Adopt Real-Time Payments as a Competitive Differentiator


It’s been about five years since real-time payments (RTP) became a reality in the U.S., and their popularity and adoption continue to skyrocket. According to a survey U.S. Bank  conducted among 1,000 financial executives across various industries in May and June of 2022, 56% said they will adopt real-time payments by 2024.

Furthermore, 41% of companies described as “RTP leaders” saw an increase in revenue compared with the previous year, while only 33% of “RTP laggards” reported the same. A further 39% of RTP leaders saw an increase in profits in the past year, while 44% said they saw their brand value increase.

To learn more about the importance of businesses adopting real-time payments and integrating them into their overall digital strategy, PaymentsJournal sat with Mike Jorgensen, Head of Emerging Solutions at U.S. Bank, Anuradha Somani, Head of Payments, Global Treasury Management at U.S. Bank, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

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Why Businesses Need to Adopt Real-Time Payments as a Competitive Differentiator

PaymentsJournal Why Businesses Need to Adopt Real-Time Payments as a Competitive Differentiator

Real-time Payments as a Competitive Differentiator

The growth of real-time payments continues to rise: In the second quarter of 2022, companies made more than 41 million real-time payments, totaling $18 billion — a 12% growth in volume from Q1, according to The Clearing House.

According to The Clearing House, roughly 62%of accounts in the U.S. can receive real-time payments “and if all the payments providers and banks had everything turned on, that figure could reach about 90%,” noted Murphy.

But real-time payments aren’t just about instant payments; they also mean that payments can be reconciled 24/7 and give businesses access to more and larger amounts of data related to payments, said Somani. She added that businesses shouldn’t just think of real-time payments as something to tack on as an afterthought, but rather using them to create “a fundamental change to your business model.”

“It gives you the ability to create a friction-free and seamless experience, so the payment moves to the back of the mind for the consumer,” she added.

Jorgensen noted some industry-specific examples, including broker-dealers enabling clients to fund their accounts instantly so they can immediately begin trading rather than having to wait the typical two to three days for an automated clearing house (ACH) transaction to clear. Or a car dealership buying a vehicle from a consumer being able to instantly transfer the funds. Jorgensen also referenced the gig economy, and workers being able to immediately get their pay at the end of their shift.

“Real-time payments offer companies the possibility of creating a differentiated experience,” Jorgensen added.

He cited the experiences of rideshare companies such as Uber and Lyft as examples of this seamless payments experience.

“In the old days, you would take a taxi and then pay them at the end of the ride,” Jorgensen said. With ride share companies, “the payment is invisible, real-time, and embedded in the experience.”

It’s not just business-to-consumer (B2C) businesses that benefit from RTP, but business-to-business (B2B) as well. Murphy noted that “there is an increasing demand from people in offices to get the same experiences [at work] that they get on their personal apps.”

Some B2B use cases include paying invoices instantly and funding payroll instantaneously, especially so that employees can receive instant earned wage access, Murphy added.

RTP and Digital Transformation

Businesses need to think about how real-time payments will be integrated into their overall digital transformation agenda, said Somani.

“It’s not just about changing a single ACH into RTP, but how does this integrate into my larger payments ecosystem, and how does it integrate with different business cases and use cases?” she added.

For example, there are a lot of back-office considerations when it comes to RTP, noted Jorgensen.

“You have to think about how RTP will affect your normal accounts receivable and accounts payable functions,” he said. What do you do if a payment comes in at 1 a.m.? Most businesses aren’t staffed to have accounts funded 24/7.”

Embracing real-time payments means “changing your entire payments system as part of a larger transformation agenda,” added Somani.

That is why it is critical for businesses to identify the right partners to work with as they embark on their digital transformation journey, including financial and technology partners.

“You are not trying to retrofit anything, but innovating and integrating into your existing systems,” she added. “This requires the right partners to help identify what pain points exist today, what is the ideal end state when it comes to payments, and how do we get there.”

A “Netflix Moment” for Payments

Jorgensen observed that business that adopt and implement real-time payments will have a significant competitive advantage over those that don’t. He cited the U.S. Bank survey that showed that nearly 60% of those polled will implement real-time payments by 2024, meaning that “the other 40% are at risk.”

“If a company doesn’t adopt RTP and they can’t figure out how to integrate it into their front-end and back-end operations, they will lose competitive advantage, speed to market, and even the ability to scale quickly,” he added.




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