As Other Markets Advance, the U.S. Has Much Catching up To Do in Real Time Payments

With the expected introduction by the Federal Reserve next year of a commercial real-time payments platform for the United States, total instant payments in the U.S. market will rise nearly five-fold, to 8.9 billion, by 2026. That’s up from 1.8 billion last year. The dollar volume on these transactions will account for nearly 3% of all U.S. spending, up from just 0.5% last year.

But for now the U.S. market, in which the only real-time networks are the Zelle peer-to-peer payments platform and the Real Time Payments system from The Clearing House Payments Co., lags well behind other national systems. India leads the league tables, with 48.6 billion real-time transactions in 2021. That’s followed by China, with 18.5 billion, and Thailand, at 9.7 billion. Globally, real-time payments by 2026 will account for 25.6% of all payments, up from 13.8% in 2021.

This is all according to “Prime Time for Real Time,” a report released Tuesday by ACI Worldwide Inc. and with input from Global Data and the Centre for Economics and Business Research. ACI brings out the report annually.

Many nations in the West, indeed, generally have much ground to cover to catch up with developing nations, according to the report. But about no market is this truer than the United States. Here, much depends on the expected introduction next year of FedNow, the real-time payments platform the Fed has been developing for several years. “Given the size of the population and the national economy, [FedNow] could easily grow to become one of the largest payments clearing settlement systems in the world,” the ACI report notes.

FedNow represents the first major payments system from the Fed in about 40 years, the report notes. Conversion to real time, however, will require operational adjustments. “If the market’s payment players are not preparing now, they should start soon by getting a handle on what FedNow compliance looks like: the infrastructure required and how the transition will be sequenced,” says the report.

The system, which is undergoing a pilot with more than 200 financial institutions and processors, is expected to support account-to-account transfers along with payments triggered by QR code and biller Request for Payment (known as RfP).

Worldwide, the table is set for real-time payments, though even here the threat of fraud looms, according to the report. Some 52.7% of consumers around the world now own and use a mobile wallet, up from about 20% five years ago, according to the report’s data. But at the same time, these wallets are more susceptible to fraud, with more than 7.3% having been hacked last year, up from 4.4% in 2019, the report notes.

All told, the report includes information on real-time transactions in 53 countries, with data on economic impact on 30 markets.