ISO 20022 Implementation Highlights Real-Time Payments’ Value Report

FinTechs Are Three Times More Likely to Offer Real-Time Payments Than Credit Unions

October 2023

Consumers are embracing real-time payments, and the migration to ISO 20022 will only accelerate this trend. The method prioritizes seamless, secure payment experiences and forward-looking financial institutions are widely offering real-time payment products in response.

ISO 20022 focuses heavily on real-time payments and will accelerate their adoption.
Innovative FinTechs leads more conservative credit unions in offering customers real-time payments products.
Large consumer-facing businesses broadly underestimate the importance of real-time payments in the bill-payment experience.


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    ISO 20022 is accelerating the real-time payments revolution.

    ISO 20022 is quickening the adoption of real-time payments. The new standard raises the bar for secure and efficient messaging between financial institutions (FIs) through strict compliance and interoperability requirements for electronic data interchange, focusing heavily on real-time payments. The governing ISO 20022 Registration Management Group has commissioned a special real-time payments working group from 70 countries. Migration to the new standard began in March, marking a turning point in financial transaction and messaging efficiency and security.


    What’s at Stake

    Many consumers embrace the immediacy and transparency of real-time payments. The migration to ISO 20022 will only accelerate this outcome. When paying bills and completing other routine transactions, consumers prioritize seamless, secure payment experiences alongside key features such as online payment options — a clear signal to providers of rapidly changing consumer perceptions. Forward-looking FIs offer real-time payment products, but many continue to sit on the sidelines — and risk being left behind.

    31%

    of bill-payers rate real-time payments
    as essential when managing monthly bills.

    As of mid-2022, 72% of FinTechs were already offering real-time payments. In contrast, credit unions (CUs) have remained more cautious toward innovation and adoption, with 22% offering the method. Just 36% of large consumer-facing businesses rated real-time payments as essential to customers’ digital bill-payment experience. Real-time payments are on track to overtake the popularity of other payment methods. However, the diverging pace of implementation and innovation among different players in the payments space highlights potential blindspots to this emerging consumer preference and a changing payments landscape.

    72%

    of FinTechs had implemented
    real-time payments as of Q2 2022.

    These are just some of the findings detailed in “ISO 20022 Implementation Highlights Real-Time Payments’ Value,” a PYMNTS Intelligence and ACI Worldwide collaboration. This report examines the evolving real-time payments preferences and expectations and draws on insights from multiple proprietary research studies of consumers and executives conducted since April 2022.

    Key Findings

    As consumer preference tilts toward real-time payments, businesses must catch up or risk missing out.

    ISO 20022 will bring a substantial increase in real-time payments adoption. Consumers are emphasizing the ability to use real-time payments for routine bill payments. Data shows that 31% of bill-payers see real-time payments as important in tracking, reviewing or paying monthly bills. Twenty-eight percent see having multiple payment methods as important, along with 19% who say the same for flexible payment plans. These views hint at the growing demand for immediacy and transparency in transactions.

    Firms across industries are taking note of this shift, but most still underestimate the importance of real-time payments. Thirty-six percent of executives who oversee consumer collections at large firms in key consumer-facing sectors recognized the growing emphasis consumers place on real-time payments during their monthly bill-payment experiences.1 This share has already surpassed the 35% who indicated integrated billing and payments systems as important, as well as the 29% who said the same about paperless billing. In comparison, 72% of FinTechs offered customers real-time payment capabilities as of Q2 2022. This share highlights the relatively slow movement of large firms in key sectors to connect the dots on how consumers want to pay.


    Unraveling the Myths of Real-Time Payments

    Real-time payments go beyond speedy transactions. They represent a modern, secure payment or funds transfer method with instant settlement, guaranteed immediate access to funds and confirmation via account balance updates. Once initiated, these payments are irreversible. Additionally, real-time payment networks operate continuously throughout the year without a pause for holidays.

    However, consumers widely lack a clear understanding of what constitutes a real-time payment. Just 29% of consumers who said they made real-time payments to other individuals believed the payment cleared immediately. Twenty-eight percent said their “real-time payment” took more than one day for the money to clear. Further, 5.5% said it took more than one week. For those paying monthly bills or subscription fees, just 16% thought their real-time payments were immediate.


    While consumers value the immediacy of real-time payments, CUs pinpoint data access as key to the decision to adopt.

    Leveraging ISO 20022 standards may be crucial for enhancing the quality of data mined from real-time transactions. While consumers prize the immediacy and transparency of real-time payments, research shows that FIs, particularly CUs, see harnessing transaction data as a key advantage. As of Q4 2022, 44% of CUs planning to implement real-time payments within three years aimed to access this data and strengthen fraud prevention. Additionally, 43% predicted improved efficiency and fewer manual processes.

    Posing the same question to FinTechs currently enhancing or planning to enhance real-time payment offerings revealed key differences. Seventy-one percent said accessing new products or markets fueled their interest. Another driver of interest for 67% of FinTech respondents was the belief that this payment rail offers a more effective means to address transaction errors. Forty-four percent said the same about fraud and data theft. Many FIs already view real-time payments as an important feature to offer customers.

    CUs adopt a measured approach to innovating real-time payments offerings while FinTechs charge ahead.

    As ISO 20022 finds its footing as the global standard for secure and efficient messaging between FIs, its potential impact on real-time payment initiatives could be monumental.

    CUs have come to recognize the value of real-time payments. As recent as Q4 2022, just 7.7% of CUs had no plans to innovate real-time payment offerings. Said differently, 92% of surveyed CUs aimed to enhance real-time payment offerings within three years or were already in the process of doing so. Among these CUs, 9% had already started at the time of our survey. Additionally, 41% plan to do so within 12 months. Larger CUs with assets of more than $5 billion led in this regard: 43% were already in the process of modernizing their platforms. This group contrasts sharply with those with less than $1 billion in assets, of which just 2.9% were doing the same.

    FinTechs have already demonstrated a definitive push toward real-time payment innovation. On average, 40% had already started innovating as of late 2022, and another 36% had plans to do so within the next year. This innovation drive was most pronounced among high-revenue FinTechs, with those annually generating $500 million or more leading at 57%. Among FinTechs of all sizes, half set a three-year goal to innovate real-time payment solutions. Just 10% lacked explicit intention to further innovate. These findings suggest that FinTechs are attempting to strategically position themselves as dominant players offering real-time payment solutions and that CUs must consider accelerating innovation agendas to compete effectively.

    Conclusion

    The advent of ISO 20022 will fast-forward the already quick pace of the real-time payments shift. Consumers demand access to this instant and secure payment rail, and FIs must deliver to stay competitive. The aggressive push by FinTechs into the real-time payments arena should serve as a wake-up call for CUs and other FIs continuing to drag out innovating. Meanwhile, large consumer-facing firms should understand that many consumers want real-time payment options when paying bills and adjust bill collection strategies accordingly. ISO 20022 will also strengthen the already significant advantages of real-time payments in transactional and data security. FIs and industry firms should view real-time payments as essential to their security infrastructure and consumer trust-building strategy.

    Methodology

    ISO 20022 Implementation Highlights Real-Time Payments’ Value,” a PYMNTS Intelligence and ACI Worldwide collaboration, examines the evolving preferences and expectations around real-time payments among consumers and executives. This report draws on insights from multiple census-balanced consumer surveys: a survey of 2,099 consumers conducted between April 22, 2022, and April 29, 2022, that explored their views about the bill-payment experience and a survey of 4,282 bank account users conducted between Oct. 7, 2022, and Nov. 7, 2022, about their opinions on product innovation and how those views affected their thoughts about their financial services providers.

    This report also draws on insights from several surveys of executives: a survey of 400 executives from the utilities, telecommunications, insurance, consumer finance, healthcare and government segments about their views about the bill-payment experience; a survey of 100 CU executives with responsibilities in areas such as financial planning and analysis, fraud detection or analysis, operations, product development, and research and development conducted between Oct. 7, 2022, and Oct. 31, 2022, about production innovation; and a survey of 50 executives from FinTechs that provide products and services to individual consumers, CUs, community banks and commercial banks conducted between Oct. 12, 2022, and Oct. 31, 2022, about production innovation.


    For more, read the previous report in this series, “The Next Chapter in Fraud: Using AI to Unveil Payments Intelligence.”


    1. Our respondents included executives from firms in the utilities, telecommunications, insurance, consumer finance, healthcare and government sectors.

    About

    ACI Worldwide is a global leader in mission-critical, real-time payments software. Our proven, secure and scalable software solutions enable leading corporations, FinTechs and financial disruptors to process and manage digital payments, power omnicommerce payments, present and process bill payments, and manage fraud and risk. We combine our global footprint with a local presence to drive the real-time digital transformation of payments and commerce.

    Ingo

    PYMNTS Intelligence is a leading global data and analytics platform that uses proprietary data and methods to provide actionable insights on what’s now and what’s next in payments, commerce and the digital economy. Its team of data scientists include leading economists, econometricians, survey experts, financial analysts and marketing scientists with deep experience in the application of data to the issues that define the future of the digital transformation of the global economy. This multi-lingual team has conducted original data collection and analysis in more than three dozen global markets for some of the world’s leading publicly traded and privately held firms.
    The PYMNTS Intelligence Team That Produced This Report:

    Scott Murray: SVP and Head of Analytics
    Alexandra Lange, PhD: Senior Analyst
    Daniel Gallucci: Senior Writer


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