Real-time systems that are designed to be ﬂexible to these changes can move quickly into new areas, to deliver better services for customers, build trust and loyalty - and increase sales. A key challenge for payment system stakeholders is working out when to upscale their real-time payment functionality. While the development of value-added services can be spurred by new use cases, others require additional functionality to blossom.
Focusing on use cases can help determine new areas for the expansion of real-time products, helping to make it clear where the gaps in consumer need are. As services expand to meet current and future use cases, consumer and business adoption of real-time payments grows.
In markets that have deployed real-time payments successfully, person to person (P2P) is a clear initial use case, as shown by the success of Swish in Sweden. Mobile app integration with real-time payments, combined with a proxy database that typically uses mobile phone numbers or email addresses, was enough to spur P2P adoption widely across the population. But as functionality was added, consumer to business (C2B) and business to business (B2B) use exploded, with a huge acceleration in transactions once Swish for Business and QR codes were added to the app.
While it took about three years for Swish to record the ﬁrst 100 million payments, it only took four more years to record its billionth transaction – less than three years after Swish for Business was launched, and less than two and a half years after QR code functionality was added. Sustaining 100% year-on-year growth for this long would have been very difficult without introducing new services.
When focusing on services offered by central infrastructures or ﬁnancial institutions, it becomes clear that most of the functionality being added in second and third generation real-time systems is focused on unlocking C2B and B2B use cases.
Request-to-pay (RtP) functionality is a key building block for C2B and B2C use cases, and scheme-wide solutions are being discussed in the US via The Clearing House’s RTP, in SEPA via the European Payment Council’s Working Group, and the UK’s New Payments Architecture (NPA).
RtP functionality allows a beneﬁciary to initiate a transaction, by sending a payment request to the payer, who can then choose to accept the request and make a real-time credit transfer. RtP allows a real-time system to have direct debit-like functionality, while ensuring that the sender has complete control over each payment.
It can also greatly improve reconciliation for billers and merchants, by incorporating messages with real-time payments, replacing direct debit and eInvoicing. Expanding use into the point-of-sale via RtP may require additional services such as dispute management, an area that card networks have developed over decades.
Digital identity will become one of the biggest challenges for the ﬁnancial services industry, as more and more transactions take place in a fully digital space. Customers increasingly expect to be able to transact completely online and leverage information from various systems from a single digital identity.
For example, Indian banks regularly allow customers to use their Aadhaar number - a government issued unique digital identiﬁer that uses biometric and demographic data - to send and receive real-time payments, while Nordic apps such as Swish, Mobile Pay, and Siirto allow consumers to do the same using their mobile phone number.
The real challenge will be to develop digital ID services for corporates, as they often have multiple bank accounts, many unique users (employees), and may operate across borders. As customers continue to conduct more of their personal and business lives online, banks and other stakeholders will have to develop more advanced digital identity solutions that can be leveraged for real-time payments.
Stay tuned for the final part in our three-part blog series, where we show you how to build the real-time payment services of the future. In part one of our three-part blog series we looked at how real time payments can help build better relationships with customers.
Read our full report on accelerating real-time payment adoption with value-added services.
Ilkka has a broad international experience in banking, corporate finance, consulting and IT. As Head of Payments in TietoEVRY he is responsible for the global Payments business. Prior to the current role Ilkka has held many senior management roles in the former Tieto company and worked in OP Banking Group as a Head of Digital Banking.