Real-Time Payments: Dispelling the Myths

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5 August 2014
Gareth Lodge

Abstract

Real-Time Payments rapidly became one of the most discussed topics of 2013. This was not least because of a series of discussions in Australia and the United States around plans for implementing such systems. Yet the discussions showed that many misunderstandings or myths surround the topic.

Where facts are in short supply, discussion on a new topic is likely to be swayed by beliefs. Some of the myths surrounding real-time payments are not just wrong on a couple of details, but completely wrong.

This report lays out today’s reality and shows that banks that have yet to investigate real-time payments in depth are in danger of being left behind. It looks at the myths in detail, examines the implications for banks, and sets out what banks need to consider today, whether they believe real-time is imminent in their country or not.

Four myths dominate most conversations. The first is that real-time payments are limited to a handful of countries. The reality is that there at least 35 countries with at least one system. The second myth is that real-time payments are a recent innovation. They are not; some systems are more than 40 years old. The third myth is that adoption of real-time systems is only ever driven by regulatory pressure. The report highlights examples from Sweden and Poland where nonbanks launched their own systems, forcing banks to respond with or risk being disintermediated. Finally, the fourth myth centres around the impact on banks’ wire revenue, which many incorrectly believe will be impacted.

“What many banks have yet to realise is that of course real-time payments means everything that is involved (for example, account systems) is real-time, not just payments,” notes Gareth Lodge, Senior Analyst in Celent’s Banking group and author of this report.

“Furthermore, there are significantly larger challenges. Real-time usually also means being available 24/7, and single messages. By implication, banks need to think twice about investing in any solutions today, particularly if they are batch based. We believe real-time is close to tipping point within the lifespan of most systems being considered for implementation today,” he adds.

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