Payments at the speed of life: Moving real-time dollars and data

As recently as a decade ago, few consumers and businesses could make an instant payment. Instead, they relied on bank transfers that could take up to five days to process before arriving in the recipient’s account. Or slower still - checks, which could take over a week to clear from the day you received them in the mail and made it to the bank to deposit them. Even in 2018, paper checks still dominated business payments, representing 47 percent of the total by value in the U.S.

Somewhat accelerated by the impact of the coronavirus pandemic, we’ve come a long way in a very short time. Today, instant payments are an everyday reality for billions of people around the world. According to Mastercard’s analysis, there are at least 55 live real-time payments systems covering 61 different countries and territories. These markets account for the equivalent of 89 percent of global GDP.

In the past year alone, real-time payments have soared. More than 70 billion real-time payments transactions were processed globally in 2020, a surge of 41 percent compared to the previous year, as the impact of COVID-19 dramatically accelerated a shift away from cash and checks toward digital payment technologies.

The pandemic has also shone a spotlight on the importance of speed when it comes to accessing funds. Around the world, real-time payments have enabled governments, working with financial institutions, to accelerate much-needed disbursements and stimulus payments to their citizens. They’ve also enabled real-time liquidity to businesses facing disrupted supply chains, while providing people with faster, safer ways to pay for essential goods and send money while pandemic restrictions were in place.

Beyond speed, there is potential for real-time payments and other emerging technologies to transform the ways we transact — whether combined with open banking to help us manage our finances, or the Internet of Things to streamline global trade. But it’s about more than moving money; it’s about moving data too.

And data is more valuable than you might think. We’ve all been there: end of the month, digging through wallets and inboxes for a receipt for this or a bill for that to remember where we’ve spent our money, when, and even what we bought. For a business, the task of having to manually match invoices to payments in and out can be more than one person’s full-time job!

But with many modern real-time payment systems, that information is tied to the movement of the money itself.  At least 60 percent of real-time payment systems support advanced data standards for payment and non-payment messages. This makes for a very conversational system, which provides the ability to add context to commerce.

For example, rich payments data — such as remittance information — can help businesses and financial institutions to improve efficiency and reduce the costs associated with reconciling data manually. The potential operating cost savings alone are estimated to be up to 60 percent. This same data can also improve the accuracy of fraud detection and sanctions screening to help financial institutions combat financial crime. It can also help to save people a real hassle when it comes to submitting expenses or tax filings.

One of the most talked about non-payment messages is ‘request to pay’ or ‘request for payment’. As you might expect, it provides a mechanism for, say, your utility biller to issue a digital payment request to which you can respond— typically via your financial service provider’s app.

Other messages using these richer data standards can also help to secure people’s trust in the form of an acknowledgement message that can be passed between a receiver and a sender to confirm the transaction has been completed. Combined with the finality of the real-time credit transfer, this can help ease any concerns relating to digital payments. It also goes a long way toward improving the user experience.

But perhaps most importantly, these data standards pave the way for payment system interoperability, meaning they can ‘talk’ to one another, to smooth international transactions. In the Nordic region, Mastercard is building a world-first regional payment platform to seamlessly connect people and organizations in Sweden, Norway, Denmark and Finland; enabling participants to send and receive funds immediately across the region at a lower cost and with higher security.

Now there’s also potential to improve cross-border connectivity in North America, where Mastercard is powering economies on both sides of the border. Since 2017, Vocalink, a Mastercard company, has powered the RTP® Network on behalf of The Clearing House in the U.S.; Mastercard was also recently selected by Payments Canada to help build a state-of-the-art, real-time payment infrastructure called the Real-Time Rail, bringing instant and secure payments to Canada 24/7/365 by 2022. This creates an exciting opportunity for regional connectivity that’s currently being explored with partners across the payments ecosystem.

With a growing number of examples like these, it’s not hard to imagine a future where it’s just as simple and secure to make an instant payment globally as it is locally.

Compatible technology, data standards and partnerships like the ones in North America are accelerating innovation in financial services and ushering in the next generation of real-time, seamless, and secure cross-border payments. Beyond the speed and valuable data, perhaps the greatest benefit to consumers, businesses and governments is that of choice and control - to pay and get paid in the way that best suits their needs. 

Illustration by: Mona Chalabi