Demand for real-time payments rises amid COVID-19 pressure

The demand for real-time payments has taken on a new urgency in recent weeks. The COVID-19 pandemic has placed enormous pressure on consumers and small businesses struggling to generate income as public health concerns force travel, retail shopping and billions of dollars in business activity to a halt. 

The need to access immediate funds has forced businesses and individuals to leverage various means of moving funds across town and across borders to provide the basic necessities of every day living and business continuity. 

“In the U.S. particularly we are seeing a heightened interest in the speed of money movement,” Bridget Hall, principal product manager, real-time payments at ACI Worldwide, told Mobile Payments Today via email.

She sid that in early April, bill payments were a major concern by many consumers and small businesses and there were also pending issues with disbursement payments, including social security, government assistance and other financial aid. The urgency created by the pandemic means that reducing the amount of time need to convert a paper check into available funds is critical for many.

“This need to move money quickly and accurately is not a new concept, but the number of people who can relate to this need is definitely going to increase with the impacts of COVID-19,” she said.

A report issued last week by ACI shows that real-time payments were expected to surge over the next few years, with more than half a trillion transactions and a compound annual growth rate of 23% between 2019 and 2024. 

India is expected to lead that growth going from 15.3 billion transactions in 2019 to 52.8 billion by 2024, with strong growth in countries like Malaysia, Finland and Belgium. The U.S. is expected to see CAGR of 42% from 734 million transactions in 2019 to 4.2 billion transactions by 2024.

Officials at Zelle, a P2P money transfer service, is already seeing a shift in payments due to the impact of COVID-19 on consumer demand.

“Given the state of the world today and recommendations from health authorities to stay inside, we are seeing a decrease in social-related transactions and an increase in consumers leveraging Zelle in paying back neighbors for groceries and sending money to loved ones in need,” according to a spokesperson for Early Warning, the parent company of Zelle. “In addition, our financial institution partners are encouraging customers to leverage their online and mobile banking features, which include sending and receiving money through Zelle.”

European pressure

Nick Maynard, lead analyst at Juniper research told Mobile Payments Today, that he wasn’t sure if demand for real-time payments has changed as a result of the coronavirus pandemic. He said that overall B2B payments have likely declined due to reduced business activity in recent weeks. However he added that supplier payments have likely been impacted as some will face a slowdown in payments, others will not be paid at all and some will see an increase in movement. 

He noted that Morrisons, a U.K. supermarket chain committed to 48-hour faster payments in order to help smaller suppliers during the crisis. Morrisons said the move would help out local food suppliers and farmers impacted by the outbreak. 

Central bank settlement

Just within the last few days, Sweden’s central bank — Sveriges Riksbank — joined the European Central Bank’s instant settlement program called the TARGET Instant Payment Settlement, which allows settlement of electronic payments in Swedish krona. 

“In crisis times, this agreement is a good example of strong cooperation between central banks in Europe,” ECB President Christine Lagarde said in a release from the agency. “Our real-time settlement platform is a pivotal contribution to Europe’s endeavors to satisfy citizens’ increasing demand for faster, cheaper and convenient payment services without compromising on security.”

A spokesperson for the ECB said that 30 countries participated in the instant settlement program, which allows 3,800 institutions to indirectly participate in the real-time payments system. 

Sweden is considered one of the leading proponents of real-time payments, with an average of 1.5 million instant payment transactions per day. 

A spokesman for Sveriges Riksbank said the country had previously announced plans to join the bank back in 2018 and was not immediately motivated by the COVID-19 outbreak. The country’s RIX-INST service is expected to be online by the spring of 2022. 

Cover image: iStock