Global digital payments growth in the pandemic and beyond

Changes to business models and consumer behavior prompted by the COVID-19 pandemic compressed decades’ worth of transformation and digitisation into the space of several months.

The COVID-19 pandemic dramatically increased the volumes of real-time payments

As a result, we saw an overwhelming upwards trajectory of real-time payment volumes across the world.

Recent research has revealed that in Europe alone there were 7.9 billion real-time transactions made, accounting for a staggering $8,317 billion in 2020. And forecasts predict this will only increase. By 2025 in Europe, we could see the volume of real-time payments rise to 23 billion payments, a compound annual growth rate (CAGR) of 24.9%.

It’s clear real-time payments are the future of commerce. But to support the increased demand for real-time payments beyond the pandemic, financial institutions need a robust and flexible payment infrastructure. Only with this reliable foundation will they be able to keep on top of the expected demand, volumes and variety of transactions and innovate effectively.

Real-time payments and customer experience

The payments industry is always looking for new ways to streamline processes, reduce costs, increase security and most importantly, improve the customer experience.

Real-time payments are currently the most effective payment instrument that offer the best foundation for digital payments services fit for the 21st century. But real-time services that improve the customer experience need the correct framework in place to ensure the right climate for innovation.

Real-time rails provide the springboard for innovative companies to create the value-add services that consumers and businesses are demanding – ones that bring enhanced customer experience and create financial inclusion for all.

However, when it comes to implementing real-time payments, it will take more than simply modernising existing Automated Clearing House (ACH) rails to drive forward the adoption of new innovative digital services and products.

What’s needed is an ecosystem based on a framework that supports innovation and the ability to conceive flexible, agile payment services with real-time capabilities. Services such as Request-to-Pay (R2P), buy-now-pay-later (BNPL) and digital wallets.

Learning from India

India, the world’s biggest real-time payments market, remains the benchmark for what’s possible with a robust yet agile real-time payments infrastructure. India’s digital payments ecosystem – Unified Payments Interface (UPI) – has seen real-time adoption increase at a CAGR of 55.1% over the past four to five years between 2016-2020.

This isn’t a coincidence. India is a vivid illustration of the way innovation snowballs when the market forces of demand and competition are unleashed onto a robust real-time infrastructure.

As each new use case builds on the last, India’s real-time market is moving swiftly past entry-level use cases, such as Person-to-Person (P2P) transfers and merchant payments, to bill, tax and toll payments.

Real-time opportunities with a robust infrastructure

When financial institutions have the ability to create value-add services for their customers on top of a robust yet flexible real-time payments infrastructure, just as we have seen in India, then market innovation booms.

The result is a symbiotic relationship where innovation is encouraged among all parties. Ultimately, as the market grows, financial services are able to capture a substantial slice of the market share, leading to a healthy ecosystem.

It’s not just Southern Asia where we have seen positive strides in this space. The announcement of the European Payments Initiative (EPI) – which seeks to increase the number of real-time payments use cases across the continent while consolidating the fragmented payments landscape with an EU-wide card, person-to-person capabilities and a digital wallet – shows significant promise and lays the foundations for enhanced real-time capabilities.

Real-time payments beyond the pandemic

The real opportunity is creating value-add services built with real-time capabilities. To capture this chance, it’s important to take a holistic approach with a focus on customer experience and the fundamentals of easy, reliable and secure payments.

The pandemic dramatically increased the volumes of real-time payments. But for real-time to continue and grow beyond the pandemic, and for the best value-add services to be brought to market, a robust yet flexible infrastructure is needed.

We’ve seen what can happen in the world’s second most populous country, India. And we’re now seeing Europe put robust frameworks in place. It is now time for financial services to take advantage and leverage these frameworks and call for more to be done to consolidate the real-time ecosystem.

Those players that innovate the best and respond holistically to the changing real-time environment are most likely to succeed.