How are real-time payments driving financial inclusion and enabling small businesses?

The Fintech Forecast is a series of guest articles published each month from thought leaders at ACI Worldwide. 

Author: Elise Thrale

The way we pay is shifting to meet the ever-evolving demands of modern life. Seismic shifts in payment industry waves such as the era of open banking, the mammoth impact of eCommerce have created a tsunami of innovative payment services and products for consumers. However, despite the infinite appetite and need for real-time payments across the globe, there is some level-setting to do in terms of adoption.

What are real-time payments?

Real-time payments are at the backbone of growing economies and the ever-changing payments ecosystem. According to ACI’s Inside Real-Time, most major markets have real-time payment schemes in place, and if they don’t, they are in the process of developing them. A real-time, or instant payment is an account-to-account find transfer that drives immediate availability of funds to the transaction recipient, normally within a matter of seconds.

Real-time payments have a multitude of benefits. On the technology and usage side, they are more data-rich, improving transparency, giving businesses reduce dependency on cards. Additionally, the speed at which they process payments improves liquidity of business and economies. On a more human side, real-time payments have the power to drive financial inclusion and help governments reach more citizens with disbursements during times of economic crisis.

Real-world human impact with real-time payments

The proof is in the pudding. World-leading real-time market, India, has changed the way consumers, business and governments make and receive payments. A staggering 89 billion real-time transactions were processed in 2022 in India alone, predicted to reach 235 billion by 2027. The broad availability and faster, more efficient nature of real-time payments are unlocking new business models. For example, small merchants operating with thin margins can become more receptive to accepting digital payments, with less costs than those associated with card payments. This means a street food seller is able to easily and securely accept digital payments at the click of a button, creating smooth customer experiences and increasing margins.

From one side of the world to the other, Latin America is at the forefront of payments modernization, driving financial inclusion for many markets with previously largely unbanked populations. Brazil, Latin America’s most populous country has a long history of cash usage. But it is its most recent chapter that has had the biggest impact.

The monumental rise of PIX, launched in 2020 by the Brazilian central bank, saw 1 billion Brazilian Real transacted within the first six months. Sparks were flying from PIX’s user-friendly QR code feature, and the government mandating banks to participate in the scheme, leading to an explosion of consumer adoption.

Making real-time payments a reality

As the European Commission is looking to broaden the scope of instant payments in the region, and in the wake of FedNow in the US, the western world is looking to catch up with leading growth markets.

Looking to the future as we broaden access to real-time payments for consumers and small businesses, we must ask ourselves how best we can make real-time payments innovation mean consumer adoption. Is it necessary to mandate real-time payments as the Brazilian central bank did, or rather, to drive the use cases that push adoption like in India?

It is indisputable that consumers and businesses around the world are hungry for real-time payments, so they can send and receive money with speed, and with little cost. To gain market share, merchants, banks and financial institutions should focus on having modern infrastructure to enable them to launch value-added use cases on top of real-time payment rails. The result for the consumer is seamless and secure payment experiences.