Faster, across use cases
In today's fast-paced digital landscape, demand for immediate, 24x7 payments has become more pronounced than ever before. The financial industry is undergoing a transformative shift, with most financial institutions recognizing the potential of real-time payments as a catalyst for digitizing banking operations. Concurrently, merchants are increasingly embracing faster payment methods, captivated by the unparalleled efficiencies they offer. The buzz surrounding faster payments has permeated global payment discussions, grabbing the attention of businesses and consumers alike.
This fervor is well-founded, given that nearly a third of the world has already embraced various forms of real time payment schemes designed to facilitate faster transactions across diverse payment categories, catering to a spectrum of needs encompassing business-to-business (B2B), business-to-consumer (B2C), consumer-to-business (C2B), peer-to-peer (P2P), government-to-citizen (G2C), and account-to-account (A2A) interactions.
A case for government led adoption
In most instances, the driving force behind enhanced interoperability rests squarely on government regulation. Countries like India with its Unified Payments Interface (UPI), Brazil, with its instant payment's platform PIX and Bahrain’s Fawri scheme have emerged as trailblazers in the realm of instant payments. In 2022, India achieved a staggering milestone, processing 89.5 billion real-time transactions, a figure constituting a remarkable 46% of global real-time transactions1. Brazil saw real-time payment transactions surge by an impressive 229% in 2022 equivalent to 29.2 billion real time transfers2. As more use cases arise, especially around international interoperability, these faster schemes are bound to have exponential growth.
These success stories have spurred a global movement, with governments and regulators across the world taking proactive steps to champion local development and widespread adoption of faster payment schemes. As leaders pave the way, an evolutionary shift is underway, reshaping the global financial landscape and setting the stage for a future where rapid, secure, and efficient payment systems become the norm rather than the exception.
Government mandates and initiatives have played a pivotal role in accelerating the adoption of faster payment across borders. Case studies, such as the groundbreaking linkage between Singapore's PayNow and Thailand's PromptPay in 2021 exemplify the potential of international interoperability between central banks that simplify fund transfers across borders. This initiative marked a historic milestone as the world's inaugural integration of real-time payment systems.
Under this pioneering linkage, customers of the participating banks are now able to seamlessly transfer funds equivalent to roughly $700 USD daily between the two countries, all at their fingertips using just their mobile phones. Singapore stands out as the most interoperable fast payments system in the world today having linked its Paynow to not only Thailand, but also Malaysia, and most recently India. India by the same token is set to expand UPI into the UAE, Mauritius and Indonesia, countries with a large Indian diaspora. These seamless and instant cross-border connectivity initiatives reshape the way we perceive international transactions, ushering in a new era of convenience and accessibility for global financial interactions.
US Instant Payments: ripe for international collaboration
In the United States, the recent introduction of FedNow® stands as a momentous achievement, signifying a pivotal step forward in the country's payment infrastructure. At the same time, The Clearing House's RTP® network has exemplified consistent success over the past six years. The strategic convergence of these two faster payment networks could herald a compelling opportunity, one that holds the promise of seamlessly integrating rapid U.S. payments into the international arena by simply fostering bilateral agreements with other central banks or public schemes, as is would have to be the case with countries that lack a central bank such as Panama.
Strategic interconnection could lay the groundwork for a transformative leap, extending the reach of the US’s faster payment systems to a global scale by simply enhancing technology and rules that will foster greater interoperability with other central banks’ faster payment schemes. An interconnected approach not only amplifies the efficacy of domestic transactions but also ushers in a new era of international payment interactions. It is by bridging these existing gaps that we can, as an industry, nurture a more interoperable and interdependent global financial ecosystem, foster collaboration, and innovate on a global scale.