" class="no-js "lang="en-US"> EXCLUISIVE: "Levelling up" - Somya Patnaik, ACI Worldwide in 'The Paytech Magazine'
Tuesday, March 21, 2023
City Week 2023

EXCLUISIVE: “Levelling up” – Somya Patnaik, ACI Worldwide in ‘The Paytech Magazine’

Somya Patnaik of ACI Worldwide says its latest report suggests the explosion in instant payments is fuelling financial stability for developing nations

The title of a recent ACI Worldwide report makes no secret of the fact that it believes real-time payments are about to ‘have their day’ – it predicts a usage explosion in the coming years. The payment giant’s Prime Time For Real-Time 2022 report, measured 118.3 billion real-time transactions worldwide last year (representing 64.5 per cent year-on-year growth) and forecasts the annual total will hit 427.7 billion in 2026, or 25.6 per cent of all electronic payments. And for this third edition of the annual offering, real-time payment solutions provider ACI used analysis from the Centre for Economics and Business Research (CEBR) to quantify real-time payments’ economic impact – which it estimated was worth an additional $78.4billion in 2021 to the 30 countries studied. Of course, COVID-19 was the catalyst that squeezed a decade of payments evolution into 24 months as locked-down people were dislocated from traditional payment systems – and each other – and had to adapt.

But the ways in which countries experienced that evolution have differed hugely across the globe, and predicted growth rates vary wildly, too. Somya Patnaik, ACI Worldwide principal product manager/global solutions lead, real time payments, says: “At a macro level, digital payments, and especially real-time payments, are growing like never before – it’s bringing in so much opportunity for all the participants in the ecosystem.

“One of the key findings of this year’s report is that there’s a direct correlation between real-time payments and economic growth, so economies that are more cash intensive tend to grow at a slower pace, versus economies that are moving towards contactless payments. “So, there is immense opportunity for markets that are yet to set up a real-time payment infrastructure. I think all participants should join the bandwagon and contribute to the payment modernisation story, and bring in new capabilities for consumers.”


Patnaik’s home country of India continues to lead the world in real-time payments and ACI Worldwide increased its rolling five-year growth prediction for that country from 27.5 per cent in last year’s report to 33.5 per cent this time. Put simply, success is built on success in India – the country’s United Payments Interface (UPI) launched in 2016 and quickly became a mainstream option for peer-to-peer payments, shopping and, since last year, a way to safely receive state benefits. It now sits at the centre of a financial ecosystem that spans far wider than just banking and finance apps. Last year, India led the world with 48.6 billion real-time transactions, which accounted for almost one-third of all transactions made.

The ACI report estimates going real-time saved Indian businesses and consumers $12.6billion – which helped to unlock $16.4billion of economic output that represented 0.56 per cent of the country’s GDP. Widespread ownership of smartphones has allowed many Indians to switch from cash to real-time payments under the UPI system. The ACI report talks of a ‘flywheel effect’ which has resulted in new features that include cross-border QR code payments, cardless cash withdrawal, contactless digital payments and the e-RUPI e-voucher system for government and businesses.

Meanwhile, in stark contrast, India’s neighbour Pakistan is only just beginning its real-time payments journey. Cash still dominates, but in January the country began to roll out the first phases of its Raast real-time payments system, with first-use cases including government payments of salaries, pensions and benefits. The system is inspired by India’s UPI service but, unlike India, Pakistan has a low penetration of smartphones and patchy internet connectivity beyond its cities. However, although almost no merchants as yet accept real-time payment from customers, ACI believes that the fact so many people are due to receive government payments through Raast means its usage will develop, adding a ‘theoretical’ 6.1 per cent to formal GDP by 2026. Moving beyond South Asia, Brazil tops the table for predicted real-time payment growth in the latest ACI report.

“There’s a direct correlation between real-time payments and economic growth, so economies that are more cash intensive tend to grow at a slower pace, versus economies that are moving towards contactless payments”

Eclipsing India’s 33.5 per cent forecast and second-placed Oman on 41 per cent, Brazil is expected to see 56.8 per cent growth from 2021 to 2026, due to the huge success of the country’s Pix real-time payments system that went live in November 2020. Brazil got its first real-time system – SITRAF – in 2002 but that platform was only available during bank opening hours. The colossal adoption of 24/7 system Pix, which can be used by customers of 761 financial institutions, shows what’s possible when real-time meets people’s needs. It’s not without its issues (see page 16), but last year it contributed to a 5.3 per cent real-time payment market share of Brazil’s total transaction volume – or 8.7 billion payments.

By 2026, ACI predicts that will have surged to 34.3 per cent and real time will eclipse all other forms of electronic payment. Economically, the CEBR estimated that real time saved $5.7billion for Brazilian businesses and customers in 2021, unlocking $5.5billion of additional economic output representing 0.34 per cent of GDP. But it believes savings will rise to $37.9billion by 2026, generating an additional $37.6billion of economic output, equivalent to 2.08 per cent of forecasted GDP.

ACI said: “Since its launch in 2020, Pix has taken off far faster than anyone expected, by October 2021, it was processing one billion transactions per month.” To put Brazil’s growth into perspective, the UK got real-time payments in the form of its Faster Payments scheme in 2008 but take-up has been far slower. ACI reported 3.4 billion real-time transactions in the UK last year (9.2 per cent of payments), and predicts that volume will rise by 11.1 per cent to 5.8 billion (12.3 per cent of payments) by 2026. ACI points the finger at the ‘stubborn prevalence of legacy payment systems’ such as credit and debit cards. But it predicts the arrival of Swift’s ISO 20022 protocol will unleash sweeping changes on the country’s payment infrastructures.


And it is the potential presented by data systems like ISO 20022 to harness that, that will provide a payoff for merchants forced to adopt digital payments, says Patnaik.

She adds: “The market has moved away from how a merchant wants to accept payments to how a customer wants to pay for their purchases, and the whole buying decision is reliant on whether the consumer’s preferred mode is available or not. If not, they abandon that purchase.

“So, merchants have to be at the top of their game. They have this opportunity to offer differentiated services to consumers, they need to offer end-to-end services and identify better ways to engage for better customer stickiness and loyalty. One change that came up during the pandemic was people moving away from fragmented payment experiences and looking for a consistent experience across all channels. So, if I make an e-commerce payment, or make an in-store purchase, my payment experience should be consistent.

“But the motivation for businesses is data – there is so much payment data available today that they can gain deeper insights into customer background and buying behaviour. That data can be leveraged to offer differentiated services.” The change being witnessed is undeniably huge, and all ecosystem players, from central banks and governments to banks, merchants and consumers, will have to contend with the resulting demands for compliance, infrastructure growth and fraud risk. Indeed, the ACI report highlights the pressure placed on Brazil’s IT infrastructure by the explosion in real-time payments.

And the country’s real-time crime problems, where victims have been held at gunpoint and forced to move cash to a mule account, have been at the extreme end of a problem that has grown wherever electronic peer-to-peer transactions are available. But Patnaik is optimistic and sees only growth for real-time payments. She also sees the systems being a solution to the inefficiency experienced in the world of cross-border money flows.

She says: “Regulatory mandates can be exhausting for banks and financial institutions and there’s a constant ‘catch-up’ for players within the ecosystem. Fraud is another challenge – due to increases in digital payment volumes we’ve seen a rise in fraud, especially during the pandemic. Fraudsters are aggressively targeting consumers and businesses with new scams and there has been a rise in fraud attempts on banks and financial institutions. “As for cross-border payments, they are undoubtedly more complicated than domestic payments. Different countries follow different data standards, but I think with the global adoption of ISO 20022 we could see this challenge reduce.

There is a definite demand for cross-border, real-time payments and we’ve seen a lot of activity. Examples include the Asian Payment Network, which is trying to connect the various domestic real-time payment schemes within the Asia-Pacific area.

“We have seen The Clearing House [banking association] in the US embark on a pilot scheme for cross-border interoperability with Europe, and India is doing the same with four countries, the UK being the latest addition. Beyond cross-border, in five years consumers will have many more cool ways to pay, we’ll have social media players, Big Tech and fintechs participating in the ecosystem that will innovate and drive adoption of real-time. We have interesting times ahead.”


This article was published in The Paytech Magazine Issue 25, Page 16-17

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