Real-time payments – also known as instant payments or fast payments – are increasingly impacting how businesses manage their operations.
Most significantly, it offers companies the opportunity to take their payment process and operations to the next level. Here’s how.
What are Real-Time Payments?
In simple terms, real-time payments refer to instant money transfers between banks or banking systems.
Compared to traditional payments, such as cheques or wire transfers, real-time payments, such as eTransfers, do not have a “hold”, an interval between when funds leave the payer’s account and move into the receiver’s account. The payment is directly made into the account, with the funds being available almost immediately.
However, while the funds are available quickly, payments made with credit or debit cards are not processed right away. It can take up to 72 days for these transactions to be cleared, which explains why you might not see updates in your account for a few days.
As stated by Deloitte, “there are five common categories of payments. Each, in turn, has great potential to disrupt the existing payment ecosystem in the next 2-3 years.” These include:
- Business to Business (B2B) (such as supplier payments)
- Business to Consumer (B2C) (such as legal settlements, insurance claims or wages)
- Consumer to Business (C2B) (such as Bill pay or pay at POS)
- Domestic Peer to Peer (P2P) (includes payments to family and friends)
- Cross Border Peer to Peer (P2P) (also payments to family and friends, but out of country)
How Do Real-Time Payments Enhance Businesses?
As funds can be easily and securely transferred, real-time payments significantly impact how businesses manage their cash flow and maintain their operations.
Businesses will have more visibility into their payments (both receiving and sending), enabling them to manage and improve their budgeting and financial outlook, streamlining their bookkeeping and overall cash management. This also allows companies to pay vendors and employees on time, buy supplies and keep better track of payments.
Payroll is another area where real-time payment can prove crucial. Both gig workers and full-time employees can receive payments without the delay of setting up payroll with a bank. Wait staff, delivery drivers and other employees can receive payments quickly and when expected.
Significantly, real-time payments allow businesses to improve their day-to-day and long-term operational efficiency, enhancing their liquidity. In fact, “liquidity improvement can be especially impactful to small merchants who may be used to waiting days for their settlement, possibly creating a positive impact on their cash flow and daily sales outstanding (DSOs).”
There is also the factor that this business payment solution engages and boosts customer satisfaction. Customers prefer the convenience and advantages that come with real-time payments, such as less time waiting in lines, the simplicity of making bill payments on time, and overall speedier transactions, resulting in them interacting with businesses that support real-time payments more often.
The COVID-19 Effect
Perhaps there has no greater effect on the embracement of real-time payments than COVID-19.
Forbes highlighted the change, stating that “brick-and-mortar businesses and bank branches are likely to want to minimize the risk of infecting customers, however minuscule it may be”, focusing on incorporating real-time payments as part of their services.
At the same time, CNBC reported that “millennials are the ones leading the charge toward a cashless future. A report from Experian in 2019 revealed that 1-in-10 millennials use their digital wallet for every purchase.”
With customers and businesses looking for contactless payment options, this form of technology has grown substantially, resulting in many industries and organizations altering, or adding to, their payment methods. Customers want the flexibility and safety of contactless payments, making real-life payments essential going forward.
What Does the Future Hold for Real-Time Payments?
Although traditional payment methods will continue to be present, real-time payment technology will continue to adapt and evolve, becoming mainstream in the foreseeable future.
Rapid technological innovation, new payment and business models by FinTech companies, consumer and merchant expectations, globalization and the effects of COVID-19 are the main driving factors behind the push of real-time payments.
As a business, it’s best to get ahead of the curve and be at the forefront of this massive change. With Pateno’s customizable business payment solutions, we can help you get there.
Pateno is the only business payment solution you will ever need. Our innovative payment solutions ensure a more streamlined, secure and flexible way to transfer money. Via our API technology, you can initiate payments from existing web pages, portals, and apps, scaling your capabilities as your industry changes. From tip disbursement to loan management payments, our highly intuitive and simple-to-use system can be easily integrated, instantly enhancing and streamlining your money transfers. Contact our sales representative to learn more today.