Payments

Perspectives

Real-time payments and implications of the COVID-19 pandemic

Increased competition, adoption of contactless payments

COVID-19 showed us why and how real-time payments can make a tremendous difference in the payments ecosystem—and instantly aid millions of personal and professional needs. Deloitte explores the current state of real-time payments processing in the United States and how the pandemic is influencing the transformation, use cases, and ecosystem participants.

COVID-19 and the urgency of real-time payments adoption

During the pandemic, access to immediate funds has become paramount for consumers and businesses from basic sustenance and continuity standpoints. Timeliness of payment disbursements, such as social security, unemployment benefits, government assistance, and other financial aid, has become a major concern among those who depend on them.

The coronavirus outbreak is also prompting second thoughts for consumers and businesses around the use of cash. A growing number of businesses and individuals worldwide have instituted measures to limit using banknotes and increase the use of contactless payments in fear that physical currency, handled by tens of thousands of people, could be a potential vector for this disease. Even without the crisis, real-time payments already has numerous established needs, including faster processing, immediate settlement, and the ability to send and receive data-rich payments messages—which can help with automating time-consuming elements of payments processing.

Real-time payments hold the potential to altogether transform payments from a commoditized service into a key, strategic service with implications across the value chain of industries. And to leverage that change, financial institutions (FIs) have started viewing payments with greater focus on the more extensive business and value-based setting inside which any payment transaction happens rather than simply as the settlement of an exchange.

Real-time payments and implications of the COVID-19 pandemic

Real-time payments competition is growing in real time

The real-time payments space had been gaining significant traction over the years prior to the start of the pandemic. Across the globe today, 40 countries have real-time payments processing solutions in place, and more than half a dozen countries have announced their plans to go live before 2023.

Real-time payments in the United States are in the fast lane, with significant year-over-year growth of 69%. We are witnessing incumbent payments networks adding incremental features, fintechs launching customer-facing apps, and new real-time payments solutions being conceptualized and developed to address the projected volume and demand for real-time payments in the next five to 10 years.

Crisis or no crisis, real-time payments transformation has already begun in the marketplace. The competitive landscape is being redefined by the evolution of new solutions provided by FIs and development of strategic alliances that cut across traditional sectoral boundaries.

All things considered, we imagine that the post–COVID-19 real-time payments processing ecosystem might include globally integrated clearing-settlement frameworks and open platform channels that offer maximum customer access, adaptability, and comfort.

Card payment

Accelerating adoption amid the pandemic

The growing prepandemic market options alone were set to speed up adoption of real-time payments in the United States, up from an 8.9% share of volume in 2019 to an expected 20.9% in 2024 and projected 42.1% CAGR of real-time payments transactions over the next five years, forecasting the US real-time payments transaction volume going from $734 million in 2019 to $4.2 billion by 2024.

Organizations should consider the following real-time payments processing and structural changes:

  • Create a stronger supply chain
  • Accelerate digital offerings
  • Shift from card payments to real-time payments
  • Develop new value-added services as a competitive differentiator

What’s next for real-time payments?

The full-scale adoption of real-time payments is only a matter of time, and the real question facing FIs is what this means for their product strategy and, ultimately, their customers. Customer expectations around speed, ease, convenience, and security of payments are increasing, despite or even stimulated by the COVID-19 crisis, meaning FIs must either deliver on real-time or risk damaging both their revenues and reputation.

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