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Retail Payments are Converging to Data-Rich Real-Time Payments

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.

Jarkko Turunen / March 30, 2021

The state of retail payments varies around the globe. Different regions are at very different maturity levels. However, we can see a clear trend: It’s becoming common practice to use mobile wallets with real-time payments to pay for retail goods.

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.


Creating value through real-time payments and cards


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.


Can card and instant payment rails converge?


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

  • End-to-end solution: a platform should include payment initiation from cards and result in either a request to pay or a traditional card authorization that transfers payments and funds using real-time payment rails. This helps to connect to existing processes and behaviours.
  • Open architecture: the architecture should be based on open standards, open APIs and support different flows so that, for instance, POS terminals can utilize traditional technology or more modern APIs when they are upgraded.
  • Ecosystem setup: acquirers and processors are established in the cards ecosystem and should be linked to the new real-time payments ecosystem.
  • Governance: cards have traditional models for interchange fees, chargebacks, and currency exchange, among others. These should be considered in real-time payment governance models for card and wallet-initiated payments.
  • Brand: cards have traditionally been used to increase brand recognition. This will remain essential in the digital payments world where many brands and payment methods compete for attention.


In conclusion 


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.

Jarkko Turunen
Head of Payment Products & Services, Tietoevry Banking
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