Industry insights around real-time payments and upcoming trends
Ankur has 25 years of experience in Sales for Banking Software and Technology products. In his current role at ACI Worldwide, Ankur is a Sr. Director and Head of Sales for Growth Markets for Middle East, CIS, Africa & South Asia. He is responsible for GTM planning and executing sales plans for Banking for Base24 Switch, real-time payments, payment gateways and real-time (omni channel) enterprise fraud risk monitoring.
In conversation with Charulatha, Correspondent, Silicon- india Magazine. Ankur shares his views on the growing adoption of real-time payment solutions among busi- nesses and the trends have emerged in the use of real-time payments for e-commerce transactions.
Real-time payment systems hold in enhancing the efficiency of financial transactions in today's financial landscape
Real-time payment (RTP), also known as instant pay- ments, describes any account-to-account fund transfer that allows for the immediate availability of funds to the beneficiary of the transaction. RTP forms the bedrock of a digital economy and significantly enhances the efficiency of financial transactions in today's dynamic financial landscape. Among its myriad benefits, I would like to highlight three key benefits.
Firstly, real-time payments improve cash flow management and liquidity. The real-time availability of funds through these systems enables businesses to optimize their cash flow management strategies. By receiving payments promptly and having immediate access to funds, businesses can better plan their financial activities, make timely investments, and meet operational expenses without disruptions or liquidity constraints.
Secondly, real-time payments facilitate cost reduction and operational efficiency by reducing transaction costs and streamlining operational processes by eliminating the need for manual intervention and paperwork. The automation and efficiency of these systems enable businesses to allocate resources more effectively, reduce administrative overheads, and optimize their financial operations.
Last but not least, real-time payments facilitate faster and more efficient cross-border transactions, enabling businesses to expand their global reach and engage in international trade seamlessly. This capability fosters international business growth, enhances market competitiveness, and promotes economic integration across different regions.
The growing adoption of real-time payment solutions among businesses
According to the 2023 Prime Time for Real-Time report published by ACI, 195 billion RTP transactions were recorded globally in 2022, with India leading the way and accounting for 46% of all real-time transactions.
Showing no sign of stopping, UPI – the instant payment service in India - has crossed the historical mark of 10 billion (or 1,000 crore) transactions for the first time ever in August this year, clocking transactions amounting to Rs 15.76 lakh crore.
Consumers’ expectations for speed and convenience play a significant role in the growing adoption of real-time payment solutions among businesses. Consumers are no longer willing to put their lives on hold while waiting for payments to be processed. The gig economy epitomizes the need for real-time payment.
With the ability to process international payments in real time, businesses can cater to a broader customer base and capitalize on opportunities without being constrained by geographical boundaries. For example, India’s UPI stands out in advancing bilateral links with other countries, spurring trade and commerce, including Singapore and the United Arab Emirates.
Support from the government and central bank and their investment in modern infrastructure is crucial in promoting the adoption of UPI in India. The government has taken various initiatives to encourage the use of UPI among individuals and businesses, such as providing incentives and cashback as well as the Pradhan Mantri Jan-Dhan Yojana program to promote financial inclusivity.
These efforts have simplified the payment process and paved the way for a more transparent and efficient financial ecosystem.
"With the rise of digital technology, consumers have become accustomed to instant gratification and convenience in all aspects of their lives, including payments"
The primary challenges in implementing real-time payment infrastructure
The primary challenges in implementing real-time payment infrastructure include the need for robust security measures, interoperability and standardization between different systems, and seamless integration with existing banking infrastructure.
Real-time payment systems must adhere to stringent regulatory standards and compliance requirements across different regions and countries especially when it comes to cross-border payments. Ensuring compliance with these regulations while enabling can be challenging for financial institutions and payment service providers.
Encouraging widespread adoption of real-time payment systems requires consumer education initiatives to raise awareness about its benefits, security features, and usage. Overcoming consumer reluctance and promoting a shift from traditional payment methods to real-time payment solutions is a challenge that requires effective communication and outreach strategies.
Trends have emerged in the use of real-time payments for e-commerce transactions
Real-time payment systems have enabled the customization of payment experiences for e-commerce consumers. Personalized payment options, tailored promotional offers, and targeted rewards based on real-time transaction data have become prevalent trends, enhancing customer engagement and satisfaction.
Real-time payment technologies are increasingly integrated with voice commerce and artificial intelligence (AI) solutions, enabling consumers to make purchases and complete transactions using voice commands, facial and fingerprint verification and palm screening and AI-powered virtual assistants. This integration streamlines the e-commerce experience and offers users a more intuitive and seamless payment process.
Role do real-time payments play in advancing financial inclusion efforts
Real-time payments eliminate the need for physical checks and lengthy processing times, making it easier for individuals in remote or underserved areas to access financial services without physical bank branches. This accessibility empowers individuals to conduct tran- sactions and access funds conveniently, reducing barriers to financial participation.
Real-time payments often have lower transaction costs than traditional banking services, making them more affordable for individuals with limited financial resources. This encourages greater participation in the formal financial system and reduces reliance on informal and often expensive financial channels.
With quicker and more secure transactions, microenterprises and small businesses can now access funds and make payments in a timely manner. This accessibility can boost entre- preneurship and economic development in underserved regions.
Real-time payment technologies can facilitate cross-border remittances, allowing individuals to send and receive funds internationally on time and cost-effectively. According to a World Bank report, India received over $100 billion in yearly remittances in 2022. This will be the first time a country reaches that milestone figure.
Remittances from migrant workers to families back home, are an important source of income for low-income households. They reduce poverty and have been associated with higher school enrollment rates for children in disadvantaged households. This capability promotes financial inclusion for migrant workers and their families, enabling them to access essential financial services across borders.
Innovations propel the evolution of real-time payment technologies
There are a number of innovations driving the evolution of real-time payment technologies. With the demonstrated success of real-time payments in many countries, there is increasing demand for countries to evolve to the next phase of growth and launch new payment methods and innovative digital overlay services on top of their payment rails.
These services enable immediate payments on various channels and platforms like social media payments, bank applications, in-app payments, eCommerce, point-of-sale (POS) payments, QR payments, and Request to Pay.
ISO 20022 is a global data-rich standard that will change how banks relay cross-border payment instructions. Since its introduction, financial institutions can not only enable more efficient real-time cross-border payments, but they can also create additional innovative products.
AI and machine learning are being leveraged to detect fraudulent activities, personalize user experiences, and optimize transaction processes in real-time payment systems. These technologies enhance security measures and improve the overall efficiency of real-time transactions. For example, India’s central bank has proposed integrating artificial intelligence (AI) technology into UPI to enable people to make ‘conversational payments.
Real-time payments impact consumer behavior and expectations
With the rise of digital technology, consumers have become accustomed to instant gratification and convenience in all aspects of their lives, including payments.
Consumers accustomed to immediacy in payments will have the same expectations in the immediate processing and delivery of goods and services. This shift in expectation can drive businesses to streamline their processes and offer faster services to meet increasing consumer demands.
Real-time payment systems give consumers real-time visibility into their financial transactions, allowing for better financial management and budgeting. This transparency fosters a sense of control over personal finances, enabling consumers to make informed spending decisions.
The prevalence of real-time payments encourages consumers to embrace digital platforms and participate in online shopping and e-commerce activities. This trend leads to increased online engagement as consumers become more comfortable with the speed and security of digital payment methods.
As consumers increasingly rely on digital payment methods, there is a growing demand for robust security measures to protect sensitive financial information. Consumers expect real-time payment systems to incorporate advanced security protocols and mechanisms to safeguard their transactions and personal data.
Insights can be provided regarding the security considerations related to real-time payment methods
Banks need to safeguard their customers and revenue by shifting their focus from relying on traditional measures designed to prevent check or card fraud. They need to arm themselves with the right fraud strategies to capitalize on the security of the real-time payment rails and reap the benefits of real-time payments without fraud management becoming a cost center.
According to the ACI’s Scamscope report, Authorised Push Payments (APP) fraud losses in India is expected to amount to $612 million by 2026. Guidelines from the Reserve Bank of India states that customers can’t be made liable if they notify the bank of fraud within three working days of the transaction. Banks will have to shoulder the burden for losses due to contributory fraud and negligence on the part of the bank.
Advanced AI-based fraud protection strategies and machine learning are essential for identifying and preventing fraudulent activities during payment processing. This includes monitoring for unusual transaction patterns and verifying the legitimacy of each transaction in real-time.
Educating consumers about best practices for secure online transactions and raising aware- ness about common cyber threats can help them make informed decisions and safeguard their financial information.
By addressing these security considerations, businesses and financial institutions can foster a secure environment for real-time payments, thereby enhancing consumer confidence in digital financial transactions and safeguarding themselves.
The future of real-time payments in the financial industry
The future of real-time payments is promising, especially in India. The UPI payments ecosystem is setting ambitious targets for the future. By 2030, it aims to achieve a staggering 2 billion transactions per day, with a ten-fold increase in customers accessing credit. Additionally, plans are underway to establish cross-border processes for half of the world's top 30 countries.
We will also see the integration of real-time payments with other emerging technologies, such as the Internet of Things (IoT). This could include smart appliances, wearables, and other connected devices that can initiate transactions autonomously.
With the rise of digital transactions and advancement in technologies, a heightened focus will be on enhancing security measures to protect against increasingly sophisticated cyber threats and fraud. Advancements in technologies such as blockchain, artificial intelligence (AI), and machine learning will likely play a significant role in the evolution of real-time payments.
Regulatory frameworks will continue to evolve to accommodate the rapid changes in the financial landscape. Striking a balance between fostering innovation and ensuring consumer protection will be crucial for the sustainable development of real-time payments.
Payments will continue to evolve beyond transactions to be an important touchpoint in the holistic customer experience framework. Financial institutions will look to differentiate themselves and develop more innovative digital overlay use cases to provide unique and personalized service, enhancing overall customer experience.
Overall, the future of real-time payments is expected to be characterized by greater speed, security, interoperability, and user-centric experiences enabled by technological advancements and regulatory developments.
In conversation with Charulatha, Correspondent, Silicon- india Magazine. Ankur shares his views on the growing adoption of real-time payment solutions among busi- nesses and the trends have emerged in the use of real-time payments for e-commerce transactions.
Real-time payment systems hold in enhancing the efficiency of financial transactions in today's financial landscape
Real-time payment (RTP), also known as instant pay- ments, describes any account-to-account fund transfer that allows for the immediate availability of funds to the beneficiary of the transaction. RTP forms the bedrock of a digital economy and significantly enhances the efficiency of financial transactions in today's dynamic financial landscape. Among its myriad benefits, I would like to highlight three key benefits.
Firstly, real-time payments improve cash flow management and liquidity. The real-time availability of funds through these systems enables businesses to optimize their cash flow management strategies. By receiving payments promptly and having immediate access to funds, businesses can better plan their financial activities, make timely investments, and meet operational expenses without disruptions or liquidity constraints.
Real-time payment systems have enabled the customization of payment experiences for e-commerce consumers
Secondly, real-time payments facilitate cost reduction and operational efficiency by reducing transaction costs and streamlining operational processes by eliminating the need for manual intervention and paperwork. The automation and efficiency of these systems enable businesses to allocate resources more effectively, reduce administrative overheads, and optimize their financial operations.
Last but not least, real-time payments facilitate faster and more efficient cross-border transactions, enabling businesses to expand their global reach and engage in international trade seamlessly. This capability fosters international business growth, enhances market competitiveness, and promotes economic integration across different regions.
The growing adoption of real-time payment solutions among businesses
According to the 2023 Prime Time for Real-Time report published by ACI, 195 billion RTP transactions were recorded globally in 2022, with India leading the way and accounting for 46% of all real-time transactions.
Showing no sign of stopping, UPI – the instant payment service in India - has crossed the historical mark of 10 billion (or 1,000 crore) transactions for the first time ever in August this year, clocking transactions amounting to Rs 15.76 lakh crore.
Consumers’ expectations for speed and convenience play a significant role in the growing adoption of real-time payment solutions among businesses. Consumers are no longer willing to put their lives on hold while waiting for payments to be processed. The gig economy epitomizes the need for real-time payment.
With the ability to process international payments in real time, businesses can cater to a broader customer base and capitalize on opportunities without being constrained by geographical boundaries. For example, India’s UPI stands out in advancing bilateral links with other countries, spurring trade and commerce, including Singapore and the United Arab Emirates.
Support from the government and central bank and their investment in modern infrastructure is crucial in promoting the adoption of UPI in India. The government has taken various initiatives to encourage the use of UPI among individuals and businesses, such as providing incentives and cashback as well as the Pradhan Mantri Jan-Dhan Yojana program to promote financial inclusivity.
These efforts have simplified the payment process and paved the way for a more transparent and efficient financial ecosystem.
"With the rise of digital technology, consumers have become accustomed to instant gratification and convenience in all aspects of their lives, including payments"
The primary challenges in implementing real-time payment infrastructure
The primary challenges in implementing real-time payment infrastructure include the need for robust security measures, interoperability and standardization between different systems, and seamless integration with existing banking infrastructure.
Real-time payment systems must adhere to stringent regulatory standards and compliance requirements across different regions and countries especially when it comes to cross-border payments. Ensuring compliance with these regulations while enabling can be challenging for financial institutions and payment service providers.
Encouraging widespread adoption of real-time payment systems requires consumer education initiatives to raise awareness about its benefits, security features, and usage. Overcoming consumer reluctance and promoting a shift from traditional payment methods to real-time payment solutions is a challenge that requires effective communication and outreach strategies.
Trends have emerged in the use of real-time payments for e-commerce transactions
Real-time payment systems have enabled the customization of payment experiences for e-commerce consumers. Personalized payment options, tailored promotional offers, and targeted rewards based on real-time transaction data have become prevalent trends, enhancing customer engagement and satisfaction.
Real-time payment technologies are increasingly integrated with voice commerce and artificial intelligence (AI) solutions, enabling consumers to make purchases and complete transactions using voice commands, facial and fingerprint verification and palm screening and AI-powered virtual assistants. This integration streamlines the e-commerce experience and offers users a more intuitive and seamless payment process.
Role do real-time payments play in advancing financial inclusion efforts
Real-time payments eliminate the need for physical checks and lengthy processing times, making it easier for individuals in remote or underserved areas to access financial services without physical bank branches. This accessibility empowers individuals to conduct tran- sactions and access funds conveniently, reducing barriers to financial participation.
Real-time payments often have lower transaction costs than traditional banking services, making them more affordable for individuals with limited financial resources. This encourages greater participation in the formal financial system and reduces reliance on informal and often expensive financial channels.
With quicker and more secure transactions, microenterprises and small businesses can now access funds and make payments in a timely manner. This accessibility can boost entre- preneurship and economic development in underserved regions.
Real-time payment technologies can facilitate cross-border remittances, allowing individuals to send and receive funds internationally on time and cost-effectively. According to a World Bank report, India received over $100 billion in yearly remittances in 2022. This will be the first time a country reaches that milestone figure.
Remittances from migrant workers to families back home, are an important source of income for low-income households. They reduce poverty and have been associated with higher school enrollment rates for children in disadvantaged households. This capability promotes financial inclusion for migrant workers and their families, enabling them to access essential financial services across borders.
Innovations propel the evolution of real-time payment technologies
There are a number of innovations driving the evolution of real-time payment technologies. With the demonstrated success of real-time payments in many countries, there is increasing demand for countries to evolve to the next phase of growth and launch new payment methods and innovative digital overlay services on top of their payment rails.
These services enable immediate payments on various channels and platforms like social media payments, bank applications, in-app payments, eCommerce, point-of-sale (POS) payments, QR payments, and Request to Pay.
ISO 20022 is a global data-rich standard that will change how banks relay cross-border payment instructions. Since its introduction, financial institutions can not only enable more efficient real-time cross-border payments, but they can also create additional innovative products.
AI and machine learning are being leveraged to detect fraudulent activities, personalize user experiences, and optimize transaction processes in real-time payment systems. These technologies enhance security measures and improve the overall efficiency of real-time transactions. For example, India’s central bank has proposed integrating artificial intelligence (AI) technology into UPI to enable people to make ‘conversational payments.
Real-time payments impact consumer behavior and expectations
With the rise of digital technology, consumers have become accustomed to instant gratification and convenience in all aspects of their lives, including payments.
Consumers accustomed to immediacy in payments will have the same expectations in the immediate processing and delivery of goods and services. This shift in expectation can drive businesses to streamline their processes and offer faster services to meet increasing consumer demands.
Real-time payment systems give consumers real-time visibility into their financial transactions, allowing for better financial management and budgeting. This transparency fosters a sense of control over personal finances, enabling consumers to make informed spending decisions.
The prevalence of real-time payments encourages consumers to embrace digital platforms and participate in online shopping and e-commerce activities. This trend leads to increased online engagement as consumers become more comfortable with the speed and security of digital payment methods.
As consumers increasingly rely on digital payment methods, there is a growing demand for robust security measures to protect sensitive financial information. Consumers expect real-time payment systems to incorporate advanced security protocols and mechanisms to safeguard their transactions and personal data.
Insights can be provided regarding the security considerations related to real-time payment methods
Banks need to safeguard their customers and revenue by shifting their focus from relying on traditional measures designed to prevent check or card fraud. They need to arm themselves with the right fraud strategies to capitalize on the security of the real-time payment rails and reap the benefits of real-time payments without fraud management becoming a cost center.
According to the ACI’s Scamscope report, Authorised Push Payments (APP) fraud losses in India is expected to amount to $612 million by 2026. Guidelines from the Reserve Bank of India states that customers can’t be made liable if they notify the bank of fraud within three working days of the transaction. Banks will have to shoulder the burden for losses due to contributory fraud and negligence on the part of the bank.
Advanced AI-based fraud protection strategies and machine learning are essential for identifying and preventing fraudulent activities during payment processing. This includes monitoring for unusual transaction patterns and verifying the legitimacy of each transaction in real-time.
Educating consumers about best practices for secure online transactions and raising aware- ness about common cyber threats can help them make informed decisions and safeguard their financial information.
By addressing these security considerations, businesses and financial institutions can foster a secure environment for real-time payments, thereby enhancing consumer confidence in digital financial transactions and safeguarding themselves.
The future of real-time payments in the financial industry
The future of real-time payments is promising, especially in India. The UPI payments ecosystem is setting ambitious targets for the future. By 2030, it aims to achieve a staggering 2 billion transactions per day, with a ten-fold increase in customers accessing credit. Additionally, plans are underway to establish cross-border processes for half of the world's top 30 countries.
We will also see the integration of real-time payments with other emerging technologies, such as the Internet of Things (IoT). This could include smart appliances, wearables, and other connected devices that can initiate transactions autonomously.
With the rise of digital transactions and advancement in technologies, a heightened focus will be on enhancing security measures to protect against increasingly sophisticated cyber threats and fraud. Advancements in technologies such as blockchain, artificial intelligence (AI), and machine learning will likely play a significant role in the evolution of real-time payments.
Regulatory frameworks will continue to evolve to accommodate the rapid changes in the financial landscape. Striking a balance between fostering innovation and ensuring consumer protection will be crucial for the sustainable development of real-time payments.
Payments will continue to evolve beyond transactions to be an important touchpoint in the holistic customer experience framework. Financial institutions will look to differentiate themselves and develop more innovative digital overlay use cases to provide unique and personalized service, enhancing overall customer experience.
Overall, the future of real-time payments is expected to be characterized by greater speed, security, interoperability, and user-centric experiences enabled by technological advancements and regulatory developments.
