Mercator Blog

The Global Opportunity for Real-Time Payment Systems
Date: January 6, 2014
Research Team
In late September 2013, Cleveland Federal Reserve President Sandra Pianalto commented on the prospect of real-time payment systems in the U.S. saying, “The pursuit of near-real-time payments in the United States is not a given. We are in the early stages of thinking about such a solution for this country. There are many challenges to consider. Overall, I see more opportunities than challenges. . . . I am in favor of seizing those opportunities.”

To date, only a few countries, like South Africa, Nigeria, and the United Kingdom, have systems capable of making these payments. However, the U.S. is just one country among many that is considering implementing a real-time payment system as consumer and business demands for real-time or near real-time payments increase and as existing systems demonstrate their value.

Faster Payments in the U.K. is a real-time payment system that has enjoyed great success and subsequently has raised interest in replicating the system elsewhere in the world. Since its launch in 2008, Faster Payments’ overall volume of transactions has grown robustly. The compound annual growth rate (CAGR) was 26.46 percent between Q1 2009 and Q3 2013 according to statistics provided by the U.K. Payments Council. The value of transactions handled over the system has increased similarly. According to the U.K. Payments Council, the average value of a Faster Payment transaction in the second quarter of 2013 was £795 (US$1,302), which was £21 ($34) more than a year prior.

The benefits of real-time payment systems are not isolated to financial institutions and their customers. Around the world, these systems have benefited a wide range of industry participants including small businesses, large firms, government agencies, and third-party payment service providers. Basic transactions are not the only potential function of these systems. VocaLink, the operator of the U.K.’s Faster Payments system, has ensured that the system remains cutting edge by promising new services like Zapp, a mobile payment solution for consumers that runs on the Faster Payments system, which is due to be launched in 2014 and has a goal of 20 million users by 2017.

Despite the high cost of implementing real-time payment systems, they have great promise and are an effective means of meeting increasing consumer and business demands for greater speed and convenience with payments. Whether a system is implemented in the U.S. or not, real-time payment systems have a global opportunity.

For more information on real-time payment systems and their international potential as well as a more detailed look at the U.K.’s Faster Payments system, see Mercator Advisory Group’s research report, Real-Time Payment Systems: A Global Opportunity, released in December 2013.

Follow Tristan on Twitter @THugoWebb.