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Why the COVID-19 Pandemic Makes Immediate Payments Growth Mission Critical

Even before the pandemic, global adoption of real-time payments was already on the rise. Technology has brought new ways to initiate payments, but ultimately customers expect the same immediacy with transactions that they experience in almost every other part of their daily lives.

Payments Modernization Predictions: Now and Then

With the global industry anticipating blockbuster real-time payments growth, our Prime Time for Real-Time report has identified five key indicators of imminent growth at a domestic and regional level. Against the backdrop of COVID-19’s global impact, it could be expected that the predictions made at the beginning of 2020 would, by now, need to be revisited. Here, we look back at those prognostications – and the results are surprising.

1. Centrally-driven payments modernization initiatives

Then: Centrally-driven initiatives were identified as crucial to the shape and direction of a country’s immediate payments adoption, although the end goal and approach differs for each country.

Now: While countries are implementing physical measures and initiatives to fight COVID-19, they are further embracing digital, with merchants and their acquirers expanding contactless capabilities while contactless payment limits are being raised for citizens. Some regulatory bodies were expected to take their foot off the gas and extend deadlines, such as for secure customer authentication (SCA) in Europe. But the rise in digital payment volumes, including contactless transactions, demands fraud prevention that is fit for the digital age. The European Banking Authority has upheld the December 2020 go-live for SCA and continues to drive the entire payments industry forward against the overall PSD2 payments modernization agenda.

2. Seamless and integrated payments experience with rich overlay services

Then: Immediate payments adoption was predicted to grow fastest in markets where the experience was simple and convenient for both corporates and consumers – digital overlay services play a key role in enabling this.

Now: Extreme scenarios often accelerate innovation, and we can expect a new wave of smart overlays to help overcome disruption. There has even been renewed interest in QR code payments in the U.S. Innovation is booming to meet consumer demand for a seamless, digital, contactless experience – Co-op’s Pay-in-Aisle is a prime example of this in action – reinforcing the power of overlay services in digital payments growth.

3. Ecosystem of players enriching user experience

Then: Greater availability encourages higher utilization, attracting more players to the real-time ecosystem. Ensuring whole-ecosystem access to immediate payments rails was predicted to drive innovation and further adoption, creating a virtuous cycle that could lead to explosive growth.

Now: The pandemic has caused consumers, governments and businesses to embrace immediate and digital payments, and this behavioral change is likely to endure. Banks are accelerating the issuance of contactless cards as more consumers are demanding to be included in the digital payments ecosystem. Person-to-person (P2P) payment services have reported transaction volume peaks as families and friends support each other through the pandemic, as well as shift their economic support to local, small businesses. Happily, global charities have reported increased support, and are looking for more cost-efficient ways to accept digital donations and debit supporters on an ongoing basis.

4. Digital payments maturity level and ingrained payment habits

Then: Heavy reliance on cash or checks was identified as a key indicator for rapid immediate payments growth, if other conditions were met, while heavy reliance on debit and credit cards could mean the opposite.

Now: Almost overnight, people around the world became unable or unwilling to use cash or checks, and even PIN-authenticated payments. Countries with widespread mobile wallet adoption were able to quickly pivot, with less disruption. Elsewhere, this could erode the deeply ingrained habits that are often obstacles to immediate payments adoption. In times of economic uncertainty, customers look to regain control of their cashflow, and digital payment services based on a real-time balance have become more attractive than ever.

5. Openness to alternative payment methods

Then: Where there already existed high levels of acceptance of innovative payment methods like mobile wallets, from both consumers and merchants, there was likely to be a greater acceptance towards the adoption of immediate payments, particularly within the mobile channel.

Now: Payment innovators are able to act quickly to keep payments moving, and this versatility will help them respond to the new challenges that this pandemic presents. However, for those countries that haven’t fully embraced innovation, COVID-19 may be the wake-up call that prompts them to accelerate adoption for the benefit of their citizens and economies.

Changes in customer behavior will remain along with the demand for immediate payments

As prior global crises have shown, the changes caused often endure. However, not all the aftereffects are negatives. COVID-19 is driving digital transformation and forcing governments and the banking industry to bring the financial and social inclusion benefits of immediate and digital payments to more global citizens. The overnight shift from cash to digital, and the innovations it brings, will remain entrenched in consumer behavior, ensuring that investments in new services will see accelerated adoption rates that improve the time to value. There is a new virtuous circle: innovation investment will drive adoption and associated revenues, ensuring available resources for additional investment and competitive differentiation.

Discover how to invest in immediate payments and innovation that will benefit your customers, and create ongoing opportunities for banks, processors, acquirers and national infrastructure providers to grow their market share. Learn how and when volumes will peak in your market with ACI’s “Prime Time for Real-Time: The Global Real-Time Payments Report.”

EVP – Retail & Consumer Payments

Ruth is responsible for ACI's retail and consumer payments business and payments in the public cloud, leading a global team of payments experts that define, develop and bring to market innovative payment solutions for banking and financial intermediary customers.