More than 70.3 billion real-time payments transactions were processed globally in 2020, a surge of 41% compared to the previous year, as the COVID-19 pandemic dramatically accelerated trends away from cash and cheques toward greater reliance on real-time and digital payments, according to a report from ACI Worldwide and GlobalData.
The second installment of ‘Prime-Time for Real-Time,’ first launched in 2020, analyses global real-time, account-to-account payment volumes and forecasts across 48 global markets. It projects a compound annual growth rate (CAGR) for real-time payments of 23.6% from 2020 to 2025.
With millions of people globally having to change the way they work and live - and the way they shop and pay - mobile wallet adoption rose to an historic high of 46% in 2020, up from 40.6% in 2019 and 18.9% in 2018. Countries like Brazil, Mexico and Malaysia, where many people historically relied on cash, are now some of the fastest adopters of mobile wallets.
As the pandemic continues to drive changes in both consumer and business behaviour, banks, merchants and intermediaries across the payment ecosystem are responding rapidly, prioritising the shift to digital to protect current revenue streams, and searching for new ones through a fully digitised customer experience.
"The pandemic has cast the spotlight on the importance of digital payments and robust payment infrastructures, condensing a decade of anticipated innovation into one year and creating human behavioural changes that will not reverse as we emerge from the crisis," said Jeremy Wilmot, chief product officer, ACI Worldwide. "Countries with a robust digital payments infrastructure already in place have coped better than those without when it comes to containing the economic impact of the pandemic. Real-time payments have enabled governments, working jointly with financial institutions, to accelerate much-needed disbursements and economic stimulus payments to their citizens. They have also enabled real-time liquidity to businesses that had to adapt to disrupted supply chains."
Global real-time payments growth
The total number of real-time transactions in 2020 was 70.3 billion, up 41% from 50.0 billion in 2019. The real-time share of global electronic transactions in 2020 was 9.8%, up from 7.6% in 2019. It is predicted to be 17.4% by 2025.
The value of real-time transactions was up by 32.8% from 2019, rising from US$69 trillion to US$92 trillion. The expected CAGR by 2025 is 12%.
Top 10 countries globally by number of real-time transactions
India retains the top spot with 25.5 billion real-time payments transactions, followed by China with 15.7 billion transactions; South Korea is in third place with 6.0 billion, Thailand fourth with 5.2 billion and UK is in fifth place with 2.8 billion.
Nigeria follows in sixth place with 1.9 billion transactions, Japan in seventh with 1.7 billion. Brazil climbs into the global top 10 at eighth with the launch of PIX, with 1.3 billion transactions driving a 58% year-on-year increase from 2019 to 2020. Expect to see the country climbing even higher next year with a five-year growth prediction of 25.3% CAGR. The US ranks ninth with 1.2 billion transactions and Mexico rounds out the top 10 with 942 million.
Fastest growing countries for real-time payments
The top spot goes to Croatia with an expected CAGR of 374.4% between 2020 and 2025, followed by Colombia (112.7%), Malaysia (83.9%), Peru (74.4%) and Finland (71.4%).
The highest growth region (CAGR 2020-2025) is predicted to be North America (36.5% percent), as both Canada and the US modernise and drive their new real-time systems (RTR and FedNow - more on which later).
Global mobile wallet adoption
Mobile wallet adoption rose to an historic high of 46% in 2020, up from 40.6% in 2019 and 18.9% in 2018. Total mobile wallet transactions amounted to 102.7 billion in 2020 and are expected to reach 2,582.8 billion by 2025.
Globally, card-related fraud remains highest in terms of reported incidents from consumers, but fraud incidents associated with real-time payments were on the rise from 2019 to 2020 as fraudsters tend to target new channels.
Real-time payments scams that were on the rise include: confidence tricks (12.5% of all fraud instances in 2019, rising to 13.7% in 2020), Identity theft (6% rising to 11.6%) and digital wallet account hacks (4.4% rising to 6.2%).
The top three fraud types in North America include:
- Card details stolen/skimmed at a merchant location (e.g. at a retailer, restaurant, gas station, hotel, taxi) - 22%
- Card details stolen on the internet - 20%
- Personal information stolen and used to apply for financial products - 14%
"Real-time payments are still in a nascent stage worldwide, and mostly focused on the obvious use-case of P2P payments in many countries," said Samuel Murrant, lead analyst, Payments, GlobalData. "However, the pandemic has provided an opportunity to accelerate the growth path for these instruments. As consumers become used to the speed of real-time settlement for P2P payments, they will naturally move to using them for e-commerce over the relatively slower and less convenient process of using cards online. From there, there is potential to move into in-store payments, once enough consumers recognise real-time payment brands and the user base is high enough to deliver sufficient value to merchants."
US faster payments landscape evolution continues
In the same week as the ACI Worldwide research, both the Federal Reserve and Nacha have announced updates to payments schemes in the US. First, the Federal Reserve has released message specifications for the initial launch of its FedNow Service for instant payments based on the standard set by the International Organization for Standardization (ISO). The FedNow ISO 20022 specifications define the message flows and formats that the service will leverage when operational in 2023. The release of these specifications is an important step that allows financial institutions and other payments providers to begin preparing systems and developing solutions to support FedNow payments.
"Our work with payments industry stakeholders revealed unanimous support for developing our messaging specs in alignment with the ISO 20022 messaging standard to enable broad interoperability, end-to-end efficiency of payments and future innovation on top of the FedNow platform," said Nick Stanescu, senior vice president and FedNow business executive. "Our adherence to the ISO 20022 standard means more opportunities for implementation across products and market segments."
The Federal Reserve also collaborated with The Clearing House to optimise compatibility between the two US instant payment services, which the Fed acknowledges are likely to have common users across the industry. In addition, the individual FedNow message flows and implementation guidelines were validated by experts on the FedNow Community ISO 20022 Working Group and other industry participants in the FedNow Community, including participants from BNY Mellon.
"We were pleased to assist the Federal Reserve in developing messaging specifications that will best serve the banking industry’s needs for instant payments adoption and its long-term evolution," said Mike Bellacosa, global head of payments and transaction services at BNY Mellon. "We were able to share insights from BNY Mellon’s experience as an instant payments pioneer with the Fed and other working group members, and look forward to continued collaboration with the Federal Reserve as members of its FedNow pilot program."
Secondly, Nacha members have approved a measure to increase the per-payment maximum on same day ACH payments, from the current US$100,000 to US$1m. This now applies to all eligible same day ACH payments, including credits and debits for both businesses and consumers.
"Nacha has made a significant enhancement to Same Day ACH every year since it was introduced in 2016," commented Jane Larimer, Nacha president and CEO. "This enhancement reflects our commitment to see that the modern ACH Network meets the nation’s needs for fast and efficient payments."
The US$1m limit is designed to be beneficial for many types of payments, from insurance claim payments and payroll funding, to business-to-business and tax payments, and many more.
The approval to raise the limit comes just weeks after same day ACH operating hours were extended. Since March, financial institutions have had two additional hours to initiate same day ACH payments. With this extension, ACH payments are now settled four times each business day.
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