Real-Time Payments Shape Commerce’s Next 3 Years of Evolution

Three transformations will shape the trajectory of the global payments infrastructure business over the next three years, ACI Worldwide Chief Product Officer Debbie Guerra told PYMNTS.

First and foremost is the transition to real-time payments, as FedNow looms for a May 2023 launch.

Real-time payments, she said, “create an unprecedented operational complexity for participants — but it also provides a once-in-a-generation opportunity for new [payments] offerings” across financial institutions (FIs), processors, central banks, merchants and billers.

And against that backdrop, she said, payments are rapidly becoming an area for strategic value creation for all manner of enterprises.

To optimize that value, she said, it’s becoming ever-more critical to modernize and digitize the “delivery model” for payments solutions that enable businesses and banks to meet the demands of digitally-forward consumers at scale.

“The demand for public, cloud-based capabilities is really accelerating,” she said.

ACI Worldwide, for its part, has been broadening its public cloud offerings and enabling real-time payments in more than 35 countries.

The growth of real-time payments, said Guerra, is spurring a wider adoption of embedded payments, where money movement is built into all sorts of non-financial interactions.

“If you’re a merchant today, you want to be able to offer the payment methods that your consumers want to use and in the ways in which they want to engage … no matter if it’s through their cellphone, their mobile device, whether it’s in person or across different modalities,” Guerra said.

That flexibility is especially critical as younger, tech-savvy individuals flex their economic and financial firepower. They’re the consumers who are most at home with peer-to-peer (P2P) payments and using digital conduits to get things done. Millennials and Generation Z are the generations that will drive real-time payments adoption, she said. Beyond consumer-facing payments, the B2B space is ripe for disruption, pivoting away from paper-based transactions, checks and card payments.

Risk and Fraud Are Top of Mind

The shift to instant payments carries with it the specter of heightened vulnerability to fraud, Guerra cautioned. The irrevocable nature of these payments and the swelling volumes of card-not-present transactions are proving to be catnip to bad actors.

“Digital payments are creating new frontiers for fraudsters,” she said, as in-app payments and embedded finance offer new attack vectors for various schemes and scams.

She noted that identity assurance is a critical line of defense, tapping into machine learning, artificial intelligence (AI), and a variety of third-party services to help make sure that transacting parties are who they say they are.

On-Premise Commerce Innovations

The innovations taking shape in payments are not confined to purely digital interactions.

Looking ahead, Guerra said we’ll continue to see the proliferation of self-service kiosks in brick-and-mortar retail settings, from grocers to drug stores and more.

The pivot to enlist the aid of technology at checkout comes as merchants grapple with higher input costs (including wages) and labor scarcity. Offering promotions and discounts (across mobile and digital channels) as these same consumers come back into physical environments will help boost sales conversions and cement brand loyalty.

The digital evolution of payments blossomed during the pandemic. Despite some macro headwinds that dominate headlines, Guerra said, “with the advent of real-time transactions, the continued opportunity to displace cash and cross-border opportunities for digital commerce, there are lot of positive opportunities ahead of us.”