP offer simple, safe and fast payment solutions with better liquidity and cash management for organisations and corporates of all sizes.
Importantly, it also offers greater consumer choice and drives financial inclusion.
Countries continue to update and upgrade their existing payment switches in an efficient, scalable, and secure way, which will allow broader use cases – like open looped wallets for more seamless payments and a better payment experience.
Between countries, domestic schemes are being interlinked, typically enabling cross-border QR and person-to-person payments. Today, these are typically bilateral links, although there is strong interest in exploring multilateral links, for example within
the ASEAN 5 and India.
And finally, as we look forward, there is also likely to be greater interoperability between RTPs and other forms of payments, including Central Bank Digital Currency and other digital assets, where RTPs can be used to enable transactions between traditional
bank accounts as well as between digital current accounts.
“In the past, we’ve built payment systems by adding rails,” Reynolds summarises. “But now, we’re looking at how we can use our technology to enable interoperability and consolidate rails to simplify and improve customer experience. We want to help people
and businesses pay and get paid in the way that suits them best.”
The next generation of real-time payments is a transformation that will redefine how we think about transactions. With the speed, security, and efficiency of real-time payments, we can unlock a future of innovation and financial inclusion. Real-time payments
enable the digital economy and, more importantly, act as a wider multiplier for economic growth.