Why Should Merchants Set Their Course for Real-Time Payments in 2023?

We live in a time of dramatically escalating inflation, severe supply and cash flow issues, and a rapidly increasing cost of living. All these factors slow down retail growth, intensify competition, enhance friendly fraud risks, raise payment fees, and shrink margins - in other words, they force businesses to invest more resources to win each sale.

To navigate these challenges effectively and maximize profits, businesses require innovative solutions, with real-time payments (RTP) being on top of the list in terms of potential. Read ahead to find out how RTP can address merchants’ pain points while helping them to meet consumer needs!

Can Real-Time Payments Change the Game?

The initiatives of upgrading national payment schemes with RTP have already shown success on a global scale and have proven to be advantageous to all parties involved, including merchants, FIs, and governments. As a result, RTP is predicted to see 64.5% YoY growth from 2021-2026 and is expected to generate an extra $173 billion in GDP across 30 countries by 2026, up from $78 billion in 2021.

7 Key Reasons Why RTP Works for Merchants

Here are the main benefits merchants can reap after integrating real-time payments into their operations:

1. Lower Costs and Higher Revenues

RTP does not involve card intermediaries, which means that merchants don’t have to deal with interchange fees. This is a significant relief especially for large retailers, considering the fact that these fees currently equal up to 0.3% of each credit card sale in the EU and range between 2-4% in the US.

Saving up on interchange fees allows RTP to boost merchant revenues by a fair amount in the long run.

2. More Affordable B2B Payments

RTP-enabled merchants can also facilitate instant B2B payments with their suppliers and vendors, which is helpful in reducing reconciliation costs. What’s more, the immediate exchange of funds between merchants and their business partners enables them to agree on better rates, manage the supply chain more effectively, and oftentimes even receive discounts and cashback.

3. Additional Loyalty and Sales Incentives

As consumers are coping with the increasing costs of living, they expect merchants to offer greater rewards and incentives. Merchants who implement RTP can invest their interchange fee savings in loyalty and discount programs to attract potential clients and boost retention rates.

4. Instant Access to Funds

Unlike card transactions, real-time payments are cleared instantly. Due to this, merchants can access the funds without delay and put them to work, which markedly boosts the Return on Invested Capital (ROIC). In other words, incorporating RTP enables merchants to restock supplies sooner, ship goods faster, negotiate more effectively, and manage cash flow better.

5. Wider Reach

Some consumers are denied access to credit cards due to age, credit score restrictions, or other reasons, which means that a large share of potential customers doesn’t have payment cards. RTP helps to resolve this issue by allowing consumers to pay for purchases directly from their bank or prepaid account without incurring additional expenses.

What’s more, RTP is available not only at online stores but also at physical locations through QR codes. This feature helps merchants to deliver seamless shopping experiences to their omnichannel clients.

India is a great example of this approach in practice, as even merchants operating on the smallest scale now accept real-time payments via QR codes. The timely adoption of RTP has saved Indian businesses and consumers $12.6 billion so far and unlocked $16.4 billion of economic output, which accounts for 0.56% percent of the country’s GDP.

6. Streamlined Expansion

If a local merchant has plans of expanding their operations internationally, RTP is the tool that will create a plethora of opportunities for them. After all, when a business introduces real-time payments into its operations, it gets access to instant, secure, zero-cost, and frictionless cross-border transactions.

7. Decreased Risk of Fraud and Chargebacks

Since real-time payments are cardless transactions, merchants who implement them can forget about card fraud. Besides, due to the fact that there is no issuer involved, there’s also a lower likelihood of declines and chargebacks.

Is RTP Equally As Beneficial for Consumers?

It’s clear as day that the advantages of RTP for merchants are plenty, but what’s in it for consumers? It turns out that real-time payments are equally as beneficial for shoppers, with the list of perks featuring:

• Speed
• Convenience
• Cost-effectiveness
• Inclusivity
• Security

As you can see, consumers don’t have to compromise on a single aspect when switching to RTP, which makes it an appealing option actively embraced by many.

Bottom Line: The Perfect Moment to Embrace RTP Is Now

Given the rapid adoption of this fund transfer type and the numerous advantages they yield for merchants and consumers, there is no better time to hop on this trend than now. On the other hand, those businesses that will miss the momentum risk to start lacking a competitive advantage in terms of the payment options offered and are likely to lose a significant share of clients and revenues.