The pandemic as a gateway to a real-time payments' ecosystem
The new payment infrastructure supports businesses to better serve their customers with a more efficient, secure experience. The applications of the payment technology are endless, including Pay by Account, Mastercard Bill Pay, and many more. Consequently, we can expect real-time payments to become the new normal over the coming decade.
Mastercard’s step
changing solutions
Mastercard has been pursuing a multi-rail strategy with our acquisitions of Vocalink, Nets Corporate Services business, and Transfast. Through these acquisitions, we’ve built our real-time payment capabilities. We are also meeting our customers' changing payments needs by developing overlay payment services that are safe, simple, smart, and accessible.
Mastercard Bill Pay is a next-generation bill presentation and messaging solution that transforms the billing experience, making it simpler, smarter, and more secure.
It reduces the risk of late and erroneous payments, and improves household budgeting, enabling customers to manage their finances in real-time. Customers can manage their bill payments via their bank accounts or cards, giving them more control and flexibility.
Mastercard Bill Pay also helps billers optimize their operational processes, enabling financial institutions to differentiate their digital banking offering, and improving the payer experience.
Mastercard Bill Pay
TM
Pay by Account
Pay by Account enables consumers to make payments directly from a bank account using their mobile-banking applications via a retailer’s application or website.
This solution benefits merchants by reducing cart abandonment and receiving instant access to funds, enabling customers to make real-time payment from any account.
Pay by Account is live in the UK as Pay by Bank App.
A future of greater speed
and efficiency
With rising consumer demand, increased regulation, and the growth of the gig economy, the shift to real-time payments is inevitable. The pandemic has accelerated adoption, as governments and institutions have experienced the positive impact real-time payment infrastructure can have on economic relief and growth.
While we are still in the early days of real-time payments, we can expect to see more applications build on these rails in the coming decade. Countries and issuers who adopt this infrastructure will almost certainly benefit from increased economic activity and better customer retention.
Mastercard is committed to supporting governments to integrate real-time payments into the existing payment infrastructure. We are also committed to putting people at the heart of this payment revolution. We want consumers everywhere to benefit from real-time solutions - from overlay applications like Mastercard Bill Pay and Pay by Account.
The COVID-19 pandemic pulled back the curtains on the creaking infrastructure of a financial system that had outgrown its original design. The reveal was telling. Unlike our parents’ generation, many people no longer work 9–5 jobs or even receive a monthly salary. Meanwhile, as governments across the world responded to the parallel economic crisis with stimulus cheques, many SMEs were already struggling with cash flow. If real-time payment systems were already on the ascent since 2017, when Mastercard’s Vocalink helped introduce them, the pandemic has now made the most convincing case for their widespread adoption.
Paul Stoddart
President, New Payment Platforms, Mastercard
"Real-time payments, support economic growth. They also reduce risk and fraud and increase financial inclusion within an overall economy."
Speed
Traditional payment systems require days to process and clear. This has created obstacles for both businesses and consumers who need to plan their finances.
Efficiency
Banks currently use batch processing to clear person-to-person or ‘P2P’ payments, a time-consuming and costly labor-intensive process. Digitalization is a cheaper and more efficient way to move data and money between financial institutions.
Fraud
Real-time payments empower consumers with greater control over when and how they pay their billers, and how they manage their finances, greatly reducing the opportunity for fraudulent activity.
Emergency funds distribution: Real-time payments has obvious benefits and an immediate solution during crises. This became apparent as governments scrambled to support their citizens with economic assistance during the pandemic.
Reducing cash and cheque usage: Real-time payments reduces the need for physical cash and cheques, as well as carbon-intensive travel, making it a faster, greener choice for public institutions.
Economic transparency and financial inclusion: Real-time payments is a powerful enabler for innovative new business models, like the gig economy. Because it provides an immediate solution for cash-strapped individuals, it supports a fairer and more inclusive economy.
The Power of Now
We are now in the era of real-time payment systems. Consumers, businesses, and governments are adopting them en masse because they are cheaper, faster, and more convenient than traditional payment systems. As interconnected global commerce takes off in the digital age, a new generation of business models is dependent on the convenience and ease of real-time payments. This trend has been gathering momentum during the COVID-19 pandemic, leading to the question: how can real-time payments enable a more inclusive and efficient payment ecosystem?
Innovation Insights
Public Sector
Forces of
Transformation
Real-time payments is a global trend
New business models
The rise in the gig economy, micro-enterprise, and innovative new business models have all converged to fuel demand for real-time payments, just-in-time payroll, and better cash flow management.
Rising consumer expectation in the power of now
Regulation and Government Policy
73% of real-time payments systems are regulatory-driven. Regulators and policymakers recognize their value for financial inclusion, consumer protection, and economic development. Therefore, they are leading on policies to increase adoption.
With the rise in technology and mobile advances, consumers want almost everything to be real-time, whether paying bills or friends. 58% of US consumers say they would switch financial institutions if they did not offer real-time payments.
2020 saw Faster Payments break the record for the highest amount of payments processed in a single year.
The US real-time payments transaction volume is projected to increase from $734 million in 2019 to $4.2 billion by 2024 at a 42.1% CAGR over the next five years.
Electronic transfers rose from 350 million in 2005 to 1 billion in 2012 after the implementation of SPEI RTP system.
Of the world’s GDP is in markets with real-time payments
87%
Once payments have been processed, they can’t be recalled. This represents a significant benefit to SMEs, who previously found themselves at the mercy of constrained cash flow, and who can now access funds immediately.
Finality
up 41% from
50BN in 2019
Drivers of the new payment architecture
total number of real-time transactions in 2020
70.3
BN
%
+40
Technology innovation
Smartphone adoption has reached over 70% in the developed world, with strong growth in emerging markets. This has been a key driver for rapid change.
Defining real-time payments
Real-time payments refers to payment rails that are real-time or very close to it in terms of initiating, clearing, and settling in a matter of seconds.
Real-time payments systems make it easier for people to pay and get paid, providing more control and flexibility.
Real-time payments transaction volumes have doubled in the last year
2x
Live global real-time payments systems covering 63 different countries and territories.
59
India, whose volumes include a combination of IMPS and Unified Payments Interface (UPI), has seen remarkable growth over the last 12 months rising 112 percent from 6 billion transactions to 13 billion transactions.
FAST, Singapore’s RTP system processed 33,000 txs with a combined value of almost $48 million (USD) just a few days after launch. Currently, the service processes almost 100,000 txs per day with a value of $147 million transferred daily.
Cash flow management: Real-time payments allows merchants to receive a settlement for goods sold much faster.
Immediacy: Real-time payments allows businesses to receive funds quickly from customers, and to pay employees and suppliers on time. Whereas, 47% of businesses find delays for payments frustrating.
Corporates & SMEs
Consumers
Who does it impact and how?
The impact of real-time payments cuts across many sectors, and many key groups will benefit
Immediate fund access: Real-time payments gives consumers greater control over their finances, giving them peace of mind so that they better manage their household finances.
Informed spending decisions: Consumers have greater control over their finances.
Simplified and fast: Real-time payments allows consumers to pay and get paid quickly, dispensing with bureaucracy and complexity.
1. The Global Adoption of Real-Time Retail Payments Systems, 2015
2. Accelerating the real time payments demand curve, Alacriti & PYMTS.com, 2020
3. Global Mobile Market Report, 2019
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1
2
3
1. The frictionless future of real-time payments, Vocalink, 2019
2. Keeping Pace with Innovation in Real Time Payments, 2020, ACI
3. Global real-time payments soar in 2020, Vocalink, 2021
1. Global real-time payments soar in 2020, Vocalink, 2020
1
1. Businesswire, May 2021
1
1. Real-time payments and implications of the COVID-19 pandemic, Deloitte, 2020
2. Global Payments: Spotlight on Mexico, Icon Solution, 2017
3. Statistics, Fasterpayments, 2020
4. The real-time payment market continues to mature, Vocalink, 2020
5. Fast and Secure Transactions, Vocalink, 2018
6. Flavors of Fast, FIS, 2018
1
2
3
5, 6
4
3
66%
20%
9%
6%
How fast is real-time?
Over 80% of today’s modern payment exchanges clear in under 10 seconds
Real-time
Under 10 seconds
Under 30 seconds
Under 60 seconds
Source: FIS Flavors of Fast 2019
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2
Displayed are five examples of real-time payments systems, which are currently live.
Once her card is found, she enters her details onto the payment page.
Alice lives with her husband and their two young children. As manager of the family’s finances, here is her journey to paying a bill.
She receives her bill by e-mail but misses it due to the volume of e-mails she receives
She receives a late payment notice through the post
She calls the biller customer care centre to query the late payment notice.
She is advised to log on to the website and pay the bill. She tries to log into her account but forgets her login details.
She has to reset her login details and finally reaches the payment page.
9
5
4
6
She is required to enter her payment information. She is required to look for her card to input the payment details
The biller receives the
payment 3-5 days later.
7
8
1
2
3
without Mastercard Bill Pay
with Mastercard Bill Pay
with Mastercard Bill Pay
without Mastercard Bill Pay
Alice lives with her husband and their two young children. As manager of the family’s finances, here is her journey to paying a bill.
She see a new feature via her mobile banking application, to register for Bill Pay.
Alice see her bills and add them to her profile on Bill Pay and payment preferences and notifications for each
She receives a bill pay push notification when her bill is due
She can view the Bill PDF
She can make a payment instantly from her mobile banking application
Biller receives payment instantly.
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5
4
6
1
2
3
Paying for Bills
USE CASE
Consumers
Corporates
Public Sector
Sender’s bank account
Receiver’s bank account
Real time payment’s
gateway
Instant Payment Service
Central Bank
Transaction in a few sections
Real time payment’s
gateway
Defining real time payments
Real time payments refers to payment rails that are real time or very close to it in terms of initiating, clearing, and settling in a matter of seconds. Real time payment systems allow customers to transact, creating a frictionless, convenient experience for the end user.
Recipient gets paid immediately
Recipient confirms payments individually
Consumers
Corporates
Public Sector
Payer initiates
a transaction
Bank authorizes payment and submits to recipient for confirmation