Japan pioneered the real-time payments system (RTPS) with the launch of the Zengin System in 1973. Four decades and six upgrades later, RTPSs are now available 24/7 and 365 days a year with advanced features and enhanced security capabilities. Since the early 2000s, Switzerland, Turkey, and Iceland, among other European nations, have been using real-time payments. In 2010, India and China—the world's two most populous countries—implemented real-time payments systems. Since 2010, many countries have been using real-time payments, and 60 countries are live on real-time payments networks. Furthermore, the adoption of real-time payments systems by countries has increased fourfold since 2014.
A real-time payment system instantly processes clearing and settlement, allowing consumers and businesses to make payments immediately at a low transaction cost and minimal risk. It leverages multiple channels including the web, smartphones, tablets, ATMs, and bank branches. Real-time payments (RTPs) combine immediate funds availability, final settlement, instant payment confirmation and notification, and bilateral information exchange. Typically, RTP schemes are of two types: Real-Time Settlement (RTS) and Net Deferred Settlement (NDS). NDS—a settlement system that settles transactions multilaterally based on a specific debit/credit balance against a particular counterparty at specific time intervals—is widely accepted in most nations including India and China. However, since the clearing authority can fix settlement cycles throughout the day, NDS may cause banks to experience liquidity shortfalls.
Financial control, cash positioning, and liquidity management are now possible with real-time payments. Modern RTPSs boast direct debit, request for payment, and remittances and have opened up payment rails to help various industry stakeholders delight customers by providing services such as bill payments, point-of-sale payments, social payments, in-app payments, QR code-enabled payments, and invoice payments. In this article, we will take a look at the various RTPSs across the world.
An ACI report states that India registered the highest volume of real-time payment transactions in 2020, followed by China, South Korea, Thailand, the UK, Nigeria, Japan, Brazil, the US, and Mexico.
In 2010, the National Payments Corporation of India (NPCI) launched Immediate Payment Service (IMPS)—an instant payment inter-bank electronic funds transfer system—in India. IMPS was the antidote to conventional funds transfer services that took a long time to complete transactions. In 2016, the NPCI launched UPI (Unified Payment Interface)—a real-time payments system that enables users to make instant payments without them having to provide bank account details, just their UPI ID (also known as Virtual Payment Address), further bolstering the adoption of RTPs in India. This open ecosystem that allows banks, tech companies, FinTechs, and non-financial companies to launch their UPI apps and integrate them into their offerings is enabling the country to evolve from a cash-dependent economy to a cashless one.
As UPI is open-sourced, BigTech and FinTechs made an early move toward implementing it and thus gained a competitive edge on the overall market share. PhonePe (previously owned by Flipkart), for example, accounts for 45% of all UPI transactions (by volume), followed by GooglePay (35%), Paytm, (14%), and banks and other financial institutions (6%). Overall, UPI has processed 34.2 billion transactions worth $844 billion so far this year, and UPI transactions have doubled between January 2020 and November 2021. The number of transactions has grown exponentially, from 3.9 billion in 2018 to 34.2 billion in 2021 so far. As per the ACI report (mentioned above), real-time payments share in India will increase from 15.6% in 2020 to 37.1% in 2025 to reach 85.5 billion annual transactions (by volume).
P2P and P2B make up 54% and 46% of all UPI transactions, respectively. UPI is now enriched with new features such as auto-debit, UPI linked to overdraft accounts, QR code, and collect request that opens up new use cases such as utility payments, toll payments, recurring payments, in-app payments, loan fund transfers, and insurance payments. These features make a strong case for using UPI for making payments. Further, the NPCI and the Monetary Authority of Singapore (MAS) recently announced their plan to link UPI and PayNow fast payment networks to enable cross-border payments for their customers. The linkage will be completed by 2022.
Thailand is another Asian country that received an overwhelming response to its RTPS. It launched its RTPS PromptPay in 2016. With PromptPay, users can receive and transfer funds using citizen IDs and mobile numbers via internet banking, mobile banking, and ATMs. Transaction volume on PromptPay has grown phenomenally, from 1 billion in 2018 to 6.7 billion in 2021 (so far). The number of transactions more than doubled during the COVID-19 pandemic, from 2.5 billion in 2019 to 5.3 billion in 2020. According to the ACI report, real-time payments share in Thailand will increase from 15.4% in 2020 to 43.1% in 2025 to reach 21 billion annual transactions (by volume).
In February 2021, the Bank of Thailand and National Interbank Transaction Management and Exchange (ITMX) implemented ACI Worldwide’s real-time payments service based on the new messaging standard (ISO 20022) to enhance bulk payments processing. This move modernized the existing real-time payments infrastructure and brought new payment use cases for merchants and the B2B sector. In addition, Thailand's PromptPay and Singapore's PayNow have successfully linked their real-time payment networks to enable instant cross-border payments between the two countries. The linkage is expected to provide a robust, seamless, and low-cost cross-payment network to users and businesses while increasing business transactions between the countries.
In February 2018, Australia launched New Payment Platform (NPP) based on a new messaging standard (ISO 20022) to enable real-time account-to-account fund transfers for individuals, businesses, and government agencies. Using PayIDs—generated using phone number, email address, or an Australian Business Number (ABN)—one can easily transfer funds on NPP. Since the platform went live in 2018, it has processed 1.82 billion transactions worth $1.87 trillion. Further, the transaction volume has grown by 11.2 times, from 74 million in 2018 to 833 million in 2021 (so far). The pandemic led to an impressive 132.36% growth (YoY) in transaction volume; transactions jumped from 275 million in 2019 to 639 million in 2020. Some use cases of NPP are personal loans, insurance claims, and immediate disbursement of funds for taxi drivers and gig economy workers. NPP Australia is investing in enhancing the existing functionalities and developing new services such as enabling third-party payment initiation and facilitating international payments.
In the US, Early Warning Services was the first private entity that launched a real-time fund transfer service for individuals and businesses—Zelle—in June 2017. Later, The Clearing House, a banking association, developed and launched its RTP network in November 2017. The network enables financial institutions of all sizes to develop new products and services. Since 2018, Zelle has processed 3.67 billion transactions worth $966 billion. Further, transactions surged from 433 million in 2018 to 1.29 billion in October 2021. Amid the pandemic, Zelle handled more than 1.2 billion transactions (in 2020) and registered a 63% YoY growth. FedNow is currently being piloted by the Federal Reserve and is expected to launch in 2023.
Brazil launched its real-time payments system SITRAF in 2002. SITRAF supports P2P and C2B payments, and payments can only be made via the internet or mobile banking. Banco Central do Brasil (BCB), the central bank of Brazil, has announced the launch of PIX—an ISO 20022-based real-time payments system that went live on November 16, 2020. Within one year of its launch, PIX processed 1.23 billion transactions. Between 2018 and 2020, transactions doubled from 600 million to 1.2 billion.
Currently, 33% of the countries worldwide have implemented real-time payment schemes. Indonesia, the US (FedNow), Slovakia, and Kazakhstan, among other countries, are expected to jump on the bandwagon and launch their national real-time payments systems. RTPSs are likely to find more takers in the coming years. They have evolved—from a P2P instant transfer mechanism to a retail funds transfer mechanism—and are likely to power cross-border transactions in the coming years, eventually boosting financial inclusion.
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