Is Real-Time Payments A Threat To Credit Cards?

Faster, faster, faster — that’s the motto driving so much of payments innovation today. Real-time payments offers promise for both small and medium-sized businesses (SMBs) and consumers. That holds especially true for the Asia-Pacific region, as InstaReM CEO and Co-Founder Prajit Nanu discussed with Karen Webster in a new PYMNTS podcast interview.

As Nanu told it, the ongoing spread of faster payments can serve to not only build a stronger commerce and payments ecosystem for Asia and elsewhere, but make credit cards less important to the further growth of the world’s digital economy.

That said, real-time payments is not a one-size-fits-all solution, and to get to a place where they become a daily part of consumer and B2B life is an effort that will take at least three to five years, according to Nanu. However, there is a roadmap — a chance to use real-time payments to make digital commerce and payment platforms attractive to more consumers, and to build a better, stickier ecosystem, he said.

The interview comes at a time when financial institutions (FIs), payment service providers and eCommerce operators are putting more focus and money into building infrastructures for real-time payments — and as regulators and consumers are coming to better understand the appeal and need for such services. Indeed, as recent PYMNTS research has shown, many countries around the world are rolling out instant payment schemes that bring speed and convenience to payments made within their own borders.

Cross-Border Payments

Unfortunately, those benefits are often limited when it comes to cross-border payments, which presents both challenge and significant opportunity, Nanu told Webster. The goal is to make those cross-border payments as “fast and seamless as domestic payments,” he said — and to open those types of payments to more consumers without ready access to credit cards.

The goal of quicker payments does not apply only to Asia, even though the PYMNTS interview focused on that continent. In fact, InstaReM just launched real-time payments in Mexico, underscoring the global appeal of such an offering.

Nanu started putting together a global remittance firm for consumers and businesses in 2014. One of his motivations was trying to send money home to his parents in India, and realizing that the process was opaque and expensive, with mystery surrounding things like when the money was going to get there and how much was going to arrive.

It soon became clear to Nanu that the international payments market was in dire need of newer, better ideas. Furthermore, the increasing digitization of financial services worldwide meant the time was right to start offering those solutions. InstaReM was then founded as a four-person operation in a single Singapore office.

Those newer ideas included offering real-time, cross-border payments to consumers — giving them the ability to use their bank accounts to pay eCommerce merchants and marketplace operators as international, online retail continues to grow in power. The ideal result was to reduce the payment process in Asia from 48 hours to as fast as 10 minutes. The goal was, and is, to bring payments up to the level of current customer expectations for commerce and transactions (traits shaped by the ongoing spread of eCommerce and digital payments), and to serve customers who might have easy access to credit cards.

Credit Cards

Compared to consumers in the U.S., people in Asia “don’t like to use credit cards, but a significant part of eCommerce is happening in this part of the world,” Nanu said. Consumers in Asia tend to have bank accounts. However, even in those countries with relatively large numbers of people without access to those financial services (for instance, Indonesia and the Philippines, as opposed to Singapore), technology can eventually enable them to use real-time payments — if only via the intermediary of mobile wallets.

The benefit to merchants comes from the reduced risk of costly chargebacks, in favor of money sent quickly from customer bank accounts. With consumers’ rising expectations for faster payments, the pressure increases for FIs to build more of the infrastructures to enable real-time payments.

As for the SMB side, “nobody wants to pay an invoice five days before the due date,” Nanu said. “They want to pay on the day it’s due.”

Yet, real-time payments offers the opportunity to not only add more certainty and digitization to B2B payments, but to craft more discounting and payment incentives. In addition, since SMBs in the region tend to not have as much access to credit as in the U.S. and other parts of the world, real-time payments can help solve for that problem.

The Role Of Trust

Infrastructure and technology are not the only hurdles real-time payments must overcome in the Asia-Pacific region: Trust counts significantly. Sending money from bank accounts can make consumers nervous, given that the funds are quickly in another person’s hands.

InstaReM gets around that problem via marketing, messaging and transparency. For instance, it shares with consumers the licensing information from the various countries in which it operates, ensuring that everything is above board. It boasts of its global reach — Japan, Indonesia and Latin America are among its newest markets — to send the message that the company is credible enough to have users around the world.

“When customers see massive global [presence],” he told Webster, it helps with “the slow process of trust building. Trust is a gradual process.”

Beyond real-time payments, Nanu hopes to build even more trust and a better digital ecosystem (one that is sticky enough to retain consumer loyalty) by adding even more services. That might include insurance or multi-currency travel cards. Real-time payments will certainly be a top feature over the next few years, but “they are not part of your daily life,” Nanu said — nothing like mobile taxi-hailing or online food delivery services, for example. “We are working now to increase the ecosystem” so users are there at least six or seven times per month, he added.

That will require a lot of work, and more than a few challenges to overcome. However, as people have learned in various ways all over the world, getting the payments part right can fuel nearly any digital ecosystem.