Real-Time Payments: Practical Use Cases Driving Growth in Financial Institutions

Real Cases for Real-Time Payments: How Financial Institutions Can Add Value to Attract and Retain Retail and Commercial Account Holders

In today's rapidly evolving financial landscape, the adoption of real-time payments (RTP) has become increasingly crucial for banks and credit unions. The RTP market size was valued at 17.57 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 35.5% from 2023 to 2030. With the introduction of The Clearing House's RTP real-time payments network in 2017 and the pending launch of the FedNow^® Service by the Federal Reserve, the potential for leveraging real-time payment rails has grown significantly. However, many financial institutions have been hesitant to embrace this transformative technology due to concerns about profitability, customer/member demand, and the difficulty of envisioning its full range of possibilities. This blog post aims to address these challenges and shed light on the compelling use cases for real-time payments that can drive adoption and growth for financial institutions.

Challenges to Adoption

Monetization and profitability have been the primary concerns hindering the widespread adoption of real-time payments. Many financial institutions have been cautious, waiting to see how early adopters fare before fully committing to implementation. The lack of available profitability data and the uncertainty surrounding the choice between different payment networks have further complicated the decision-making process.

Additionally, although consumers have shown a preference for instant payments, they may not actively demand real-time payments since they are often unaware of the underlying technology. Financial institutions must draw out demand by meeting consumer expectations and innovating based on their needs, as failure to do so may leave room for disruptors to step in and capture market share.

There is also significant—perhaps more—demand from businesses for real-time payments which can bring increased efficiency and greater competitive advantage, as well as cost-savings to them. Businesses have been at the forefront of adoption since the early days of the network—but in order to leverage real-time payments, they must have access to a network. 

Real-time Payments Use Cases for Consumers

• Instant, anytime, anywhere money movement: Real-time payments enable consumers to move money instantly between each other and between their accounts, providing a seamless experience beyond the closed networks of popular apps like Venmo and PayPal.

• 24/7/365 loan funding: Integrating real-time payments with digital loan applications and decisioning workflows allows consumers to apply for loans, receive approval, and disburse funds to a car dealership, for example, even outside of traditional banking hours.

• Getting paid earlier: Real-time payroll is especially valuable for hourly and gig workers, allowing them to access their earnings immediately and alleviate cash flow challenges which low-income wage earners may be more prone to experience.

• Secure large transactions: Real-time payments facilitate secure transactions, such as transferring escrow funds for property purchases, by eliminating delays fraudsters can use to divert and intercept funds, and providing instant verification.

• An easier way to send cross-border payments: Real-time payments can revolutionize the cross-border payment landscape by providing faster and more cost-effective options. Financial institutions can leverage real-time payment networks to streamline the process, reduce fees, and enhance transparency for international transfers, thereby improving the customer experience and attracting businesses engaged in global commerce.

Real-time Payments Use Cases for Businesses

• Getting paid faster: Real-time payments help businesses improve cash flow by receiving funds instantly, while also integrating payment capabilities into workflows to streamline processes. 
• Ensuring timeliness of deliveries: For cash-on-delivery (COD) vendors, real-time payments can eliminate potential delays caused by payments held up during the delivery process. 

• Providing value-add services: Utility companies, for example, can leverage real-time payments to reduce non-payment disconnects by offering instant payment options during customer interactions, helping customers avoid service disruptions and saving the utility company the cost of sending an employee to shut off service.

• Offering a more secure means of payment: Real-time payments reduce the risk of fraudulent intercepts by allowing businesses to send immediate Request-for-Payment (RfP) notifications to clients.

Orbipay Instant Payments Brings the Future to Financial Institutions

Alacriti’s Orbipay Instant Payments brings a modern payments infrastructure to financial institutions, empowering them to harness the power of real-time payments today. The platform provides access to TCH’s RTP® network, FedNow^® Service, and Visa Direct payment rails empowering you to deliver modern money movement experiences to your customers or members.

The real-time payments gateway is cloud-native and built for scale, and its open APIs, and microservices-based architecture mean the sky's the limit for building innovative solutions that can be integrated with your existing systems (Alacriti has pre-built integrations with many core banking solutions and digital banking systems). The platform also offers a host of built-in features for safety, security, speed, convenience, and ease of use to ensure seamless integration of real-time payments into your existing infrastructure and workflows. 

Innovation, Value, Competitive Advantage, and a Better Bottom Line

Real-time payments present significant value and growth opportunities for financial institutions. By embracing this transformative technology, banks and credit unions can meet evolving consumer demands, enhance customer/member experience, drive operational efficiency, and tap into new revenue streams. The compelling use cases for real-time payments span across consumer and business domains, providing benefits such as faster fund transfers, improved cash flow, enhanced security, and expanded international payment capabilities.

Financial institutions that proactively adopt real-time payment solutions and strategically align them with their customers' needs will gain a competitive edge in the market. It is crucial for organizations to invest in the necessary infrastructure, collaborate with payment networks, and educate both their internal stakeholders and customers about the advantages of real-time payments. By doing so, they can unlock the full potential of real-time payments and position themselves as leaders in the digital payment ecosystem.

Discover the various use cases of real-time payments and how they can benefit financial institutions, businesses, and consumers by increasing value, convenience, and opening new revenue channels in the article: The Sky’s the Limit: Unfolding the Use Cases of Real-time Payments.

Alacriti’s centralized payment platform, Orbipay Payments Hub, provides innovation opportunities and the ability to make smart routing decisions at the financial institution to meet their individual needs. Financial institutions can take full ownership of their payments and control their evolution with ACH, Wire, TCH’s RTP® network, Visa Direct, and the FedNow^® Service, all on one cloud-based platform. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com.