Innovation in real-time payments
April 27, 2015

Many small-business retailers process all their payments in a batch at the end of the day, but this may change soon. Credit card processing partners are starting to offer more frequent processing, moving closer to real-time payments. According to research from SWIFT, next-generation point-of-sale systems will have access to payers' and payees' accounts to confirm transactions. In addition, new systems will offer service at all times. While these systems are used in many other countries, the U.S. is somewhat behind in payments innovation because updating an existing POS system can be very costly.

Why is the US behind in payments?
The U.S. automated clearinghouse system has been in place since 1974, according to NACHA. Although the system is reliable and relatively efficient, other countries offer more features for payment processing. In addition, most European countries utilize the EMV standard, which the U.S. will not switch to until the end of 2015. Payments innovations in other countries have often been driven by non-banking institutions that have sparked developments that have caused the financial industry to adapt.

Will adoption of real-time payments systems speed up?
Currently, the payments landscape is fragmented because there are multiple real-time payment standards with varied operational and network requirements, PYMNTS stated. If banks offered real-time payments, they would need to meet multiple requirements. However, the U.S. Federal Reserve Bank released a formal paper on real-time payments, which shows that this trend is becoming a top-of-mind issue for many in the industry.

Why would real-time payments benefit companies?
Real-time payment processing has the potential to streamline operations and boost efficiency. For business-to-business firms, real-time payments could offer companies the ability to handle conditional payments on large invoices, which would give business owners a better idea of working capital.

"Real-time is a growing trend led by consumer expectations, supported by regulatory reform," Juliette Kennel, Head of Market Infrastructures at SWIFT, said of the company's white paper. "The industry is going to have to come up with ways to enable banks to offer real-time capabilities while keeping costs in check. Collaboration and innovation is going to be key."

Consumers expect the retail experience to be seamless and efficient, and real-time payments could help companies boost their service levels.

Nexus: G-WEBCD3