A technology enabling instantaneous money transfers has firmly established itself in the payment processing industry as real-time payments. The interval between the moment money leaves a payer’s account and when it becomes available in a receiver’s account, it is eliminated with real-time payments. The funds are instantly available and payments can be made around the clock, all year long.
Here’s how real-time payments impact the payment processing industry:
The Constant Barrage of Pressure
Real-time payments provide certainty of payment, instantaneous access to funds, and real-time visibility of balances. The services support all payment use-cases, providing financial institutions with opportunities for product enhancement, revenue generation and end-user satisfaction.
As a means to move from an informal cash economy to a more stable and secure digital payments ecosystem, real-time payments are advantageous for governments and central banks. One of the greatest addressable markets is probably those with which people pay other people. The instant, irrevocable nature of real-time payments makes them ideal for replacing cash in these situations as a proxy for trust.
Speed Beyond Any Expectation
Value-added services are at the centre of a new era of real-time payment systems. These systems separate the core clearing and settlement engine from a platform layer that enables the exchange of value-added messages for the development of innovative new products and services. The advanced messaging capabilities of the platform provide more context for transactions and enable a diverse range of innovative use cases.
Global cross-industry interoperability is enabled by their widespread adoption. Therefore, businesses and financial institutions can reap additional benefits outside of faster processing, for instance, more efficient back-office processing that is verified by customers.
Streamlining Business Processes
A transaction can be auto-posted if the appropriate level of data is accompanied by the transaction. Along with instant payment notification, RTP provides flexibility for identifying payments and explaining exceptions. As a result, auto-posting and reconciliation are optimized, and payments inquiries are minimized. Payees can also afford to devote fewer resources to collecting receivables and reconciling them which differentiates RTP from other systems.
Providing Two-way Communication
Currently, payment systems permit communication from a payer’s bank to its own, and from a payer’s bank to a recipient’s bank. The RTP system notifies payees when funds have arrived at their bank accounts. This is especially useful for urgent payments, as it closes the information gap for payees waiting for funds and can alleviate call centre inquiries about payment status.
Besides that, future vendors will also be able to send a Request for Payment securely using the RTP system which will enable payers to choose an immediate payment option.
Real-time payments technology enables improved cash flow, simplified money management, reduced chance of fraud for businesses and customers while assuring that all money transfers happen instantaneously. Therefore, it stands to reason that real-time payment models will coexist with current payment processing systems as fintech companies reinvent payment methods.