Card Accounts
Business Accounts
Other Accounts
Personal Cards
Business Credit Cards
Corporate Programs
Personal Travel
Travel Inspiration
Business Travel
Membership Rewards
Card Rewards and Benefits
Cash Back
Business Solutions
Funding and Payment Products
Other Business Solutions
By Joe Braue
With the continued rollout of corporate real-time payments infrastructure in the U.S., Australia, and the European Union (EU), retailers of all sizes and a growing number of small and midsize enterprises (SMEs) are beginning to see the advantages of real-time money transfer in mid 2018 – not just to enhance customer experience, but also to improve efficiency and save money.
The Federal Reserve has set a 2020 target for real-time payments to be available to every U.S. consumer and business. Meanwhile, many large banks have signed onto The Clearing House’s real-time payments network launched last November, with hundreds of smaller institutions expected to follow.1 Estimates are that half of all U.S. accounts will be reachable via real-time payments by the end of 2018.2
However, American Banker points out there are a number of issues that banks need to resolve before being able to meet the U.S. payment systems 2020 deadline, including management (should they outsource real-time payment infrastructure or manage it internally?) and the exact shape of instant payment services to offer customers.3 And then there is pricing: Banks are looking to set a rate somewhere between wire transfers that cost anywhere from $5 to $25 and ACH (Automated Clearing House) transactions, which typically don’t cost more than $1.4
Global markets’ increasing need for speed alongside potential business benefits of faster payments is driving the interest in real-time payment services. Such services generally include the following characteristics, according to an Accenture report:5
Retailers small and large are taking notice of real-time payments, not just as a customer benefit and competitive need, but as an operational imperative. A May 2018 report from the research house Ovum found that 78 percent of merchants believe real-time payments will increase efficiency, up from 59 percent in 2017, and 78 percent think it will allow them to cut costs. More specifically, Ovum found real-time payments could enable greater efficiency in liquidity management, negotiating more favorable rates with suppliers, and expediting payments for short-term or temporary workers. The research showed that the largest merchants (those with revenues above $5 billion) were seeing the biggest benefits from real-time payments: 81 percent expect cost savings. Those in the telecoms and retail sectors expressed the highest expectations that real-time payments will drive cost savings (87 and 86 percent, respectively).6
Retailers were also bullish about using instant payments to enhance customer service. Across all markets, 78 percent of survey respondents expect to improve customer experience with real-time payments, particularly in time-sensitive areas such as refunds and disbursements, up from 59 percent in 2017.7
Ovum recommends that larger merchants update or change their IT development roadmaps to take advantage of real-time payments opportunities, while others should press their banking partners to unlock real-time benefits for them.8
So how might instant payments potentially improve SME businesses? According to payments technology solutions provider Hyperwallet, there are three main areas:9
Moreover, real-time payments have the potential to simplify retailers’ transactions with consumers and wholesalers/suppliers, note FIS, another payments technology supplier. Instead of waiting for a consumer’s payment to clear before placing that customer’s order and then sending payment to the wholesaler for fulfillment, retailers can request a customer’s order, receive payment, and send their payment to the wholesaler all on the same day – with no impact on cash flow while improving the customer experience. FIS says merchants win in this scenario two ways: They free up working capital from supply chains – capital they can now use for growth – and they drive loyalty and satisfaction with their customers.10
As more banks sign on to real-time payments networks and establish pricing and services, merchants of all sizes are seeing potential operational advantages of transacting with customers and partners in real time. Similarly, use cases for real-time payments are becoming clearer for small businesses, many of which are still using paper checks and wire transfers.
For more than 20 years Joe Braue has been a writer, editor, and media executive involved in the creation of award-winning technology content, including articles, research, events, and videos.
Sources
1. “A Key Element of Real-Time-Payment Adoption in the U.S.: Education,” Payments Journal; http://paymentsjournal.com/a-key-element-of-real-time-payment-adoption-in-the-u-s-education/
2. Ibid.
3. ”Real-time Corporate Payments Not Ready for Prime Time,” American Banker; https://www.americanbanker.com/news/real-time-corporate-payments-not-ready-for-prime-time
4. Ibid.
5. Executive Guide to Immediate/Real-time Payments, Accenture/ACI Worldwide; https://www.aciworldwide.com/-/media/files/collateral/trends/executive-guide-to-immediate-payments-tl.pdf
6. 2018 Global Payments Insight Survey: Merchants. Ovum; https://www.aciworldwide.com/-/media/files/collateral/trends/2018-global-payments-insight-survey-merchants.pdf
7. Ibid.
8. Ibid.
9. “Will the Real-Time Payment Use Cases Please Stand Up?” Hyperwallet; https://www.hyperwallet.com/resources/fintech-payout-innovation/will-the-real-time-payment-use-cases-please-stand-up/
10. “Beyond Instant P2P – Real-time Payments for Retailers, SMEs and Businesses” FIS Payments Leader; https://www.paymentsleader.com/real-time-payments-growth-for-retailers-smes-business/
1 833 319 7265
Existing FX International Payments customers log in here
Article(s) on this website that are identified as being prepared by third parties are made available to you for information purposes only. These third party articles do not represent the opinions, views or analysis of American Express and American Express does not make any representations as to their accuracy or completeness. If you have questions about the matters discussed in those articles, please consult your own legal, tax and financial advisors.
NMLS ID # 913828