Money is on the move. Transactions that once took days now happen in seconds as new technology kickstarts a real-time payments revolution that is fundamentally changing how people work and live.  

The old 9-to-5 ways of doing business are being swept aside by the need to be able to send money anytime. All over the world, increasingly tech-savvy consumers and companies want their bill payments, online shopping and cross-border transactions completed instantly, cheaply and at scale. 

In more than 50 countries worldwide, including the UAE, this is now possible—or will soon be.  

The time to act has arrived 

Many banks have been skeptical in the past about the advantages of modernizing their payments systems. They felt that the consumer demand for instant payments wasn’t strong enough to warrant the expense. And they considered that expense to be excessive because it would involve the transformation of their entire legacy system to meet the new standards. As a result, some regions have seen banks take a wait-and-see approach to real-time payments to assess whether the rollout by others proves its worth.

The landscape has now evolved, and both customers and regulators expect payments systems to be modernized. The banks that move first in their region will have the greatest chance to unlock new revenue pools, attract the best talent and generate a wealth of data that can be used to enhance customer experiences and build brand loyalty.

Early movers will also be first to lower costs and improve fraud detection, while remaining ahead of inevitable new regulations that will transform instant payments from a choice today into a requirement tomorrow.

Turning challenge into opportunity 

While the power and potential of real-time payments are clear, making the switch to instant transactions at speed and scale is not easy. Modernizing legacy IT systems takes time and costs money. Revenue per transaction will decline in the short term and non-bank technology companies are beginning to enter the fray, increasing the competition for both customers and talent.

The transition to digital solutions in the Middle East is lagging behind frontrunners like China, Singapore and Europe. Despite the widespread adoption of mobile technology in the region, the use of cash remains high.

Some of the challenges banks in the region face in modernizing their systems include updating infrastructure and technology to support real-time payments through instant validation and confirmations; meeting international standards like ISO 20022; providing 24/7 processing and support; and ensuring that their systems can scale sustainably.

However, the benefits of the transformation now make it worth facing those challenges. The opportunities created by real-time payments include: 

• Increased revenues through transaction fees, cross-selling, and data monetization; 
• Systems modernization that facilitates the effective use of data and increases efficiency;
• Cost savings through the reduction of cash and check transactions and in-branch activity, as well as the automation of exception handling; 
• Ancillary benefits such as better responsiveness to customer needs (which will increase loyalty) and the ability to build propositions around transactions.

The advantages of speed 

The advantages of moving early can be seen in Singapore, a world leader when it comes to instant payments. After introducing Fast and Secure Transfers in 2014, a second platform called PayNow was launched in 2017, enabling users to transfer funds using a mobile phone number. 

In 2020, PayNow’s individual registrations jumped by 1.6 million while business registrations doubled to 240,000—which means 80% of the country’s residents and businesses now use real-time payments to buy groceries, pay salaries, purchase insurance and perform a host of transactions that continues to grow as more services are added to the digital ecosystem. 

The rapid growth of cross-border e-commerce and B2B payments has seen Singapore link its real-time payments system to similar systems in countries like Thailand and India, opening the door to yet more transactions, users and opportunities. 

The path ahead

Undertaking the transformation to a real-time payments system requires careful planning and a clear strategy with well-defined objectives. However, banks should not delay getting started down this path. Here are some steps to develop a real-time payments strategy: 

1. Understand the nature of real-time / faster payments: Assess current trends and the impact of real-time payments both locally and globally. 
2. Identify potential impacts and opportunities: Consider how various business lines will be affected, identify opportunities to address customer pain points and look for areas where reusable assets can be leveraged. 
3. Develop business cases for each opportunity: Identify opportunities for new service offerings, assess risks to existing business and analyze the financial implications. 
4. Create and execute an implementation road map: Build a transition plan that includes a road map for rapid deployment with key milestones and benchmarks. 

Accenture’s team can help you build your plan for a rapid transition to real-time payments. Contact us here. 

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