ACI Worldwide — GLOBAL PAYMENT TRENDS — Charting the growth of 'immediate payments'

Economic Benefits of Real-Time Payments Remain Largely Untapped

Hong Kong recorded 262 million real-time transactions in 2021, which resulted in an estimated cost savings of $107 million for businesses and consumers. This in turn – which helped to unlock $338 million of economic output, representing 0.09 % of the country’s GDP.

With real-time transactions set to rise to 1 billion in 2026, – net savings for businesses and consumers are forecasted to climb to $260 million in 2026. That would, helping to generate $932 million of additional economic output, equivalent to 0.22% of the country’s forecasted GDP.

That means for one of the richest countries in the world (with a per capita GDP of $62,839), the economic benefits of real-time payments remain largely untapped. According to the Cebr, the theoretical impact of all payments being real-time could add 2.4 % to formal GDP by 2026. However, these are theoretically modelled modeled benefits; they, this does not suggest that there is no longer place for non-instant electronic payments or paper-based payments in the future.

Hong Kong launched its real-time payments Faster Payment System (FPS) scheme in September 2018. Unlike several other real-time payment systems globally, FPS connects both banks and payment service providers, allowing interoperable transfers between bank accounts and mobile wallets. The increasing preference for mobile payment solutions, coupled with the adoption of a nationwide common QR standard, supported real-time payments growth in the country. The growing acceptance of electronic payments amid the COVID-19 pandemic has also increasingly supported the adoption and use of real-time payments.

While the share of real-time payments accounted for 7.3% of the total payments volume in 2021, it accounted for a 16.8% share in terms of value. This signifies that real-time payments in Hong Kong are mainly used for low-volume, high-value transfers. However, with consumers increasingly shifting from cash to mobile-based payments for their day-to-day purchases, the gap will significantly reduce with real-time payments volume set to record a 31.9% CAGR from 2021-2026 compared to 12.9% in terms of value.

Key Stats

Real-Time Payment Types

Single Instance

Bulk Payments

Initiation/Authorization Methods

Bank Account

Mobile

QR Code

Year of Real-Time
Payments Launch

2018

Availability

365

24/7

Message Standard

ISO
20022

ACI’s Take

Three years after it was launched in 2018, Hong Kong’s Faster Payment System (FPS) is making inroads on its objectives of driving growth in real-time payments.

The high usage of mobile wallets, integrated with FPS and enabling QR-code payments, is a significant driver of adoption. However, the vast majority of low-value payments — the key driver of higher real-time payment volumes — remains the preserve of the Octopus stored-value card and credit cards. The prevailing mindset among Hong Kong consumers appears to be “buy now, pay later,” so real-time low-value payments have limited appeal. Consequently, banks have only invested tactically in real-time payments to date, typically taking the low-cost route, via open API and outsourced toolkits.

Hence the major opportunity for real-time payments growth at present is in the higher-value B2B space. Much of the wholesale banking infrastructure is more than 30 years old and ripe for replacement with processing capabilities organized along the lines of a payments hub approach. However, banks should resist the temptation to again take a tactical approach to standing up these capabilities. APIs and service-based architectures remain important enablers, but they should make this the first phase of a more expansive roadmap for converging payment types onto a single process. This will ensure their payments modernization has long-term strategic value, is cost-effective and sustainable.

Future changes will also be easier to manage and cheaper to action. This will be important if, as expected, FPS steadily gains more traction in the low-value space and new use cases lift consumer expectations. Banks will then be grateful for a more sophisticated, flexible, real-time infrastructure. They should also be preparing for the impact of the Greater Bay Area project, the long-term goal of the Chinese government to economically integrate the Hong Kong and Macao Special Administrative areas with nine mainland cities in Guangdong Province. High on the list of the project’s policy recommendations is connecting the various payment and transfer structures.

History

September 2017

HKMA announced its plans to launch FPS in September 2018.

September 2018

FPS was made available for public use.

November 2019

Launch of government bill payment service via FPS.

January 2020

Half of Hong Kong’s population have signed up for FPS.

December 2020

FPS payments using HKID numbers were enabled.

December 2020

FPS payments were enabled at government counters and self-help kiosks.

Mobile Wallet Trends

86.6%

% of adults who have a mobile wallet and have
used it in the past year (2021)

Real-Time Acceptance

Banks

Merchants

Consumers

Billers

Real-Time Total Participants

Population Banking Level

3.4

Number of debit, credit and
charge cards per adult

152

Index to global average

Fully Banked
Progressing
Underbanked

Real-Time Transactions

262M

2021

1.0B

2026f

31.9%

F5 Yr CAGR

Payments Fraud Rate

12.9%

Population who reported being a
victim of fraud in the last 4 years

Top 3 Payment Fraud Types

% of fraud victims	Trend
16.4% Card details stolen online
14.0% Confidence trick
13.7% Card details stolen/skimmed in person

Share of Volumes by Payments Instrument

Transactions

Paper-based payments
Electronic payments
Real-time payments

2021

2026

Spend (USD)

2021

2026

Real-Time Payments Volume and Its Share in Overall Non-Paper-Based Transactions, 2015-26f

% of total electronic payments transaction volume

Trends + Data

Cloud Management Platform

46.7%

73.3%

Infrastructure as a Service (IaaS)

66.7%

73.3%

Hybrid Cloud

66.7%

60.0%

Managed Cloud Service

60.0%

68.7%

Current priority
Planned

Platform as a Service (PaaS)

Private Cloud

Software as a Service (SaaS)

Cebr

Hong Kong SAR had a GDP per capita of $62,839* in 2021, making it one of the richest regions in the world, and the 40th largest global economy in 2021 (Cebr World Economic League Table, 2022).

With its current share of adoption, Hong Kong consumers and businesses gained an estimated net efficiency savings of $107 million; predominantly driven by a reduction in the payments float. Real-time payments unlocked a total transaction value of $1.1 billion per day in 2021 through reduced float time. This working capital facilitated an estimated $81 million of output in the same year.

The share of real-time payments in 2021 was recorded at 7.3%, which is estimated to more than triple to 22.8% by 2026. The strong predicted real-time uptake will result in consumer- and business-level benefits reaching $260 million in 2026.

The macroeconomic benefits of using real-time payments were an estimated $338 million of economic output (0.09% of GDP) in 2021; equivalent to the output of 3,355 workers. In relative terms, this is in line with the benefits associated with real-time payments across China in 2021 (0.11% of Chinese GDP).

As the share of real-time across the payments mix grows, it is forecasted to facilitate 0.22% of formal Hong Kong SAR GDP in 2026. The scale of this impact is substantial and is equivalent to $932 million of output, annually. In relative terms, this significantly outpaces the forecasted benefits associated with real-time across China in 2026 (0.13% of Chinese GDP).