Traditional card payment rails were developed some decades ago and they don’t always support real-time fund transfers. However, there is added value in moving card payments to real-time payment rails.
Nowhere is this more obvious than in China, India and Kenya, where the vast majority of the population used mobile wallets in the past year. In Europe, Sweden has the highest weekly user rate of mobile payment apps. Despite this, the majority of Swedes still use debit or credit cards issued by their banks to pay for goods. Hence, cards still play a major role.
The Pandemic has contributed to the global increase in card usage, transitioning even more people away from using cash. This has been supported by the adoption of contactless payments, increased payment limits for contactless payments, and improved usability of cards via mobile card solutions like ApplePay and GooglePay.
Traditional card payment rails were developed some decades ago. Not surprisingly, they don’t always support real-time fund transfers and contain a limited amount of transaction data. This causes payment delays for merchants and makes it difficult to automatically reconcile end-to-end payments, for instance, when booking credit card bills from abroad or reconciling partial e-commerce refunds. Clearly, there is added value in moving card payments to real-time payment rails.
However, there are arguments for keeping traditional cards and card rails in place for both consumers and merchants. Not all consumers have adopted mobile phones as payment tools and many still use cards when shopping. In addition, cards are a proven technology, and they are less vulnerable to network connectivity issues or dying batteries.
On the merchant side, there is a willingness to serve customers who don’t want to switch to mobile cards. In addition, existing POS terminals and partnerships with acquirers will ensure cards remain a viable alternative for a relatively long time.
We believe there is a need to combine cards and instant payments into a single, modern, real-time payment platform. Based on our international experience from implementing card solutions and delivering central instant payments infrastructures for banks, we have identified five consideration areas for a new, real-time payment infrastructure
It’s exciting times in retail payments. Data-rich, real-time payments will bring considerable added value to consumers and merchants. New real-time payment systems should consider how current card payments volumes can be boosted through greater adoption. A concrete example of this convergence is the European Payments Initiative (EPI), which aims to offer new card rails and an e-wallet.
At Tietoevry, we are working actively with central banks, peer organizations that are establishing real-time payment systems, and our banking clients that are connecting to these real-time payment rails. Reach out to us to hear how our expertise and solutions can help you take advantage of this.