What are Real-time Payments: A Complete Guide for Businesses

What are real-time payments?

Real-time payments are instant payments that can be made between two bank accounts, at any time, any day of the year – 24×7, including on holidays and weekends. An example of this is a SEPA Instant Credit transfer, which lets you transfer up to €100,000 at a time, within seconds, to any country within the EU. Real time payments are quick, secure, and simple. This makes them a great choice for business and consumer payments, including ecommerce payments or P2P transfers. Real-time payments are a much faster (and safer) option than cheques and bank transfers when making cross-border payments. This helps you to make or receive payments on time with lesser chances of fraud.

How do real-time payments work?

Real-time payments use real-time payment rails, which is a digital infrastructure designed to move money from end-to-end in real time. These rails (or networks) operate throughout the year, even on holidays and weekends. This ensures online payments made via this route are initiated and settled almost instantly at any time, any day of the year. Real time payments, along with open banking, have made it easier for businesses to accept and make payments, improve customer experience and become more competitive.

How long does a real time payment take?

Real time payments move funds between two bank accounts instantaneously, within seconds. These transactions can be made year-round, including on bank holidays and weekends, and after business hours.

Why use real-time payments?

Over the years, cash and paper checks have been the primary methods to settle business payments, though more recently electronic bank transfers (or even credit cards) have allowed one to make payments directly from their bank account. But these methods have their challenges. Checks can get delayed, lost, or forged. International bank transfers are expensive and take time to settle (since they are mostly done in batches by banks). Such delays cause uncertainty and impact cash flows, especially for smaller businesses, which rely on receiving payments on time to manage daily operations. Without a steady flow of funds, businesses cannot scale. Plus, old-school methods come with higher risks of fraud, untraceable payments, and mismatched or incomplete payment data, which in turn affects payment reconciliation. New research shows that people prefer real time payments for their convenience.

A 2020 Mastercard survey of consumers across six markets in three continents found that people consider real-time payments as important (or more important) than access to the internet, next-day delivery and even everyday utilities. 75% of people say they would like all digital payments to be in real time. Across Europe and the rest of the world, the maturing of open banking, introduction of new messaging standards such as ISO 20022, and other measures have made RTP adoption easier. But there’s a lot more ground to be covered, though change is happening. Hence, countries round the world have started investing in real time payments infrastructure to enable more people and businesses to benefit from digital payments. Such systems are called “real time payments” or “instant payments.”

Examples of real-time payments

Currently, SEPA Instant Credit Transfer (SCT Inst) in the EU, and Faster Payments in the UK, are the active RTP systems in the region. Nordic’s P27 network is expected to go live this year (by Q2 of 2023). According to a 2022 report, nearly six dozen countries on six continents support real-time payments, processing over $118.3 billion worth of transactions in 2021, clocking a year-on-year growth of 65%. India is the largest market by volume, with $48.6 billion in transactions, followed by China, Thailand, Brazil and South Korea.

Who uses real-time payments?

Real-time payments are used by both consumers as well as by businesses, both big and small. RTP adoption has gone up in the last several years. As of now, up to 72% of the world has a live real-time payments infrastructure or is planning to launch one soon.

Real time payments for corporates

Businesses and banks see the value that RTP brings. And as adoption increases, more use cases will emerge. There are several benefits for businesses to use RTP:

• Faster payment settlement and confirmation – means you get paid on time and can pay your suppliers and partners on time. Every receives a bank confirmation once payment is settled.
• Richer data – RTP moves richer data via the ISO 20022 messaging standard, which provide actionable insights into corporate client needs
• Greater control – you have more control over when your payments are cleared. This gives you more visibility and control over your cash flow.

A survey found that 90% of business leaders are interested in real-time payments, with a majority believing that real time payments will significantly improve customer experience and customer service levels. This is indeed a strong positive and bodes well for the future of real time payments. New legislation in the EU also promise to make real time payments cheaper that what they are now.

Read more: How Real-Time Payments Help You Create More Value

How can Novalnet Help?

If you want to set up real-time payments, we can help. As trusted advisors to Europe’s leading brands on all things payments, our state-of-the-art technologies and methods help businesses like yours accept payments globally. From our instant payment plug-ins to our AI-based risk management tools, we have the resources to get you up and running with your payments in a short time, and with zero hassle. Reach out to us today to know more.

Jose Augustine

Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.