ACI Blog

The U.S. Connected Economy: Making the Case for Real-Time Payments

In today’s “always on” world, consumers expect instant gratification in all areas of an increasingly connected economy. Consumer payments are no exception. Whether it’s making a banking transaction, paying a bill, shopping or dining out, consumers want assurance that the transaction is complete. The immediate nature of our world has, in a sense, created a widespread appetite for real-time payments, and more than 50 countries around the world have enabled real-time schemes.

Real-time may be the future of payments in the U.S., but for the average consumer in this country, it currently exists solely through person-to-person (P2P) payments such as those sent through Venmo or Zelle. When it comes to the rest of the connected economy—payments for bills, banking, travel, communication, food, shopping, work, leisure and health—real-time payments still have massive untapped potential.

What real-time can bring to the connected economy in the U.S.

At a high level, real-time payments are important to all aspects of the connected economy because of the ability to provide instant gratification through a real-time experience.

Trust is crucial in the connected economy. People buy from companies they trust and, with real-time, this all-important trust can be easier to attain and retain. Consumers share credit card details with the hope that the merchant or biller doesn’t experience a breach – and there have been no shortage of high-profile breaches in recent years. Because real-time payments only require a phone number to enable the payment from the consumer’s bank account, no credit card numbers are provided to or stored by the merchant or biller. This lowers the barrier to connecting with new customers, providing a new way for merchants and billers to establish contact with potential customers.

This technology can also enable new payment programs. With real-time, the bank doesn’t have to be the only entity offering consumers a loan or payment plan. Instead, a merchant or biller could send a Request for Payment (R2P) with the option to pay in full, pay later or set up a payment plan.

Other advantages of real time are instant liquidity for businesses, which in turn gives them more bandwidth to hand over products to consumers in an in-store setting. It also enables an eCommerce merchant to leverage funds to buy goods they’ve just sold. On top of it all, merchants using enabling real-time payment options can avoid interchange fees, which remain particularly high in the U.S.

Taking the next step: bank transformation driven by consumer demand

Between the demand for immediacy, and the exposure to real-time payments via P2P channels, consumers demand for instant payments across the connected economy is growing. However, for progress to be made, banks need to modernize to take advantage of real-time rails.

For most U.S. consumers, their bank is their most trusted financial institution. This, combined with their richer product portfolios and greater scale than their fintech counterparts, gives banks the best positioning to capitalize on the benefits of real-time payments and deliver them to their customers. In fact, we predict that customers would welcome a real-time P2P solution that gave them control of their money and the perceived extra layer of safety that comes from being a bank-operated service. As they become more familiar and comfortable with bank-provided real-time payments from their account, they will become more amenable to additional services that are overlaid onto the real-time rails.  

Despite this huge potential, many banks have been taken by surprise by the growth of digital and real-time payments over the last year. Banks that might not have thought themselves ready to be involved in discussions around real-time, or those who developed their original connectivity and services based on low volumes, now have serious cause to reconsider their positions.Given the growing demand for more diverse and responsive digital payment methods across the connected economy, ubiquity and interoperability discussions will develop from mere curiosity into more realistic conversations. In these discussions, banks must play a leading role.

Where real-time can make an immediate difference

The potential of real-time payments to positively impact the connected economy is far-reaching, but, as with most technologies, there are some areas that stand to receive immediate benefit. One example is the insurance vertical.

With real-time payments, insurance—especially when it comes to disbursements—has the potential to evolve towards a future that is better for both billers and payers. For example, real-time allows companies to send money instantly for a driver’s car repair, a traveler’s lost luggage or delayed trip, as well as a disaster survivor’s relief after a hurricane, fire or even a pandemic. As of today, the U.S. government is still cutting checks to citizens for COVID relief; real-time payments could have added efficiencies to this process.

To learn more about the potential of real-time in the U.S. connected economy, check out this recent PYMNTS fireside chat with ACI Worldwide CEO, Odilon Almeida.