Real-Time Payment Systems Up Globally, North America Still Lags: FIS Report

The number of real-time payment systems in use around the world increased 35% over the past year, and nearly four times since 2014, according to new research released by FIS.

FIS, the Jacksonville, Fla.-based provider of technology solutions for merchants, banks and capital markets published its “Flavors of Fast” report, which presents data on the global adoption of real-time payments. FIS identified 54 countries with active real-time payment programs, up from 40 in 2018. Leading contributors to this increase were new programs launched in Asia and the expansion of Europe’s Single Euro Payments Area Instant Credit Transfer scheme.

The report defined real-time or faster payments as funds transferred from one financial institution account to another with payment confirmation in one minute or less.

FIS used its Faster Payments Innovation Index to score programs on a scale of 1-5 (with 5 the highest), based on innovative features, fund availability and market application. India received the only 5+ rating and remains the global leader in real-time payments usage. That country saw a 10-fold increase in value and an eight-fold increase in transaction volumes through its national immediate payment service over the last year.

Six countries (Australia, Denmark, Poland, Romania, Singapore and Sweden) received a 4+ rating for their real-time payments systems. The U.S. and U.K. were among 31 other countries or regions with a 4 rating for their faster payment schemes.

“Consumers and businesses globally are demanding faster payments, and more countries and financial institutions are hearing the call and taking action,” Raja Gopalakrishnan, EVP, International Banking and Payments at FIS, said. “While this is good news for the marketplace, we are only at the beginning of this revolution and much more investment is needed to make the global transition to real-time payments.”

The FIS research took note of the growing use of chat-based services, retail apps, instant loans and open APIs, as well as the migration toward the ISO  20022 global payments standard (developed by the International Organization for Standardization as the common global language for exchanging payments within and across borders) as key factors driving the increased adoption of real-time payments around the world.

Now in its sixth year, FIS’ annual “Flavors of Fast report has evolved from capturing the early influences of faster payment schemes around the world to discussing how real-time payments are helping fuel the payments revolution now underway.

The report recognized the first retail schemes to exemplify real-time characteristics date back to the early 1970s: Japan had an operational payment system in 1973, and Korea and Switzerland had one in place in the 1980s.

However, North America has been relatively slow to embrace immediate payment mechanisms, with the U.S. only launching in 2017 and Canada still under development (targeting live 2020). Central and South America, in contrast, have some long-established real-time schemes dating back to 2002 (Brazil), 2004 (Mexico) and 2008 (Chile).

In July 2017, the Federal Reserve System’s Faster Payments Task Force (of which FIS was a member) released official plans to evolve the U.S. payments system into one “that is faster, ubiquitous, broadly inclusive, safe, highly secure and efficient by 2020.”

The Clearing House launched its real-time payments system, RTP, which is open to all U.S. financial institutions and constructed to support digital commerce and to become a platform for innovation, in November 2017. The FIS report wrote, “In addition to clearing and settling payments in seconds, RTP includes features like payment confirmation and the request for payment messaging that enable pull payments to deliver bills and invoices through digital channels.”

Concurrently, the real-time payments service Zelle (rebranding of clearXchange) offers P2P payments backed by a network of U.S. financial institutions and managed by private financial service Early Warning Services (originally formed to combat fraud in the financial industry). “Zelle is a complementary service but does not offer bank-to-bank settlement in real time,” the report noted.

Meanwhile, The Federal Reserve Board, is working on FedNow, a service to enable all U.S. financial institutions to offer real-time payments 24/7. The system, expected to be operational by 2023 or 2024, will initially support transfers of up to $25,000. “While welcomed by smaller community banks and credit unions, larger banks are less enthusiastic as it represents direct competition for The Clearing House’s RTP service. Fintechs wanting to break into banking also look set to benefit from FedNow, allowing them to bypass RTP for what could well become a cheaper service,” the report suggested.