Real-time payments will soon dominate global transactions. OpenPayd’s payment infrastructure is helping us get there.
Just ask Usain Bolt, Sir Lewis Hamilton or Michael Phelps. It’s all about speed.
Payments are no different. Everyone wants to get paid faster, and those sending funds don’t want to wait days for transactions to settle.
As an industry, we’ve made big strides in recent years to make payments not just fast, but instant. It’s a topic we’ve written about ourselves, with Faster Payments in the UK and SEPA Instant in Europe allowing businesses and individuals to make payments in real-time.
While Faster Payments and SEPA are well-known examples, there are actually over 55 countries that have real-time payment capabilities, and that number is only going to grow. In 2023, P27, a partnership between several banks in the Nordic region, is set to launch. The platform will allow instant flow of money within Denmark, Sweden and Finland for individuals and businesses - the world's first real-time, cross border, multi currency payment system.
We are all building towards what I like to think of as ‘payment Nirvana’. A system in which any payment you make to anywhere in the world is sent and received instantly. So how do we get to that point?
Building payment infrastructure takes time and realistically, we’re not going to be in a position where real-time payments can be made and received in every country in the world any time soon. Countries have their own regulators, their own risk appetites, unique technical capabilities - some parts of the world will see this innovation faster than others.
But even when a real-time payment rail exists, accessing it is not something that just happens. I have spoken before about the four pillars of OpenPayd’s approach; financial licences, payment rails, banking-as-a-service and embedded finance, and how they work interdependently.
Our clients need this combined approach, with licensing in various jurisdictions, along with the tech and infrastructure in place to make embedding a real-time payment rail a seamless experience for every business.
While the journey is not a short one, it is one we are preparing for. OpenPayd is currently working on more banking partnerships across the globe, starting with the locations that would most benefit our clients. Simultaneously, we are building out our tech further to accommodate additional payment rails when they become available. This is something that is very much at the forefront of our roadmap.
In terms of what else can help us, continued advancements in regulation will never be a bad thing. Again, this is something that finance has been particularly good at over the past decade. If the industry sticks by its commitment to improving international transactions further, with the G20 making it a top priority in 2020, we will see the rate of progress accelerate.
As beneficial as speed is, the advantages of real-time payments actually go much further. As highlighted in FIS’s most recent Flavors of Fast publication, the Reserve Bank of India launched a New Umbrella Entity effort in 2020 to address which private companies are able to contribute and compete in real-time payments, increasing economic competition.
Brazil is another good example. Their real-time payment functionality, again launched in 2020, cut out a lot of intermediaries in account-to-account transactions and therefore reduced costs for users and businesses.
There’s also a point to be made about monetising instant payments. Research suggests that 85% of gig economy workers would work more often if they were paid instantly (again from the Flavors of Fast report). An interesting case in The Netherlands has shown that real-time payments can be used for healthcare insurance disbursements, getting payouts to those in need of funds. In the UK, health insurance payouts can take up to five days to receive once a claim has been accepted, and considering the costs of procedures, this is an uncomfortably long wait time for many.
If real-time payments across the globe don’t seem like a priority for you right now, just know that that’s where the world is heading. Partnering with a payment provider committed to this goal allows you to be part of the development, not left chasing after it.
The mid-market rate is the midpoint between what a bank or FX business is willing to buy a currency for and what they will sell it for. It is known as the interbank rate, as it is the most accurate possible rate of exchange.