What’s Fueling The Growth Of Faster Payments?

By Author: sifip
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While payments are becoming faster, there is a push for real-time payments (RTP) through online payment gateway in every aspect of the ecosystem. We look at some of the causes and effects, as well as predictions for the coming year.

We are probably aware of the advantages of real-time payments (RTP), but the world still needs to do more to facilitate faster payments. Despite the push for faster payments in both the B2C and B2B arenas, the payments industry is still largely batch-based. According to a report, nearly 72% of the world now has a live real-time payment infrastructure or plans to launch one soon. We'll examine the current state of faster payments—and where we might be in a year.

What Faster Payments Mean
When considering the term "faster payments," it would be remiss not to define it precisely. Payments are already becoming increasingly faster in many ways.

A number of peer-to-peer (P2P) payment providers have facilitated faster payments between individuals. These options allow for settlement in seconds (or minutes) rather than days.

Gig Economy & Other Influences to Spur Innovation
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... B2B has been slower to adapt, despite the fact that it is ready for a shift toward faster, if not real-time, payments. The gig economy, among other things, is fuelling the push for RTP.

Gig Economy
The gig economy is not new, but it has grown at an exponential rate in recent years. Almost 56% of gig workers admit to taking on extra work to supplement their income. According to Upwork, freelancing or gig work employs 36% of the total American workforce. Traditional freelancers, gig marketplaces, self-employed individuals, and others who earn money outside of a traditional employer arrangement comprise the gig economy.
This economic shift favors a shift toward Requests for Payment (RFPs), in which self-employed individuals directly request payment for the projects on which they work. This would also be a departure from more traditional bill and invoice payment methods such as checks, cash, wire transfers, and ACH.

It reframes how consumers and businesses view bill payments, which are currently a cumbersome process. Consumers are accustomed to this hampered process, in which they are frequently required to sign up for a third-party bill payment service in order to view and pay bills online. Even with online bill payment, the process of matching payments to invoices is complicated. Alternatively, RFP can streamline this disjointed process by directly linking payments to the request.

Insurance Claims
While paper-based payments continue to dominate the insurance industry, there is an increasing demand for quick payouts—as well as a more secure, cost-effective way for insurance companies to facilitate payouts. Digital payments that can be sent through the best online payment gateway and settled in minutes (rather than days) are becoming increasingly popular in the insurance industry, particularly in emergencies.
Digital payments are less expensive than paper payments, which require check processing and mailing. RTP, or even faster digital payments, provide more value to customers while being a low-cost option for insurance companies.

Banks Will Benefit from RTP
This report on real-time payments and the modernization of bank account-based payments notes that RTP benefits all members of the payments ecosystem, with a focus on banks. Top considerations include improved data/messaging capabilities, immediate fund availability, and improved security. These advantages include:

Revenue increase: Not only will RTP fees increase revenue, but RTP cross-sell opportunities are also compelling.

Modernized systems: RTP necessitates a digital transformation component, which can improve operational efficiency and data insights.
Lower costs: A shift away from cash and checks and toward digital alternatives powered by automation can result in cost savings.
Other advantages include improved overall customer experience as banks are better able to address customer needs in a timely manner.

Moving Faster
While RTP is still evolving, other methods of expediting payments are in the works. Banks and FinTechs are both making progress toward faster payments. As the economy fluctuates due to the gig economy and other factors, we will see a continued push for RTP. Banks should think about the many advantages of RTP and prepare internal systems and processes to accommodate new systems and requirements. While revenue growth and cost reduction are compelling reasons for RTP, a better customer experience is also a worthwhile goal.