Data: Real-time payments go corporate

New architecture for real-time payments went live in recent months in key global markets, expanding B2B payment options for financial institutions and their corporate customers.

In the U.S., The Clearing House launched its own instant payments brand last fall at the same moment when instant cross-border payments became available in Europe.

It’s very early in the adoption cycle and the majority of U.S. corporations are still just learning about the technology, several recent surveys suggest. What follows is a look at the perceptions of corporate finance and treasury managers so far as they begin to explore real-time payments in collaboration with financial institutions.

Chart: The fast lane
Expectations for real-time payments to transform legacy B2B payment processes and systems are high, according to a recent survey by TD Bank. Forty-two percent of U.S. corporate finance and treasury respondents ranked real-time payments as having the greatest potential for positive change in their departments over the next three to five years, surpassing other buzzworthy technologies.

The adoption of real-time payments is significantly more likely to improve daily operations than artificial intelligence and machine learning, blockchain and biometrics, according to executives handling companies’ commercial payments. TD surveyed 380 finance professionals in the spring of 2018.
Chart: Learning curve
Most finance executives at U.S. corporations have a lot to learn about real-time payments and the supporting technology, according to a recent survey of finance executives PNC published. Overall, only about a third said they were “extremely familiar” with real-time payments and 25 percent said they knew little about the subject. Forty-two percent of executives rated their familiarity with real-time payments as “neutral.” PNC conducted its survey in May 2018 among 59 finance professionals with Insights and Market Dynamics.

Financial institutions eventually will do the heavy lifting to drive awareness and education of real-time payments with corporate customers. To encourage real-time payments adoption, The Clearing House is conducting briefing sessions with banks across the country to help them shape their real-time payment offerings, develop business cases and solve problems.

One area where banks are seeking guidance is in how to differentiate their own real-time payments products, according to Tim Mills, vice president at The Clearing House.
Chart: Wish list
Corporate finance execs are eager to eliminate some of the common pain points of legacy B2B payments, such as narrow timing windows, lack of detail accompanying payments and uncertainty that the payment went through.

More than a third of execs in PNC’s survey said having 24/7 access to real-time payments is potentially the most important feature of real-time payments. Thirty percent ranked real-time messages that accompany payments as the best feature, while 17 percent said having real-time confirmation of the payment was the most important thing. Fifteen percent of respondents said the certainty real-time payments technology delivers is vital. Four percent said the technology’s “request for payment” capability was key.
Chart: Real time countdown
Despite strong interest in real-time payments, the majority of finance executives aren’t ready to adopt real-time payments, according to PNC’s survey. Fifty-four percent said they have no plans to integrate the approach at this time, while 15 percent said they’re currently integrating it. One in four said they plan to begin adopting real-time payments within six months and 5 percent will be ready to start within the next six months.

Lack of capital and expertise are the top factors holding back real-time payments adoption in the U.S., PNC’s survey indicates. The majority, 64 percent of respondents, said the cost and/or complexity of real-time payments integration is preventing them from integrating it, while 28 percent said they need more knowledge about the technology's value and applicability to their organization. Nine percent said the cost of a new type of transaction is a roadblock.
Chart: No waiting
The top use case for real-time payments—by a long shot—is paying suppliers. Nearly 75 percent of corporate finance executives PNC surveyed said vendor payments are the top use case they anticipate for the technology. Employee payments are the second-most anticipated use case, at 30 percent, followed by collections at 26 percent. Only 22 percent of respondents ranked consumer payments as a top use case for real-time payments.

Smaller organizations with less than $1 billion in assets were most interested in using real-time payments for vendor payments, according to the survey. Eighty-two percent of finance execs at smaller companies flagged vendor payments as a prime use case for real-time payments, compared with only 60 percent of companies with more than $1 billion in revenue.
Chart: European speed
Europe appears to be ahead of the curve in adopting real-time payments at the corporate level. After years of planning, the Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) launched in November 2017, creating a system for instant cross-border payments for consumers and businesses in 34 European countries.

Initial response was healthy. By July 2018, 26 percent of European payment service providers had adopted SCT Inst, enabling instant euro transfers for domestic and cross-border payments within the zone, according to the European Payments Council.

The first wave of SCT Inst included 17 participants and over 500 addressable payment service providers (PSPs) in eight countries. The system had notched a total of 1 million transactions within five months, and by July more 1,000 PSPs were participating in 12 countries. Transaction volume is lower on weekends and evenings, but real-time payments circulate at all hours and on all days of the week, the EPC said in a recent report. Nearly all transactions processed between PSPs occur within 3 seconds, from origination to settlement.