How Real-Time Payments Are The Next Big Thing In Fintech?

Any transaction that involves money transfer is inherently important and demands speed, security, and successful completion. While security and completion have always been the MUSTS, there weren’t many expectations for speed in the past.

People sending money used to wait weeks to receive money, and even months when the money was transferred across borders. However, as technology has developed and been integrated into finance, Fintech innovations process payments much faster. What is most remarkable now is that real-time payments are possible. It feels like actually handing over the money to the receiver. Benefiting both individuals and businesses, RTP is emerging as the Next Big Thing in Fintech. Let’s find out how.

What Are Real-Time Payments?

Basically, real-time payments are financial transaction networks that process payments electronically and settle them instantly, almost in a matter of a few seconds.

Furthermore, they differ from traditional payment networks, which use multiple intermediaries and are only available on specific days and times. RTPs can be conducted at any hour of the day or week, which means even during holidays and weekends, and are available year-round.

Most countries currently support RTP networks, such as Clearing House’s RTP network in the USA, Unified Payments Interface (UPI) in India, Faster Payments Service (FPS) in Europe, and PIX in Brazil. These fast payment networks assist customers and businesses in paying payroll, utility bills, retail payments, or otherwise.

Why Are Real-time Payments So Beneficial?

Of course, speed in the payment finalization is a basic benefit of real-time payments, but there is more than that. They hold different importance for businesses and individuals, as explained as follows:

Benefits for individuals

• Whether it’s salary payment or refunds, employees and customers don’t have to wait for fund clearance.
• RTP networks are the quickest mode to make purchase payments, send money to friends or loved ones, or pay off bills.
• RTP platforms are secured using advanced security protocols like advanced encryption, end-to-end authentication, and more. Thus, the payments are secure from fraud or loss.
• RTP platforms ensure complete transaction transparency and offer real-time notifications. As a result, they keep users up to date on the entire transaction journey, even if it is only a second long.
• When carrying a return or receiving an insurance payout, payments and claims are settled immediately.

Benefits For Enterprises

• RTP networks automate most operational tasks, which in turn reduces errors and enhances efficiency in business operations.
• RTP networks are operational 24 hours a day, seven days a week, as opposed to traditional banking systems, which were only accessible during working hours. Thus, businesses can pay employees, carry vendor payments, or make emergency payments at any time.
• RTP networks allow businesses to offer their customers solutions such as real-time payroll, active discounts, and much more. As a result, businesses provide innovative services to their customers, which improves their experience and allows them to increase revenue streams.
• With RTP adoption, institutions no longer have to use conventional and costly payment methods. It allows them to reduce operational costs while also providing affordable services to customers.
• RTP networks are primarily secure, as they involve bidirectional interaction. This nature helps in increasing transparency and reducing errors in transactions. In addition, advanced security protocols further strengthen the system and protect business funds from cyberattacks and threats.
• As the payments are settled instantly, companies can get real-time visibility into financial transactions. Thus, they can reinvest and allocate resources more efficiently for better cash flow management.
• International remittances are typically expensive financial transactions, owing to the presence of multiple intermediaries who add service charges. However, RTP networks allow for faster and more direct cross-border transfers at lower costs. Thus, speed and cost-efficiency enable businesses to operate globally and broaden their reach.

Fintech Innovations Driving Real-Time Payments

There is not a single technology, but a set of multiple technological innovations that have made real-time payments actually possible. Here are the top advancements fueling the growth of real-time payments:

Artificial Intelligence and Machine Learning

Since RTPs are designed for rapid processing, they are also more vulnerable to potential cyberattacks. Artificial intelligence and machine learning help to improve the security of real-time payment networks. Machine learning (ML) algorithms are used to detect risks in real time and flag them before they cause significant damage. Self-learning AI models further improve the functionality of these systems by adapting and increasing the accuracy of threat detection.

Application Programming Interfaces

APIs allow businesses to seamlessly integrate RTP capabilities into their existing financial systems without the need for complex development, saving time and development costs. These powerful APIs are fitted with all the tools and technologies to streamline communication and process transactions in real time.

Cloud Computing

Cloud technology is leveraged to increase the system scalability and allow it to handle multiple transactions at once without experiencing system failures. Financial institutions also employ cloud-based platforms to process money transfers in real time, which assist in smooth transactions even during periods of high traffic.

Blockchain Technology

Blockchain, also referred to as a Distributed Ledger Technology (DLT), is not, though, the basic technology enabling real-time payments, but it is paying its fair share to take it to the next level. Blockchain offers core functionalities such as security, transparency, immutability, and more to instill in financial transactions as well. Blockchain applications like smart contracts allow financial institutions to adopt faster payment systems that work on certain set conditions and automate real-time payments.

Wrapping Up

By integrating the capabilities of multiple technologies, Real-Time Payments (RTP) are becoming the next big thing in Fintech. Actually, they have literally become the one by benefiting both the enterprises and individuals with speed, efficiency, and security.

At Tech Remit, we build remittance platforms by incorporating the latest fintech innovations to enable real-time cross-border transactions. Remittance businesses worldwide rely on our remittance platforms to provide fast, secure, and reliable money transfer services. Curious about how we are making a difference in the market? Get in touch with us today!

Also Read : P2P Payment Revolution: The Future of Payment Processing with Money Remittance Software