real-time payments research

By Jeff Domansky

Interac Corp and 13 leading Canadian financial institution members launched Interac e-Transfer for Business, providing real-time digital payments to personal and commercial bank accounts with confirmation of funds received within seconds.

Interac launches real-time business payments

Recent research by Interac showed 83% of business leaders want new commercial payment options as part of their post-pandemic business recovery.

“The launch of Interac e-Transfer for Business in collaboration with Canada’s banking and credit union community marks a milestone in the modernization of Canadian payments and provides a timely solution as businesses embrace financial transformation to aid their recovery and growth plans,” said William Keliehor, Chief Commercial Officer at Interac. “It reflects an increasing focus from Interac on the commercial market as we respond to the accelerating need for secure, data-rich, real-time business payments, made especially evident during the pandemic.”

Canadians ahead in some payment innovations

Compared with the US and other developed nations, Canadians often adopt new payment methods faster, but some old habits remain in the business sector.

Regarding e-commerce purchases, Canadians are among the world’s top users of credit cards, with 55% of purchases made with credit cards, followed by digital or mobile wallets (23%) and debit cards (11%).

Canadian credit cards

Contrast that with US e-commerce preferences, including credit cards (30%), digital/mobile wallets (30%), and debit cards (21%). Real-time payments could spur a dramatic shift in payment preferences as consumers look to avoid high credit card interest charges.

82.6% of Canadians over the age of 15 owned a credit card, according to Globaleconomy.com, followed distantly by Israel (75%), Norway (70.5%), Luxembourg (69.8%), Japan (68.4%), and the US (65.6%).

Businesses in Canada still used 389 million commercial checks in 2019 with an average value of $9,000. However, according to Interac, with higher transaction limits up to $25,000, the new service could displace as many as 200 million of these business checks.

By comparison, in the US in 2020, businesses wrote nearly 3.8 billion checks worth $7.88 trillion. It’s worth noting that was down 14.2% from the previous year, according to the US Federal Reserve.

Still using checks?

Before the impact of Covid, many businesses stuck with slow, expensive, legacy paper systems. Now, business and consumer expectations about the speed of payments have changed. Bank of America estimates the cost of creating and mailing checks at between $4 and $20 each.

According to Paystand, here’s what it costs a midsize business to process an average of 5000 checks monthly:

digital check
  • $1,300 daily ($39,500 monthly) on processing, including imaging and check fees, reconciliation fees, positive pay fees, stationery, printing supplies, and postage
  • $40,000 monthly on labor costs, including managing and reviewing invoices, mailing, data entry, invoice reconciliation, routing for approvals, and vendor research and management.

That’s up to $480,000 a year to create, manage, reconcile and pay for the cost of managing 5,000 checks each month. Add in bounced checks, non-payments, data entry mistakes, and costs rack up fast. So it’s no wonder checks are disappearing at a faster rate in the past year.

The race to real-time business payments

With the proliferation of fintech, P2P, and other consumer payment innovations, the demand for real-time payments in business is accelerating worldwide.

real-time payments

ACI Worldwide and GlobalData estimate more than 70.3 billion real-time payments are processed globally in 2020, a jump of 41% over the previous year. The pandemic forced consumers and businesses to dramatically increase the adoption of digital payments and decrease cash and checks.

The ACI/GlobalData report projects a Compound Annual Growth Rate (CAGR) for real-time payments of 23.6% from 2020 to 2025. Mobile wallet adoption also rose to a new high of 46% from 40.6% in 2019 and 18.9% in 2018.

Other key findings from the report:

  • Total number of real-time transactions in 2020 was 70.3 billion, up 41% from 50 billion in 2019
  • The real-time share of global electronic transactions in 2020 was 9.8%, up from 7.6% in 2019; it is predicted to reach 17.4% by 2025
  • The value of real-time transactions was up by 32.8% from 2019, rising from $69 trillion to $92 trillion, an expected CAGR by 2025 of 12%.

“The pandemic has cast the spotlight on the importance of digital payments and robust payment infrastructures, condensing a decade of anticipated innovation into one year and creating human behavioral changes that will not reverse as we emerge from the crisis,” said Jeremy Wilmot, chief product officer, ACI Worldwide.

“The pandemic has provided an opportunity to accelerate the growth path for these instruments. As consumers become used to the speed of real-time settlement for P2P payments, they will naturally use them for e-commerce over the relatively slower and less convenient process of using cards online. From there, there is potential to move into in-store payments, once enough consumers recognize real-time payment brands and the user base is high enough to deliver sufficient value to merchants,” added Samuel Murrant, lead analyst, Payments, GlobalData.

Top 10 countries for real-time payments

digital world

ACI/GlobalData identified the top 10 countries for real-time payments, including India with 25.5 billion real-time payment transactions, followed by China (15.7 billion), South Korea (6 billion), Thailand (5.2 billion), UK (2.8 billion), Nigeria (1.9 billion), Japan (1.7 billion), Brazil (1.3 billion), US (1.2 billion), and Mexico (942 million).

Fastest-growing countries for real-time payment CAGR between 2020 and 2025 include Croatia (374.4%), Colombia (112.7%), Malaysia (83.9%), Peru (74.4%), and Finland (71.4%).

North America will be the fastest-growing region between 2020 and 2025 with 36.5% as Canada and the US modernize their real-time systems. That’s still way behind the faster adopters.

And keep in mind how more retail payments will be made in the future – mobile. Total mobile wallet transactions totaled 102.7 billion in 2020 and could reach 2,582.8 billion by 2025.

Who’s pushing the boundaries of real-time payments?

Fintech companies are helping established organizations advance the potential for real-time payments using new technology.

digital credit card

The list of recent announcements is growing longer daily and includes:

  • Mastercard launches the next generation PayPort+ real-time payments gateway (link)
  • ACH Marks B2B payments traction as real-time rails expand (link)
  • B2B’s participation could be key to driving real-time payments (link)
  • Payfare to power real-time payments for the gig economy with integration of Mastercard Send™ (link)
  • Dwolla launches real-time payment options for business (link)
  • Prime Time for Real-Time 2021 ACI Worldwide (link)
  • The state of play in US faster payments – Jan 2021 (link)
  • NIBSS – Africa’s premier real-time payment system (link).

Innovation and new developments are moving faster in the world of real-time business payments. And that’s a good thing for all businesses and consumers.

You can read Interac’s real-time business payments announcement here.