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Real-time payments : An opportunity for the entire Asian financial ecosystem ?
Real-time payments (RTPs) enable money transfer between two different financial institutions with a guarantee of immediate funds availability to the end recipient on a 24-hour-365-day-a-year basis.
This technology is driving growth of cashless transactions in unprecedented proportions.
RTPs are critical for bringing millions of people into the digital financial ecosystem, enabling the rise in the region’s digital commerce and creating new transaction efficiencies for users.
Disruptive new digital commerce players have brought people online into their platforms by seizing upon RTPs and the advantages they offer in digital payments systems.
Traditional banking industry participants continue to develop their use cases to leverage the technology.
While there are a number of logical reasons as to why the adoption of RTPs across industries is not happening at the same rate, it is time for the growth of RTP use cases in payments to accelerate.
Most RTP payments are currently peer-to-peer (P2P) or peer-to-small-and-medium-enterprise payments (P2SME). This is driving cash conversion at the lower pyramid of consumer payments.
For example, 85 percent of transactions on Thailand’s real-time payments platform, PromptPay, are less than THB 5,000 (approximately $200) each, while 80 percent of India’s United Payment Interface (UPI) transactions are less than INR 1,300 (approximately $20) each. However, RTP technology can be applied across all payment categories: B2B supplier payments; B2C payments such as legal settlements, insurance claims, wages; C2B payments such as hospital bills, utility payments, and point-of-sale purchases; and domestic P2P and cross-border remittances.
For the use cases of RTPs to expand and reach their full potential in Asia, the entire ecosystem—of both established financial service players and digital newcomers—must participate in efforts to develop RTP infrastructure, improve fraud monitoring, and encourage consumer adoption.
Specifically, the following issues need to be addressed to realize the potential of RTPs:
- Regulators and policymakers across Asia must promote RTPs standardization, and coordinated policy efforts must encourage RTPs usage across a wide variety of transactions.
- Critical use cases and revenue models must be identified for all industry players—but in particular those adopted by traditional banks—to encourage broader RTPs adoption by all.
- Cost-efficient, standardized infrastructure needs to be developed, ideally on a shared or distributed basis.
- Regulators must require use of intelligence-based analytics tools that identify potential fraud, money laundering, and safety and security risks, and industry participants need to use analytics—informed by large volumes of global data on transaction context and payer demographics and behaviors—to solve for security risks.
The case for RTPs adoption
Real-time payments have been around in some form for nearly 50 years, but only now do we begin to see momentum in their use. The convergence of smart phones, the digitalization of commerce supported by large fintech investments, and the expansion of digital and financial inclusion in the region have created the perfect backdrop for this technology to proliferate.
Rama Sridhar is Executive Vice President, Digital and Emerging Partnerships and New Payment Flows at Mastercard.
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