The modern pace of life dictates the need for instant cross-border money transfers. Real-time payments (RTP) play a pivotal role in catering to this demand, as they are settled in a matter of seconds from the moment of initiation.
In this overview, we will compare how RTP is adopted in two completely different payment landscapes - Latin America (LATAM) and the US, and list the opportunities and challenges this fund transfer type is facing. We will also share some forecasts regarding RTP’s evolution in the upcoming years - read ahead for all the details!
The main factors driving the popularity of RTP are:
The list of advantages of RTP goes on, making it clear why such transactions have become a worldwide trend. Let’s take a closer look at the way they have gained recognition in LATAM and the US.
The US is often one of the first countries to adopt emerging tech solutions. However, when it comes to real-time payments, the LATAM region took the lead.
One of the most prominent RTP solutions in Latin America is the Brazilian 24/7 real-time payment network, PIX. The usage of this system in Brazil has surpassed credit card ownership, which accounts for approximately 25% of the country's population. Another worthy mention is SPEI in Mexico (The Interbanking Electronic Payment System), which also functions as an RTP network and is rapidly gaining national popularity.
In the US, real-time-payment solutions like Venmo and Zelle are on the rise, with $230 and $490 billion in payment volumes processed in 2021, respectively. Also, there is an up-and-coming RTP solution called FedNow that is scheduled to be launched in 2023.
However, despite the promising statistical data in both regions, there are certain obstacles standing in the way of full RTP adoption.
The main challenges that RTP networks face globally are:
The same concerns apply to the LATAM and US, affecting the spread of RTP networks in these areas.
According to industry experts, if countries in Latin America seize the moment to develop and promote RTP networks, these solutions have an amazing potential to drive economic growth and financial inclusion. Governments and corporate champions are expected to be the main driving forces in the LATAM region’s shift toward real-time transactions.
In the US, instant money transfers are said to be “in the fast lane”, evolving quickly in response to the digitization trend boosted by the COVID-19 pandemic. The FedNow system that is going live next year will speed up the RTP’s spread even more, offering improved efficiency and convenience for businesses, individuals, and FIs.
These new networks will be using existing instant fund transfer initiatives as a blueprint for their own development, so we are sure to see the opportunities and challenges of RTP in the LATAM and US tackled with unconventional strategies.
1 - Grand View Research - Real-Time Payments Market Size
2 - Deloitte - Real-time payments and implications of the COVID-19 pandemic