Looking Ahead at Real-Time Payments in 2023

Jan 17, 2023 by Kelsey Banerjee

According to a recent survey, 9 out 10 business leaders are interested in pursuing real-time payments (RTP), and it’s not so they can be paid faster. Other key reasons include:

  • More accurate cash flow
  • Providing immediate receipts
  • Replace check payments
  • Transform accounting operations

It’s not just private businesses that see the value in developing secure real-time payment systems. Despite being slower to adapt to real-time payments than countries like India, China, and Sweden, the United States Federal Reserve plans to launch its own RTP transaction application in 2023 called FedNow.

But what does this mean for B2B transactions?

Currently, most real-time solutions are focused on Peer-to-Peer (P2P) or B2C transactions. But the demand from organizations for B2B is growing. There are a few good reasons why. A sound real-time payment platform can:

Looking ahead into 2023, four clear and powerful real-time payment trends are set to ensure instant payments continue to grow.

Digital Transactions Expected to Dominate Payments

Real-time transactions are on the rise, and we’re likely to see more and more businesses add digital payment options to their invoices.

And when we mean digital, we mean digital wallets, P2P transactions, and other real-time deposits. But, of course, online payments are nothing new—debit and credit card payments have long been around in eCommerce and B2B transactions. In fact, credit cards still top the charts when it comes to worldwide payment methods.

But the inefficiencies and high costs of credit cards are quickly giving way to a preference for real-time payment methods. Worldwide, 63% of businesses will prefer mobile wallet payments in 2023. This number makes sense, as two of the largest global populations, China and India, currently lead in bank-to-bank real-time transfers.

And as the United States and Europe continue to develop their payment rails, we’re likely to see a meteoric rise in the RTP payment rail. Already, it’s expected that digital payments will constitute 80% of buyer-supplier transactions by 2025.

Streamlining Customer Experience

Almost one-third of businesses consider real-time payment capabilities when signing on with a bank. And it’s not just because an RTP transaction enables transparent and timely bookkeeping.

The fact is that a convenient, user-friendly invoice fulfillment system attracts and retains customers. We see this often with eCommerce stores.

Around 17% of consumers abandon their cart due to lengthy, convoluted checkout processes, and 9% drop off due to a lack of payment options. The kicker? Nearly 1 in 4 customers go and buy the same products from competitors.

In other words, choosing long, outdated, and limited payment processes not only hampers customer experience but it throws money at competing businesses.

Generally, the shorter the process, the better. A rule of thumb is that the payment process should take less than 5 minutes and contain fewer than 12 questions.

Real-time payments solve most of these issues—without sacrificing security. Since transactions are linked to verified bank accounts and all items are recorded, it’s often easier to maintain compliance.

Faster Payments Push for Stronger Anti–Fraud Measures

There is one trend that most businesses should be concerned about: Fraud and financial crime. Cybercriminals have caught up to real-time payments, and as a result, business leaders, financial organizations, and government agencies are demanding more stringent regulation.

A particularly harmful scam is authorized payment fraud. For example, suppose a vendor sends an email with a late invoice. Using a real-time payment app, you push an instant payment as an authorized payment. But what you don’t realize is that this vendor is a carefully crafted imposter.

The current situation regarding this uptick in fraud is a bit messy. There is a bill, sponsored by several senators, to ask banks to take responsibility for authorized payment fraud by extending Regulation E.

While these attacks tend to target financial institutions and consumers, it’s best for businesses to stay on their guard. Most authorization scams prey on human error, and so automation in payments often provides the best protection against them.

Organizations looking to safeguard their finances while improving their revenue with payments can still do so. The key is to choose a payment rail that provides extensive protection against both hackers and fraudsters. Solutions with bank-grade security, instant account validation, immutability, and tokenization can all reduce the likelihood of a successful attack.

And when combined with automation, you can limit human error, too.

Solving the Cross-Border Payments Conundrum

While the United States continues to develop its real-time payment network over 2023, cross-border payments will be the next frontier. And it’s a profitable one.

Business today is a global enterprise, with B2B cross-border payments valuing approximately $150.7 trillion in 2022. Whether you are talking about suppliers, manufacturers, distributors, or vendors, everyone needs to get paid, even if they reside in another country.

Yet, most RTP transaction solutions continue to be local products. Zelle in the USA, PayTM in India, and AliPay in China are all examples of locally robust, internationally limited solutions.

At the same time, current providers in this space focus either on remittances or non-business spending. But even if you do have a software solution, such as Wise, that provide business payment services, these solutions essentially combine bank transfers with digital wallets. You add money to your Wise account before or during the transfer, which is then transferred to the overseas account.

It’s a fine solution, but it’s not an RTP payment option.

The challenge with enabling cross-border payments for B2B transactions lies in the complexity of local, national, regional, and global compliance laws, enforcement, and several other factors.

Until this challenge is solved, many businesses can use payment solutions that offer:

  • Multiple payment methods, such as credit cards and wire transforms for international purchases
  • Credit card options and convenience fees to off-set the costs
  • Support for multi-currency and subsidiary transactions

The payment process may not be immediate, but it can reduce overdue invoices and support organizations working with a global workforce.

Look to the Future with the Venmo of B2B Payments

Businesses looking to streamline their AR processes shouldn’t be looking at the past but at the future. And that means accepting real-time payments.

Paystand optimizes AR processes by providing a number of payment options, including bank-to-bank transfers. There is a reason that we’re called the Venmo of B2B transactions, after all. But that’s not the only thing that matters.

We know that security, automation, compliance, and user experience are critical to successfully lowering DSO and improving collections. The ability to encourage or discourage certain payment methods through fees and sync data with your ERP turn AR into a strategic asset.

If you want to find out how we really work, book a customized demo today.