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

Economic Benefits of Real-Time Payments Remain Largely Untapped

The adoption of real-time payments is still limited in the U.S., accounting for only 0.9% share of total payments volume in 2021, which is not significant compared to paper-based payments and electronic payments (excluding real-time payments) at 21.4% and 77.7%, respectively.

The U.S. recorded 1.8 billion real-time transactions in 2021, which resulted in an estimated cost savings of $648 million for businesses and consumers. This in turn helped to unlock $1.4 billion of additional economic output, representing 0.01% of the country’s GDP.

With real-time transactions set to rise to 8.9 billion in 2026, net savings for consumers and businesses are forecasted to climb to $2 billion. That would help to generate an additional $5 billion of economic output, equivalent to 0.02% of the country’s forecasted GDP.

That means for the largest global economy, the potential economic benefits of real-time payments still remain untapped. According to the Cebr, the theoretical impact of all payments being real-time could add 1.7% to formal GDP by 2026. However, these are theoretically modeled benefits; they do not suggest that there is no place for non-instant electronic payments or paper-based payments in the future.

Future projections for real-time payments are expecting strong growth as the volume of real-time payments are projected to grow at a CAGR of 37% from 2021-2026. This growth can be driven by the gradual decline in cash usage in the U.S. and the launch of the Federal Reserve’s own real-time payments scheme called FedNow, which is being piloted with ACI Worldwide.

As of now, there are two real-time payment solutions in the U.S.: Zelle and the RTP network from The Clearing House (also connected with ACI Worldwide), but their adoption at a national level is still limited due to the dominance of cards in the market. Both platforms were launched in 2017. But despite the presence of both the RTP network and Zelle, the U.S. is still lagging behind other countries that have already implemented a real-time payments network.

RTP and Zelle are not overarching real-time networks that cover the entire country, which is necessary for providing this service at a national level. Economic impact of RTP is thus expected to be low in the immediate and medium term; much of the RTP functionality is already available to consumers in one form or another, mostly through private companies such as Venmo and Zelle.

Key Stats

Real-Time Payment Types

Single Instance

Bulk Payments

Refunds

Initiation/Authorization Methods

Bank Account

Mobile

Year of Real-Time
Payments Launch

2017

Availability

365

24/7

Message Standard

ISO
20022

ACI’s Take

In straightforward terms, we expect growth in real-time payments for the U.S. market to accelerate in the coming years — and banks, other financial services and payment processors may soon need to pick up the pace on their current measured preparations.

FedNow, the central bank’s instant payment service is being piloted through 2022, and will eventually enable P2P, B2B, B2C, C2B and G2C payments (the full launch is slated for 2023). Given the size of the population and the national economy, it could easily grow to become one of the largest payments clearing settlement systems in the world.

To some executives, it might be tempting to see real-time payments as simply a novel way to process payments. Actually, these payments are a critical component of new and disruptive economic functions. The gig economy, for example, is growing at a tremendous rate thanks to digitization and mobile connectivity. But the nature of the work and the services it supports requires payments to be settled on delivery, not at the end of the month. The movement of money in real time is already lagging, and yet many more business models will also soon depend on real-time payments to enable customers, merchants and financial institutions to work more effectively together.

If the market’s payment players are not preparing now, they should start soon by getting a handle on what FedNow compliance looks like: the infrastructure required and how the transition will be sequenced. They need to establish critical milestones, priorities and contingency plans. To help with this planning process, banks and financial institutions should drill right down to the level of specifics, so they have a clear idea of the requirements of real-time payments for both their organization and its customers.

When the time comes, any real-time payments infrastructure must be flexible so that payment players can respond to future changes more easily than they can today. Service-oriented architectures, sourced from multiple suppliers, are likely to play a role, so orchestration between them will be critical. These services need to mesh elegantly and be reliable and resilient. With a more complex framework of systems in place, a failure in any one would make executing and processing transactions harder.

History

June 2017

Zella went live.

November 2017

Launch of RTP. The first real-time payments on the network were initiated between BNY Mellon and US Bank.

January 2018

TCH formed an RTP Advisory Committee to obtain additional input on the operation of its new system.

August 2019

The Federal Reserve Board announced that the country’s federal reserve banks will develop FedNow.

February 2020

TCH increased the transaction limit via RTP from $25,000 to $100,000.

September 2020

TCH partnered with FIS to ease the process of connecting to RTP for smaller banks and credit unions.

October 2020

Federal Reserve announced the FedNow pilot program.

February 2021

EWS partnered with TCH to enable Zelle payments on the RTP network.

2023

FedNow industry wide launch is planned.

Mobile Wallet Trends

43%

% 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

163

Real-Time Payments (RTP)

1,000

Zelle

Population Banking Level

3.6

Number of debit, credit and
charge cards per adult

161

Index to global average

Fully Banked
Progressing
Underbanked

Real-Time Transactions

1.8B

2021

8.9B

2026f

37.0%

F5 Yr CAGR

Payments Fraud Rate

33.3%

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

Top 3 Payment Fraud Types

% of fraud victims	Trend
23% Card details stolen/skimmed in person
18.7% Identity theft
16.8% Card details stolen online

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

78%

75.2%

Infrastructure as a Service (IaaS)

75.2%

71.6%

Hybrid Cloud

72.5%

64.2%

Managed Cloud Service

73.4%

68.8%

Current priority
Planned

Platform as a Service (PaaS)

Private Cloud

Software as a Service (SaaS)

Cebr

The United States is one of the world’s wealthiest countries per person, ranking as the world’s largest economy in 2021 (Cebr World Economic League Table, 2022). In 2021, the United States accounted for 16% of global GDP after adjusting for purchasing power parity.

However, considering the U.S. is the largest economy in the world, real-time payments usage remains nascent in 2021, accounting for less than 1% of total transaction volumes. As a result, the current overall economic impact is limited, while the untapped potential is significant.

In 2021, net benefits for businesses and consumers reached $648 million (less than 5% than that of China), supporting $1.4 billion of total national output (0.01% of formal U.S. GDP). The primary factor generating these benefits was the ability for real-time payments to formalize activity in the shadow economy by reducing cash usage. Given the scale of the U.S. economy, the country’s 8% shadow economy share represents an estimated $1.86 billion in informal output. Despite the relatively small transaction share in the U.S. of real-time payments, they have the ability to formalize a relatively large level of informal economic activity.

Looking forward to 2026, approximately 3.8% of the payments mix is anticipated to be real-time, tripling the anticipated economic benefits for businesses and consumers to almost $2 billion. The economy-wide impact also rises significantly to $5 billion, representing a 0.02% share of forecasted formal output, or the equivalent of 31,542 additional jobs.