Real-Time Payments: A Record-Breaking Year

Real-time payments are revolutionizing the financial sector by enabling instantaneous fund transfers between bank accounts. The increasing adoption and growth of real-time payment systems across the globe have had a profound impact on businesses and consumers alike. Based on insights from the "2024 Prime Time for Real-Time Report," this article will delve into the critical factors driving the growth of real-time payments.

Overview and Growth:

Real-time payments have experienced significant growth in recent years. For instance, the report highlights that in South Africa, real-time payments are projected to grow at a Compound Annual Growth Rate (CAGR) of 21.6% from 2023 to 2028, reaching 755 million transactions by 2028, up from 284 million in 2023. Similarly, Indonesia, a relatively new entrant into the real-time payments landscape, ranks #8 globally for real-time payments volume and growth, with a staggering CAGR of 44.6% (2023-2028). Indonesia’s real-time platform, BI-FAST, processed nearly 2 billion instant transactions in 2023.

In 2023, global real-time payment transactions reached a record high of 266.2 billion, marking a year-over-year growth of 42.2%. By 2028, global real-time payment transactions are forecasted to hit 575.1 billion, with a CAGR of 16.7%. The rise in real-time payments is closely linked to the adoption of mobile wallets. In 2023, the percentage of consumers using mobile wallets was 91% in India, 90% in Indonesia, and 87% in Malaysia. This trend indicates that by 2028, one in four transactions globally will be real-time, up from 19.1% in 2023 to 27.1%.

Critical Factors Driving Real-Time Payments

1. Technological Advancements and Infrastructure Development The deployment of advanced payment infrastructures, such as ISO 20022 messaging standards, has facilitated seamless real-time payments. For example, BI-FAST in Indonesia uses ISO 20022, which supports interoperability and efficient transaction processing. South Africa's PayShap and Malaysia's PayNet also utilize advanced infrastructure to streamline real-time transactions.
2. Government and Regulatory Support Governments and regulatory bodies play a crucial role in the adoption of real-time payments. In Europe, the new EU Instant Payments Regulation mandates instant payments across the eurozone, promoting faster and lower-cost processing for B2B payments. India has also seen significant growth due to regulatory support, with UPI transactions reaching 129 billion in 2023.
3. Collaboration Between Banks and Fintechs Partnerships between traditional banks and fintech companies have accelerated the implementation and adoption of real-time payment solutions. In Malaysia, the integration of fintech services with the national payments network, PayNet, has driven the uptake of real-time payments, with an expected CAGR of 16.9% from 2023 to 2028. Similarly, in Thailand, real-time payment volumes reached 20 billion transactions in 2023 due to such collaborations.
4. Consumer Adoption and Mobile Wallet Usage The widespread use of mobile wallets has significantly contributed to the growth of real-time payments. In Malaysia, 86.9% of the population owns a digital wallet, facilitating easier and faster transactions. In Indonesia, mobile wallet penetration was at 90%, and in India, it was at 91% in 2023, driving the exponential growth of real-time payments in these countries.
5. Cross-Border Payment Solutions The expansion of cross-border real-time payment corridors has enhanced international trade and financial inclusion. Indonesia’s BI-FAST is linked to neighboring countries like Malaysia, Thailand, Singapore, and India, promoting smoother cross-border transactions. Payments using India’s UPI scheme can now be made in Malaysia, Indonesia, UAE, and France, while Malaysia's DuitNow supports QR-code real-time payments across Indonesia, Singapore, Thailand, and China.

Regional Highlights

South Africa

• Despite the introduction of the Real-Time Clearing (RTC) system in 2006, real-time payments accounted for only 1.7% of payment volumes in 2023. However, the launch of PayShap in 2023 aims to boost real-time payment adoption by offering cost-effective, mobile-friendly services. By 2028, real-time payments in South Africa are expected to reach 755 million transactions, growing at a CAGR of 21.6%.

Indonesia

• Indonesia’s real-time payments landscape has rapidly evolved with the implementation of BI-FAST. With almost 2 billion transactions in 2023 and strong government support, Indonesia is fast-tracking from a cash-based to a digital economy. The country's real-time payments are projected to grow at a CAGR of 44.6%, reaching 9.2 billion transactions by 2028.

Europe

• The EU Instant Payments Regulation is set to harmonize instant payments across Europe. Dutch banks, leveraging their experience with SCT Inst and iDEAL, are at the forefront of this transformation, with instant payments representing 10.9% of the Netherlands’ payments volume in 2023. By 2028, Europe's real-time payments are expected to grow significantly, driven by regulatory mandates and technological advancements.

The growth of real-time payments is driven by technological advancements, regulatory support, collaborations between banks and fintechs, consumer adoption, and cross-border solutions. As real-time payments continue to gain traction, they promise to reshape the financial landscape, offering faster, more efficient, and inclusive financial services worldwide. The numbers and trends from various regions underscore the transformative potential of real-time payments, setting the stage for a future where instant transactions become the norm.