The goal of any payment method — check, cash, digital wallet, really any payments choice — is ubiquity.
After all, achieving maximum utility only happens when every payer can reach every receiver.
Melissa Tuozzolo, head of international payments in Global Transaction Services at Bank of America, told PYMNTS that real-time payments have the potential to change the very nature of payments. But we’re a long way from ubiquity — and it will take more than just technological infrastructure to get there.
And the bid to get everyone on board — the consumers and corporates, and even the financial institutions (FIs) themselves — well, that involves a bit of a behavioral shift.
Tuozzolo noted that about 60 countries around the world have real-time payments schemes in operation, and another eight countries are in various stages of implementation. In some markets (India or in Latin America, for instance), instant payments are already ubiquitous.
“We’re getting to the point where, from a global perspective, [real-time payments are] becoming a standard offering in major markets around the world,” noted Tuozzolo.
Markets including the United States have been relatively slow to embrace real-time payments because payment rails like automated clearing house (ACH) and checks are firmly entrenched and have worked just fine. But there’s room for a broad range of payment options to co-exist, she said.
“To prod a change in user experience and in user behavior is still a journey that needs to be undertaken,” she said.
Changing the Behaviors
For true scale, businesses and their banks need reassurance that when they send funds across instant payments channels, receivers will actually know it’s happening. There also needs to be evidence that what’s new is also better. At least at present, the U.S. has proven to be the proverbial tough nut to crack.
Tuozzolo said real-time payments will become a strategic differentiator as companies look to launch value-added services to pay vendors or employees immediately. For the FIs, there’s competitive advantages in reclaiming the consumer flow that’s been lost to payment service providers — chiefly for cross-border payments.
For the FIs’ customers? Well, they must grapple with the technical heavy lift of establishing 24/7 treasury operations. That means examining liquidity and funding demands — and the regulatory environment, too.
We’re likely to see a bigger shift when transaction limits are eased, which in turn will entice treasurers to transact via real-time payments more readily, she said.
With larger transaction sizes, she added, “When you think about payments and pain points, it’s really the cross-border side of things where instant payments can provide a vastly improved experience from what we’ve got today.”
Public-private partnerships will also help push real-time payments more to the forefront, predicted Tuozzolo, who noted that in Indonesia, for example, banks have been working with regulators to move to instant payments and get rid of their ACH infrastructure.
In the end, she said, “It’s not about the cannibalization of existing payments. You might see some movement of ACH to real time or movement of wire to real time, but it’s really about that movement of physical cash or checks to real-time payment schemes. … We’re going to get there.”