Real-time payments (RTP) act as a catalyst for economic growth of modern economies by allowing immediate or instant transfers of money between bank accounts (account-to-account payment fund transfers) that are cleared and settled in seconds at any time of the day or the week, holidays and weekends included. RTPs have become increasingly popular among consumers and companies around the world due to their speed, convenience, efficiency and cost-effectiveness.

In fact, the rapidly evolving global payments landscape is beginning to centre itself around RTP, with new sophisticated use cases for consumers and businesses driving “Global RTP volumes to record highs, with 195 billion RTP transactions recorded globally in 2022 — a YoY growth of 63.2%”, according to the 2023 Prime Time for Real-Time report, published by ACI Worldwide in partnership with GlobalData.

The report also predicts that 511.7 billion real-time transactions will occur globally by 2027, representing a 2022-2027 compound annual growth rate (CAGR) of 21.3%. RTPs are expected to account for 27.8% of all electronic payments worldwide by 2027.

While real-time payments have “Profoundly changed the way consumers, businesses and governments make and receive payments and conduct their financial affairs”, as per ACI’s report, the world’s largest economy, the US, continues to lag in real-time payments. India, on the other hand, spurred by its homegrown instant payment system, has surged ahead as the global leader in instant payments.

India the undisputed real-time payments leader, leaving the US far behind

“The Indian real-time payments market is the most advanced in the world by far, ahead of developed and developing markets alike. Real-time payments were available in India since the launch of Immediate Payment Service (IMPS) in November 2010. However, the Unified Payments Interface (an overlay payments system launched in April 2016 based on IMPS) is the one which disrupted the payments space in the country, enabling real-time payments using QR codes, mobile numbers and virtual IDs”, the ACI report said.

India’s robust real-time payments system, the Unified Payments Interface (UPI), has not only helped it become a digital payment powerhouse, but has also become a benchmark for payment players worldwide of what’s possible when it comes to considering adoption of a UPI-type transaction platform to enable fast, seamless and low-cost domestic real-time payments. It has also been paving the path to payments interoperability across providers and borders to facilitate easier cross-border payments and overseas transactions.

Research by ACI Worldwide shows that in 2021, India extended its global leadership in real-time payments, hitting a staggering 48.6 billion transactions, which was almost threefold that of the closest challenger, China, and almost seven times greater than the combined real-time payments volume of the world's leading economies – the US, Canada, the UK, France and Germany (7.5 billion).

A year later, “India remains the undisputed RTP leader — responsible for 46% of all transactions worldwide — followed by Brazil, China, Thailand and South Korea”, the ACI report noted.

Source: 2023 Prime Time for Real-Time Report

With a staggering 89.5 billion transactions (46% of global real-time payment transactions) in 2022 and a YoY growth rate of 76.8%, India ranks on the top of the world real-time payments market, while Brazil takes the second place with 29.2 billion transactions, accounting for 15% of all global real-time transactions.

Trailing India and Brazil on the list of the countries leading in real-time payments were China (17.6 billion transactions), Thailand (16.5 billion transactions) and South Korea (8 billion transactions). However, “Several of the leading economies are distinct laggards in moving to real-time payments. The U.K., Canada, the U.S., Germany, France and Italy — all top 10 global economies by GDP — are forecast to place 17th, 19th, 33rd, 34th, 35th and 42nd, respectively, for consumer adoption in 2027”, the report mentioned.

Given that the US is the world’s leading economic power and yet doesn’t rank in the top 10 countries with regard to real-time payment transactions per person per month, it appears that the current US payment ecosystem isn’t keeping pace with the rest of the world.

This sentiment was underscored in BlackRock Chairman and CEO Larry Fink’s annual letter to investors last month, when he took a jab at the US payment system and said, “In many emerging markets – like India, Brazil and parts of Africa – we are witnessing dramatic advances in digital payments, bringing down costs and advancing financial inclusion. By contrast, many developed markets, including the U.S., are lagging behind in innovation, leaving the cost of payments much higher.”

As per ACI Worldwide’s US summary, “Real-time payments are still only a small piece of the overall payments mix in the U.S., accounting for only a 1.2% share of the total payments volume in 2022.”

Data from the ACI report reveals that real-time payments usage in the US is falling behind the key global RTP players, namely, India. In 2021, the US recorded 1.8 billion real-time transactions compared to the near 49 billion for global RTP leader India, and last year, in contrast to India’s 89 billion immediate payments, the US processed a mere 2.8 billion real-time transactions.

With the increasing shift from cash to digital-based real-time payments, India is estimated to hit 235 billion RTP transactions by 2027, with its share of global real-time payment transactions forecasted to rise from 46% in 2022 to 67.1% in 2027, the ACI report further added. In comparison, the volume of real-time transactions in the US is projected to grow from 2.8 billion in 2022 to 11.4 billion by 2027, a compound annual growth rate (CAGR) of 32.6%, ACI Worldwide explains.  

This will still leave the US way behind India with respect to immediate payments. This suggests that America’s payment system would have to take huge and rapid strides towards adoption and monetisation of instant payments as a part of a larger digital payments transformation agenda in order to stand tall among the world’s leading RTP markets.

FedNow is coming

“In the U.S., a market where regulators strongly favor non-intervention, the Federal Reserve is launching its highly anticipated FedNow system in July 2023 to expand real-time access in the U.S. — a highly significant milestone for real-time”, observed the ACI report.

FedNow, the nationwide real-time payments network, is set to revolutionize the way thousands of institutions transfer funds by enabling instant payments (immediate settlement and funds availability) 24/7, 365 days a year for businesses and individuals. The use of ISO 20022 standards in building FedNow will enhance payment security, speed, traceability and transparency, further streamlining the payment process.

FedNow is a major step and is expected to modernize the US payments system, as well as reduce operational risk with liquidity management, intraday credit and broadcast status messages. It is also a welcome step in propelling the payments system forward in the world’s largest economy. It will give corporations the ability to improve cash flow and working capital management and to streamline supply chain finance.

Besides the US, “The U.K. has embarked on its New Payments Architecture program, which aims to modernize the country’s RTP rails”, and “In Europe, the EU Commission has proposed a law mandating RTPs across its 27 member states”, states the ACI report.

Governments, central banks and regulators are taking cues from instant payment success stories like India and Brazil and are launching initiatives in hopes of emulating the success of the leading RTP players.

Craig Ramsey, global head of real-time payments and banking at ACI Worldwide, commented: “The countries at the top of our league table — Bahrain, Brazil and Thailand — are all relatively recent enablers of real-time payments. Concerted industry collaboration and government mandates, widespread merchant adoption, strong brand recognition for a scheme, and related services, such as digital wallets, have provided the perfect combination for strong growth in these markets.”

Many believe that it is time for the US and other developed western economies to do the same, holistically and swiftly, and take advantage of a colossal opportunity that RTP may present for a stronger payments presence on the world stage.

To conclude, as the digital payments ecosystem drives transformation into companies across all sectors and industries, facilitating efficient, cost-effective and secure payments to its stakeholders in seconds is likely to become the expected norm. Those governments, regulators, financial institutions and corporations who believe in the staying power of real-time payments will adopt and monetise it to attain profitable growth, as well as harness financial inclusion.