The demand for real-time payments is increasing within the retail segment as the COVID-19 pandemic is placing enormous pressure on small businesses struggling to generate income as public health concerns force travel, retail shopping and billions of dollars in business activity to a halt.
The need to access immediate funds is prompting retailers to leverage various means of moving funds to provide the meet the necessities of every day business continuity.
“In the U.S. particularly we are seeing a heightened interest in the speed of money movement,” Bridget Hall, principal product manager, real-time payments at ACI Worldwide, told Mobile Payments Today via email.
In early April bill payments were a major concern by many consumers and small businesses, she said, given many bills came due at the beginning of the month. Timeliness of disbursements payments, such as social security, government assistance and other financial aid, is also going to be a major concern among those who depend on those payments, she added. The urgency created by the pandemic means that reducing the amount of time need to convert a paper check into available funds is critical for many.
“This need to move money quickly and accurately is not a new concept, but the number of people who can relate to this need is definitely going to increase with the impacts of COVID-19,” she said.
An ACI report issued last week reveals real-time payments were expected to surge over the next few years, with more than half a trillion transactions and a compound annual growth rate of 23% between 2019 and 2024.
India is expected to lead that growth going from 15.3 billion transactions in 2019 to 52.8 billion by 2024, with strong growth in countries like Malaysia, Finland and Belgium. The U.S. is expected to see CAGR of 42% from 734 million transactions in 2019 to 4.2 billion transactions by 2024.
Leaders at Zelle, a P2P money transfer service, is already seeing a shift in payments due to the impact of COVID-19 on consumer demand.
“Given the state of the world today and recommendations from health authorities to stay inside, we are seeing a decrease in social-related transactions and an increase in consumers leveraging Zelle in paying back neighbors for groceries and sending money to loved ones in need,” said a spokesperson for Early Warning, the parent company of Zelle. “In addition, our financial institution partners are encouraging customers to leverage their online and mobile banking features, which include sending and receiving money through Zelle.
Faster pay
Steve Ledford, senior vice president products and strategy at The Clearing House, said a growing trend that preceded the COVID-19 crisis has been an increase in gig economy workers getting direct payments into their accounts for work as soon as it is completed. Another growth area has been in the ability for payroll to access pay on demand services, with many workers now able to access funds after a specific shift.
Since the beginning of the outbreak, a number of banks have inquired about making real-time electronic payments to suppliers because they cannot access the office and cut paper checks.
Jack Henry & Associates Inc., a provider of core banking, payment processing and other technologies to banks and credit union, has been in pilot mode with a system called JHA Pay Center.
After entering the real-time space two years ago, the JHA Pay Center integrating with Zelle in 2019 and last fall allowed a group of 15 banks, for processing real-time payments through an RTP network connection to The Clearing House.
Tede Forman Jr., group president, consumer & commercial payments, at Jack Henry, said it’s a little too early to tell how COVID-19 will have on demand for faster payments over the long haul, but they are seeing growth in remote deposit capture functionality to gain immediate access to funds, particularly as consumers have limited access to bank branches.
“I think you’re also going to probably see some changes in bill pay behavior, where real time payments are going to be more prevalent,” he said, “versus schedule it, fire it forget it.”
European pressure
Nick Maynard, lead analyst at Juniper Research told Mobile Payments Today, that he wasn’t sure if demand for real-time payments has changed as a result of the coronavirus pandemic. He said that overall B2B payments have likely declined due to reduced business activity in recent weeks. However he added that supplier payments have likely been impacted as some will face a slowdown in payments, others will not be paid at all and some will see an increase in movement.
He noted that Morrisons, a U.K. supermarket chain, committed to 48-hour faster payments in order to help smaller suppliers during the crisis. Morrisons said the move would help out local food suppliers and farmers impacted by the outbreak.
Central bank settlement
Just within the last few days, Sweden’s central bank, Sveriges Riksbank, joined the European Central Bank’s instant settlement program called the TARGET Instant Payment Settlement, which allows settlement of electronic payments in Swedish krona.
“In crisis times, this agreement is a good example of strong cooperation between central banks in Europe,” ECB President Christine Lagarde said in a release from the agency. “Our real-time settlement platform is a pivotal contribution to Europe’s endeavors to satisfy citizens’ increasing demand for faster, cheaper and convenient payment services without compromising on security.”
A spokesperson for the ECB said that 30 countries participated in the instant settlement program, which allows 3,800 institutions to indirectly participate in the real-time payments system.
Sweden is considered one of the leading proponents of real-time payments, with an average of 1.5 million instant payment transactions per day.
A spokesman for Sveriges Riksbank said the country had previously announced plans to join the bank back in 2018 and was not immediately motivated by the COVID-19 outbreak. The country’s RIX-INST service is expected to be online by the spring of 2022.
Cover image: iStock