The instant payments revolution is in full swing. Customers now expect to send and receive money instantly, which has prompted financial institutions to identify and set up new real-time payment use cases to meet demand.
Yet many providers are lagging behind in this area by failing to incorporate immediate payment methods into their operations. If your company is one of them, you risk:
- Causing cash flow bottlenecks and inefficiencies by using old-fashioned systems that hold up working capital.
- Missing out on sales due to bad customer experiences and missed opportunities for faster business models.
- Losing ground to competitors with real-time payment systems that give them a competitive edge.
Letting these problems fester for too long can severely affect your business’s bottom line, especially with more customers than ever using real-time payments.
“The demand is there”, says Steven Wasserman, author of Smart Instant Payments, a new book on the topic. “If your financial institution and payment service customers are not asking for instant payments, it could be because they are already using something else”.
Yet, knowing how to use this new technology is tricky. How do you know which real-time payment use cases will work for your business?
Read on to discover the six emerging technologies that businesses are turning to right now, and how they work.
Want to see how real-time payments can grow your business? Contact Berkeley Payments today to find out how our unified payments platform can help you build a robust long-term revenue stream.
What is the RTP network used for?
The Real-Time Payments (RTP) Network is the conduit for the instant settlement of funds between financial institutions in the United States of America.
It’s the largest of what are known as “payment rails”, disruptive payment networks that are supplanting traditional systems (like the Automated Clearing House or ACH) across the United States and Canada.
Set up by The Clearing House (TCH), the RTP Network processed $25 billion worth of electronic payments in the first quarter of 2023 alone, more than six times the amount of four years previously.
Source: Cross River
The speed and low cost of RTP payment transactions explain why there’s been such a huge RTP take-up across the US, to the point that it dealt with one million transactions in a single day in late 2023.
These include everything you can think of from across the payment landscape, from simple bill payments to RTP mortgage instalments.
Faster and more efficient financial transactions are now an important of everyday life for many US and Canadian citizens.
What is an example of a real-time payment system alternative to RTP?
Multiple payment rails directly challenge RTP.
FedNow, launched by the Federal Reserve in 2023, is the most well-known. The FedNow service also allows us to instantly send money between bank accounts and digital wallets at minimal cost, but there are some differences (as of August 2023).
- FedNow has a higher maximum transfer amount of $5 million, compared to RTP’s $1 million.
- FedNow’s payment requests cost just $0.01, compared to RTP’s $0.11
- FedNow allows bank-to-bank funding, while RTP doesn’t.
RTP vs FedNow
In Canada, Payments Canada launched the Real-Time Rail (RTR) in 2022. Similar to FedNow, the RTR powers instant interbank settlements at a low cost.
While the RTR’s core functionality is the same as FedNow, some key differences exist. Notably, the RTR boasts a significantly higher transaction limit, reaching up to $25 million compared to FedNow's $5 million cap.
Zelle and Venmo are popular examples of companies that streamline transactions with a real-time payment system. They allow users to instantly transfer money between participating banks and credit card companies.
The 6 Top Emerging Real-Time Payment Use Cases in 2024
Talking about real-time payments in theory is great, but what is a use case of instant payments that can benefit your business?
The answer is that several real-time payment use cases can add an extra string to your bow, from refund mechanisms to customer cards.
Let’s take a closer look.
1. Customer refunds
If your customers asking for a refund, then it’s a sure bet that they’re already annoyed. A slow payment, then, adds fuel to their flame of anger and might push them to leave you a damaging review.
Instant refunds may not solve the problem entirely, but they certainly help to douse the flame and could be the difference between them kicking up a fuss or resolving the matter quietly.
70% of consumers say that faster payments drive greater satisfaction, according to recent PYMNTs Intelligence research which shows how important they are in the consumer mindset.
If you’re a manufacturer, then using RTP for warranty-based payouts could even be a competitive advantage for your business.
Imagine the tagline: something like “Instant Refunds: We Value Your Time As Much As Your Custom” will give customers peace of mind when buying your products.
Rapid business-to-consumer (B2C) payments will also make them more likely to purchase and might even drive loyalty.
2. Mobile phone payments and digital wallets
Mobile phone payments and digital wallets are the beating heart of real-time transactions, with their accessibility allowing payers to send money not just instantly, but whenever they want.
"Instant payments rely heavily on mobile phones," states Wagner Lopes, Head of Growth of fintech software provider Luby."Real-time payments enable a seamless mobile payment experience, which is critical to attracting and retaining customers.
So, what does this mean for your business? Simple. You need to embrace mobile apps and digital wallets and integrate them into your payment ecosystem.
Digital wallets bridge a customer’s phone and their bank account, allowing them to securely store their debit or credit card information. This makes in-store and online purchases easy, with a simple tap or scan initiating a real-time payment.
Their convenience factor is enormous, and the benefits for businesses go far beyond.
The biggest win? Faster customer checkouts and reduced cart abandonment, leading to a potential sales boost.
3. Loan payouts
Real-time payments (RTP) aren't just for everyday transactions – they can be a boon for loan providers.
Imagine a small business owner facing an unexpected equipment breakdown. Without a functioning machine, their entire time-sensitive operation stalls, jeopardizing payroll or fulfilling customer orders.
Here's where RTP shines. By integrating RTP into their system, lenders can disburse funds instantly upon approval. The business owner receives the necessary funds immediately (electronically deposited directly into the payee’s account) to quickly get their business back on track.
The benefits extend beyond the borrower. Lenders can attract a wider customer base by offering a faster, more efficient loan process. They can also process more applications and grow revenue.
The swiftness of RTP payments also reduces the risk of fraud associated with traditional methods like checks or money orders.
4. Business transfers (B2B)
Business-to-business (B2B) transfers cover a broad scope of payments but all benefit from real-time payments.
Many of them will center around A2A payments (account-to-account payments) that let you instantly move money between bank accounts.
Supplier payments are the big one here. A useful supplier that gets their money right after they send their request for payment is much more likely to want to do business with you again than someone who has to wait around.
Not only that, but you save time on payment processing and reduce your payment costs as part of the deal.
You may also find yourself in a situation where you must pay a partner or contractor money quickly to smooth the wheels of a business deal. A2A payments allow you to do this without barriers, which frees up more time for strategic initiatives.
Immediate digital payment options also cut out the need to keep an eye on the transaction’s status as you know when you click ‘Confirm’ that the money will be in their account right after.
5. Employee disbursements and payroll
Staff that get their wages on time are much likelier to be happy – and to stick around when the competition comes sniffing for your top talent.
Instant payroll payments take you a step further than this. Not only do your employees get their money on time, but immediate payment means they get greater financial flexibility and control.
The low cost and speed of these transactions mean that employers can also offer earned wage access (EWA), a mechanism that lets employees access the money they’ve already earned outside of the typical payment cycle.
In today's competitive job market, these benefits can be a powerful differentiator, attracting and retaining top talent who value financial empowerment and a progressive workplace.
Contractors or gig economy workers will also appreciate a rapid payment. Slow payments are one of the main frustrations of freelancers who are often forced to juggle multiple income streams and unpredictable schedules.
With RTP, contractors will get a payment notification on their mobile as soon as they finish a project, nipping in the bud any frustration caused by waiting for their payment.
If your business can reduce friction for these workers, then you’ll stand out from tardy competitors and attract a wider pool of contractor talent.
6. Prepaid cards
One of the big benefits of real-time payments is the instant loading of prepaid cards for customers and employees.
People love the feeling of getting something for nothing, so adding instant credit to a prepaid card is a powerful way to build loyalty. For customers, this could be cashback for each purchase or instant discounts for repeat customers.
Businesses can now design prepaid card programs via user-friendly platforms to make the most of this real-time payment use case. Cardholders enjoy immediate notifications and personalized accounts for tracking rewards, driving engagement and loyalty.
Berkeley Payments: Multiple real-time payment use cases in one financial ecosystem
Are you impressed with the above real-time payment use cases but have no idea how to integrate them all into your business?
Berkeley’s unified payments platform is your answer. Our smart suite of APIs will let you tap into our financial ecosystem in just minutes and start growing your revenue.
Here’s how.
Streamline B2B payments
Why use multiple payment solutions when our platform handles them all for you?
Our real-time payment processing means your business partners receive funds instantly, from invoices to vendor payouts.
You can also set it up to work the other way, so your customers can pay you immediately and keep your liquidity strong.
Simplify employee payments
All companies, from international corporations to small businesses, do better when their employees are happy.
Empower your workforce with instant access to their earned wages through Berkeley Payments.
They get their money when they need it (without waiting for payday), and you get a workforce with high morale and a lower turnover rate.
Revolutionize prepaid cards
Create and manage your own sleek, branded prepaid cards on the platform, be it for customers or employees.
Forget the limitations of traditional prepaid cards. This platform gives you way more control and functionality, which you can access via your mobile phone.
Plus, every transaction updates instantly, so you can always see exactly what's going on.
Berkeley’s one-stop instant payments platform: It's like having a mini financial world at your fingertips – branded just for you.
Ready to connect your business to a world of RTP? Sign up today and find out how you can start increasing revenue in just minutes.
