What Are Real-Time Payments? Technology and Key Benefits Explained

Real-Time Payments (RTP) benefit both businesses and individuals by enabling instant money transfers.

As of 2023, 80 countries have either live or planned real-time payment infrastructure. Beyond simply connecting payment partners, RTP now includes:

• Real-time payments to wallets
• Real-time payments to banks
• Real-time cross-border payments
• Onboarding new partners to expand network reach
• Meeting the needs of diverse customer groups (businesses, platforms, network participants)
• Incorporating richer data within payment messages
• Expanding from local to regional, beyond individual countries
• Participation of Non-Banking Financial Institutions (NBFIs), broadening RTP networks beyond traditional banks to include mobile wallets and other institutions

While building RTP at the national level is complex, scaling it internationally introduces even greater challenges.

This article explores how real-time payments work, their benefits, challenges, and real-world examples.

Table of Contents

• What is a Real-Time Payments network?
• What are the benefits of Real-Time Payments?
• Examples of Real-Time Payments
• Global Real-Time Payments: The challenge
• The cost of integrating local Real-Time Payments
• How Thunes makes cross-border Real-Time Payments seamless

What is a Real-Time Payments network?

To answer this question, we’ve come up with a checklist to define a real-time payment system:

• Instantly initiated and settled: RTPs are initiated and settled within seconds, differentiating from the many payment methods that settle into a bank account in a batch process and are only usable after a certain period. 
• Available 24/7/365: Uptime is a crucial differentiator of a real-time payment network, given that the constraint of banking hours has been a significant hindrance to the legacy banking infrastructure.
• Open-loop: While adopting e-wallets has been significant and provides real-time value, these networks still have a closed loop. You and your payment beneficiary must onboard yourselves to the platform to execute a transfer and often need a “pre-funded” balance. With RTP, the settlement is made in a participating bank account, so there is no pre-funding for end users. 

This checklist is imperative in determining a “true” real-time payment network to avoid confusion.

While mobile wallet companies and Non-Banking Financial Institutions (NBFIs) can participate in an RTP scheme, most participants are still banks and bank account settlements. 

What are Real-Time Payments used for?

Real-Time Payments can be useful in two ways:

1. Getting paid in real time / accepting a payment in real time (ACCEPT)
2. Paying a beneficiary in real time (PAY)

We can take the example of a coffee shop to demonstrate these two use cases in action. The coffee shop can use RTPs to get paid instantly by a customer, and the coffee shop can pay its suppliers instantly leading to better service or leading to discounts from suppliers.

Benefits of Real-Time Payments

RTPs benefit organisations because they are fast, transparent, available 24/7 and introduce new business opportunities. Flip, a leading Indonesian payment platform serving over 10 million users, partnered with Thunes to leverage RTPs. As a result, Flip established payment systems in 45 countries and doubled its transfers in just a few months.

There are more examples of how RTPs can benefit businesses. For instance, Paydesk, a cross-border cross-currency money transfer company in the UK, worked with Thunes to support RTPs in 90 currencies in 140 countries.

Here is a detailed overview of how RTPs can be valuable to organisations.

1. Fast Transactions

The obvious advantage of RTP is that these payments are fast. In a peer-to-peer environment, the benefits are associated with a society that expects and demands real-time in all day-to-day activities. This trend is heightened in the Millennial and Gen Z populations; younger generations tend to be dissatisfied with waiting to transfer information from one place to another, and payments are no exception.

The benefits to SMEs are even greater regarding instant payments and settlement: 

• Efficient cash flow management
• Receivables cycles
• Cash flow efficiency
• Forecasting
• Process optimisation

RTP systems absolve this process. It allows instant payment, allowing it to reinvest in its business without delay and bring in more customers.

2. Transparent Processes

In a world where messaging drives the payments system and standards for messaging have improved and become standardised, synchronous messaging and settlement become feasible, which could be game-changing for consumers. Transaction messaging helps both the sender and beneficiary of the transfer identify:

• Who this transfer is intended for, and who it’s from
• Transfer status
• Unique references/identifiers

If all of that comes at the same time as the settlement of the transfer itself, this can enable simplified reconciliation and transparency.

3. 24/7/365 availability

The primary difference between traditional banking systems and an immediate payment service is that the latter is available 24/7, every day of the year. Businesses can send and receive money at any time, unlike legacy payment methods that don’t operate on specific days or at certain hours. This is especially true for cross-border payments involving foreign exchange, because local bank transfer schemes such as Instant SEPA in Europe allows bank customers to execute real time payments within the SEPA / Eurozone.

The 24/7 availability of RTPs provides organisations with opportunities for new business models. For instance, they can process refunds quicker, improving customer service.

Real-Time Payments Examples

We created this map to showcase all global RTP networks and the Thunes coverage to transfer to these networks. The list is extensive, but let’s highlight a few examples of real-time payment systems in action.

1. FAST: Fast and Secure Transfers – Singapore

Launched in 2014, the FAST infrastructure has enabled 26 participating banks and seven non-financial institutions (mobile wallets) in Singapore to link into a transfer network that enables real-time payments 24/7, 365 days a year across the country. “PayNow”, the customer-facing platform (“overlay service”) on the FAST infrastructure, is widely known and used.

The usage is astounding – Fintech News SG noted that 80% of consumers and businesses are using the payment scheme. Given the involvement and encouragement by the central bank of Singapore (MAS) and its creation and adoption by the country’s largest banks, its success comes as no surprise.

FAST recently integrated with PromptPay in Thailand to offer RTP cross-border between two highly transacted markets. Now, FAST is continuing this expansion with a link to UPI in India and Malaysia’s DuitNow in 2022. This will create additional connectivity between international markets, expand RTP capabilities beyond regional reach, and be one of the early steps towards proper interoperability.

2. NPP: New Payments Platform – Australia

Australia upgraded its payment system in 2018 with the introduction of NPP in partnership with the Reserve Bank of Australia. With this partnership, Australia began offering real-time settlement with enhanced transaction messaging.

As noted by the Reserve Bank of Australia, the government and consumers have supported the adoption. Notably, the Australian government made $12 billion in payments through NPP for COVID-related support in 2021. On the consumer side, 90 million customer accounts at 107 Financial Institutions. 

NPP has a vast roadmap in place to enhance the capabilities of the network, offering third-party authorisation and the implementation of simpler beneficiary identifiers than the Bank State Branch (“BSB”) number of the bank and the account number. This follows the example of FAST (above), where a phone number is the identifier of a recipient.

3. SPEI: Interbank Electronic Payment System – Mexico

Sistema de Pagos Electronicos Interbancarios

This payment network was implemented quite early, launched in 2004 by Mexico’s central bank, and gradually incorporated improvements over time. The scheme runs on very frequent batches to process, where participants can assign priority to the transfers for settlement within 30 seconds after a payment request is made.

The “CLABE” number is necessary to input for a beneficiary, which is a combination of bank, branch and account number. Mexico has had lower adoption of the network due to the largely unbanked population, a hurdle restricting utilising this network. As of 2021, only 37% of the population had a bank account. So, while the network offers simplicity and speed, there is still a reliance on banking, which has not yet been reached in Mexico, resulting in lower usage.

4. Faster Payments System – UK

Introduced in 2008, the Faster Payments Service enables 37 participating institutions to process almost all payments in real time, with some transfers taking up to two hours to process. The network also enables flexibility in processing future dated transactions as well as recurring payments and bulk payments (via file upload). 

A “sort code” is necessary to input for a beneficiary, which includes the encoded bank/branch (similar to “CLABE” above). The adoption of the network includes banks and fintechs alike, with transaction limits as high as £1 million (an increase from £250,000 in February 2022). Adoption has been steadily increasing, with Q1 2022 processing £912 million in payments through Faster Payments, accounting for £728 billion, a 22% increase from Q1 2021.

5. FedNow Service – USA

The US Central Bank introduced FedNow on July 20, 2023, to offer depository institutions immediate payments. Modernising the country’s payment infrastructure, 470 banks and credit lenders have joined FedNow to use this instant payment method for bill payments, peer-to-peer transfers and small business transactions. FedNow’s convenience and 24/7 availability significantly improve the Automated Clearing House (ACH) network.

Now, users can initiate a payment via the interface provided by their financial institution, which verifies the user has sufficient funds for the transaction and completes the payment via the FedNow platform. After the recipient’s financial institution approves the payment, FedNow withdraws the funds from the payer’s account and deposits them in the recipient’s account.

FedNow charges a monthly subscription fee and a low fee for each transaction. Like RTP railways in other countries, FedNow eliminates the cost of third-party intermediaries, and recipients receive their funds within seconds.

6. Future Use Cases

The transparency of payment flows, pricing, participation requirements, and road-mapped features have been clearly of interest to the Federal Reserve Banks creating this network. Moreover, the interest in speed to market before adding all features necessary shows an agile nature surrounding this RTP rail, signalling a clear value of rapid development and iteration based on the customer.

With these elements in mind, the adoption of FedNow will likely be widespread, reaching regional banks and consumers in markets across the US. Inclusion is a high priority of the FedNow network, and the focal points mentioned will be additive to the conversion of this goal.

The Challenges of Global Real-Time Payments

An undeniable difficulty of RTPs is their fragmented nature worldwide. Real-time payments and the concepts discussed herein still do not address a global payment market perspective.  They are inherently local.

• Central Banks are interested in exercising control over the process in their own jurisdiction. However, if a network expands beyond the country, the central bank is no longer the ultimate rule-maker.
• Consumer preferences are vastly different, and payment flows are unique across regions. Moreover, the banks themselves are different; thus, the participants in a payment scheme are different across markets.
• Technical feasibility and technological know-how vary between regions. Countries have individual integration rules, governance, technological advancement, and system processes.

There have been links across RTP networks with FAST to Promptpay, India’s UPI, and Malaysia’s DuitNow. However, this approach still needs to be more efficient and fragmented. RTP is more open than a private network but can’t be extended beyond a country-by-country network. 

While RTP creates massive efficiencies and benefits, the interoperability gap between these networks remains.

Costs of Integrating Local Real-Time Payments

Whether you are a bank, a fintech, a marketplace, a social media platform, an e-wallet, or an ecommerce business, integrating one or many RTP networks to make or process payments faster will imminently become part of your business plan. 

Serving international customers or expanding into new markets necessitates moving funds efficiently to new markets, and RTP networks are certainly optimal to ensure arrival timing and quality of service.

But this begs an assessment of the cost/benefit of the effort required.

Your benefits are clear:

1. Faster fulfilment: For high-velocity transactions, efficient and fast transfer fulfilment is optimal for customers, suppliers, merchants, etc.
2. Transparency: The ability to move rich data that can provide actionable insights into client needs, particularly corporate customers.
3. Payment Confirmation: Ability to confirm payment without tracking the transaction. With RTP integration, platforms can be assured the beneficiary account has been credited with the value.
4. Loyalty and Retention: By offering the value described, customers are more likely to return to the platform because stability and speed are ensured in their payment.

However, the costs of instant payments are high as well:

1. Resources: Time and money investment required to connect to local networks is often significant and would need to be repeated across each local jurisdiction. 
2. Fragmented rules: Integrating with a local RTP network means working within a particular framework that this network has enabled. This presents a sizable technical investment to integrate sufficiently and ensure compliance with the protocol of these rails. And, of course, this is just for one country and one network – imagine repeating the effort multiple times.
3. Regulatory Requirements: To operate in a local jurisdiction, companies will likely need licensing and/or bank accounts in that region. This is another costly endeavour.
4. Customer Management: There is a responsibility to simplify the experience for a payment customer, requiring additional local knowledge to ensure that payments passed to the network will be successful: Fields to include, beneficiary details to ask, etc.
   

How Thunes enables seamless Cross-Border Real-Time Payments

While RTP networks are powerful domestically, in most instances, there is no easy way to send a payment from one national network to another. These schemes have been developed with a domestic mindset, and international settlement remains challenging.

Thunes can help. With a single, seamless API integration, we enable our customers to access interoperability to most RPP networks worldwide. We can also provide access to direct clearing to mobile wallets, which most RTP networks do not directly connect to. Additionally, we offer transparency, pricing, and speed to make cross-border transactions feel more like domestic RTP networks.

We’re constantly adding new partners and payment methods so we can scale, adjust, and customise our solutions for you. There are no network management, operational worries, or fuss — just leave it to us.

Explore our Pay and Accept network capabilities today.