The adoption of real-time payments is expected to grow substantially over the next four years, creating more need to ensure the different instant settlement networks can work together and reach as many users as possible.
"Until the entire globe relies on a single legal system, a single monetary policy, and a single financial system, companies will need to build solutions to bridge the differences," said Elizabeth Rossiello, CEO and founder of AZA Finance, a fintech that enables companies from outside of Africa to work with the continent's local fintechs.
In the years to come that will increasingly include real-time payments, it will require replacing transactions that settle in one to three days.
There were more than 195 billion real-time transactions recorded globally in 2022, according to ACI Worldwide data released March 28. That's 63% higher than the 121 billion recorded in 2021. ACI projects a growth rate that will reach 512 billion by 2027, or 28% of all global electronic transactions.
That growth, which largely reflects real-time payments within individual countries, will create pressure on all real-time rails to operate internationally to serve more needs. That can create additional expense, as smaller countries look to upgrade their real-time rails to connect to other networks.
"These real-time networks may work within a country, but supply chains are global, and you have to be able to pay parties in other countries," said Debbie Buckland, a director and analyst at Gartner.
The U.S. is awaiting the release of the FedNow real-time processing network in July. Along with The Clearing House's RTP rail, FedNow will give the U.S. two major networks. But those are just two of more than 60 real-time settlement networks globally, according to
Given the differences in size of the countries and how local payment networks operate, connecting them all could be difficult. An average request for proposal for a real-time payment project in an emerging country had a cost of about $500,000 in 2022, which could be too low in some cases, according to Mastercard.
"The Requests for Proposals (RFPs) for RTP system deployment were very broad in scope," Mastercard reported. "Nearly all RFPs reviewed called for solutions that covered all use cases: P2P, in-store, online, bill payments, person-to-government, government-to-person and transactions between governments and businesses." The RFPs typically did not take recurring costs such as security and maintenance into account, as well as work to extend the networks to other countries to execute real-time cross-border payments.
"In some of these smaller countries it depends on the path they want to take," Buckland said. "If you are dealing with the underbanked, it becomes more expensive because you have to provide a way for them to access that system that's not an existing bank account."
The expense of operating a real-time rail doesn't fit easily into "developed markets" and "developing markets," and is more about overall payment volume. Some developing economies have relatively high real-time volume, which can cut into their expenses.
In lower-volume countries such as Moldova, Belize and Albania, the cost of supporting real-time payments is higher than higher-volume countries such as India. That cr
eates further economic challenges for expansion, Mastercard reported.
With 90 billion in real-time transactions in 2022, India was the largest real-time payments market, making up 46% of the world's real-time transactions, according to ACI Worldwide. Brazil was second with 29.2 billion, followed by China with 17 billion, Thailand with 16.4 billion and South Korea with 8 billion. Most European markets are well behind, and Canada has not yet launched its real-time network. The U.S. had only 4 billion real-time transactions in 2022, ACI reported, though the researchers added the introduction of the FedNow network should drive adoption in the years ahead by increasing access for more banks.
Emerging economies often outpace developed nations when it comes to adopting real-time payments. They recognize that real-time payments and the frictionless movements of funds can power their economies. Many also see it as an opportunity to help connect their unbanked citizens to the financial world.
In the six years since introducing its PromptPay system, Thailand has become a world leader in real-time payments, said Peter Reynolds, executive vice president of real time payments for Mastercard, in an email. "Citizens who were previously heavily reliant on ATMs to access their money, can now make and receive payments using their phone number, citizen ID or QR codes."
More recently, there's also been rapid adoption in the Philippines, helped by a tech-savvy population and high internet and mobile phone usage, Reynolds said. "The scale of the opportunities presented by real-time payments in emerging economies is a powerful trigger to kick start an instant payment scheme," he said.
Officials from The Clearing House this week were traveling to Australia and Singapore to discuss expanding international real-time cross-border payments to more markets.
"Now that domestic real-time schemes have become the new norm, global interoperability has become the latest area of focus for real-time payments," said Craig Ramsey, global head of real-time payments and banking for ACI Worldwide. "However, the situation is nuanced: While global or cross-border payments are the next frontier, not every payment needs to happen in seconds across the world."
Right now, the focus should be on connectivity and offering real-time payments in corridors where speed of settlement is essential, according to Ramsey. An example would be moving funds in an emergency, or last-minute settlement.
"Right now, those services are mostly being provided by money transfer companies, and although there are fintechs offering similar services, it's all happening outside of the traditional rails," Ramsey said.
For smaller countries, the high costs of operating a real-time payment network that's accessible internationally can be addressed through collaboration. For example, Mastercard has worked as a partner in P27, a
"Often the biggest hurdle is the initial decision as to whether the government will institute a real-time payments mandate. The initial investment to build real-time rails is shown to pay off over the long run, as real-time-payments growth drives significant economic growth and financial inclusion in the form of consumer and business adoption," Ramsey said.
Another option is to work through fintechs to connect Western payment technology companies to local rails — creating a network effect since the fintechs are likely to have relationships in multiple countries.
But connecting European and U.S. networks to emerging real-time networks could be more challenging.
"Many North American or European payment companies struggle when entering emerging market regions like Africa and Southeast Asia exactly because of varied topography of service and local last-mile infrastructure," Rosiello said.
That could present an opportunity for mobile money payment operators, which have a history of introducing digital payments in emerging markets by working through mobile network operators.
"In many emerging markets, mobile money operators were the first entrants to provide real-time settlement. They did this at a low cost with their own proprietary infrastructure," Rossiello said. "The speed and low cost of these mobile-money systems set the bar incredibly high for fintechs, traditional card companies and payment companies in these emerging markets."
