The practice of real-time payments is almost 50 years old. In April 1973, Japan became the first country to pioneer a real-time gross settlement service with the Zengin system, which operated during business hours on working days.1 Although progress was slow, RTP has now been adopted in more than 70 countries.2 And more countries and services are expected to join.
In the United States, instant payments became a reality with The Clearing House’s (TCH) RTP system, which processed 49 million real-time transactions worth US$22.7 billion in 4Q 2022, growing 10% each quarter.3 And the Federal Reserve-backed FedNow launched recently in July 2023.4
One of the significant factors behind the growth in RTP in the United States is payroll processing, which allows employers to offer instant payroll capabilities and employees immediate access to their earned income.5 But real-time payments services could be utilized much more broadly.
B2B payments should present one of the strongest growth opportunities in real-time payments for banks and payments firms. In a conservative growth scenario, Deloitte predicts that real-time payments could replace US$18.9 trillion in ACH and check-based B2B payments in the United States by 2028 (figure 1). In an aggressive growth scenario, that number could jump to US$37.0 trillion. And here’s why.
For decades, paper-based B2B payments have been fraught with inefficiencies. They are slow and often expensive.6 Consider the US$8.9 trillion in commercial check payments in the United States that companies still use for record-keeping purposes.7 Meanwhile, many of the nonpaper-based B2B ACH payments are still handled through an end-of-day batch process and settled within two to three business days. Yet, it remains one of the most cost-effective payment methods, as US businesses made US$52.5 trillion in ACH payments in 2022.8 Same-day ACH can offset some of these inefficiencies for businesses at a domestic level.
And the US$37 trillion cross-border B2B payments9 can be even more complex, expensive, and time-consuming. The challenges businesses had with B2B payments in supply chain financing during the pandemic is one example.
In a survey of global business executives, about two-thirds of respondents said they typically pay US$10–$50 in cross-border fees; a similar proportion paid 0.25%–3% in foreign exchange fees.10 And about 70% reported delays of up to 10 days in receiving or sending cross-border payments, with businesses in Singapore and Germany reporting the longest delays.11 When asked about their payment methods, more than one-half used wire transfers (one of the most expensive methods) and bank transfers; 28% used e-checks; and 17% used physical checks and cash.12
Some of these issues may not just be related to the payment, but to the nature of the transactions and the parties themselves. Transitioning to real-time payments, therefore, may not be a panacea for all challenges, but it should help address some. For instance, real-time payments can improve corporate treasurers’ and finance teams’ payments experience. In a 2022 survey of US finance executives, 47% of respondents said that creating a B2B payments customer experience similar to P2P payments is their most important payment-transformation initiative for the year ahead.13 In another survey of US real estate executives, although only 1% used real-time payments, 84% of them believed that RTP will replace checks for making payments.14
In addition to driving business growth across borders and giving access to new markets, real-time payments would also add more transparency to the otherwise fragmented and unpredictable B2B payments landscape. Many RTP systems use International Organization for Standardization (ISO) 2022 messaging standards that enable two-way communication, such as “request for payment,” “request for information,” and “confirmation of payment.” Based on the ISO 20022 standards, RTP would also allow banks to overlay richer insights and value-added services and help modernize B2B transactions end to end, such as automated matching of purchase orders to invoices, virtual account services, e-invoices for payment initiation, and account reconciliation for B2B clients. These value-added services could be even more important in an increasingly networked economy, where businesses are more intertwined, and faster flow of information and faster transfer money go hand-in-hand. They would become table stakes.
In particular, real-time payments could benefit many small and midsized businesses that are challenged by limited transaction visibility, high processing costs, manual invoicing and accounts payable processing, and payment delays in their B2B payments.15 The speed of real-time settlement should free up businesses’ working capital, reduce the need to maintain high cash buffers, and increase the velocity of money in the economy.16 It could also give these businesses flexibility to pay and receive payments closer to the due date. Complementing real-time payments with real-time balance and transaction reporting could improve cash visibility. In addition to faster money flows and richer data, RTP could help businesses mitigate check kiting (where fraudsters take advantage of the float time it takes to settle checks in order to transact against uncollected funds).17
Many banks have started to launch RTP integrations for their corporate clients in the United States. In 2019, Wells Fargo and HSBC offered their US business customers application programming interfaces (APIs) to integrate to the TCH RTP system, allowing them the ability to send and receive faster payments.18
Aiming to be early movers in this space, payments network firms have launched their own cross-border real-time payment services for businesses.19 Similarly, some technology organizations and fintechs are experimenting with digital currencies to facilitate decentralized cross-border value exchange over blockchain.20
Cross-border B2B payments is another untapped market with enough room for multiple solutions to coexist at a global level, including truly interoperable real-time payment rails in the next five years. In 2022, SWIFT, TCH in the US, and EBA Clearing in Europe launched a pilot platform for cross-border payments in USD and Euro, called Immediate Cross-Border Payments (IXB).21 This platform aims to expand to other currency corridors as well. In a bilateral exchange, Thailand and Singapore enabled cross-border payments between the two countries by linking their real-time payment networks.22
Despite general enthusiasm, however, some banking institutions may be conflicted about promoting RTP, given the risks. While faster payments benefit clients, it would risk banks’ float income in today’s high-rate environment, pushing them to search for alternative revenue sources. Moreover, faster payments would mean banks and payment firms would have a shorter window to detect anomalies, decline unauthorized requests, and safeguard consumers and businesses against fraud.
And, with the irrevocable nature of most real-time payments, payers may not get the benefit of chargebacks as they get with payment cards. While authorized credit push payments in these RTP systems are safer than debit pull transactions, fraudsters could discover malicious and more sophisticated ways to deceive businesses and banks. For example, the United Kingdom witnessed a spike in authorized push payments (APP) fraud, where payers are manipulated into transferring real-time payments to fraudsters impersonating as payees.23
Invoice-verification capabilities, therefore, will likely become even more important in the context of faster payments. Banks and payments firms should be creative in offsetting potential loss in float revenues and bolster their risk management and fraud defenses.
Banks should prepare to support direct integration of transaction data into clients' enterprise resource planning and other back-office systems to offer real-time or near-real-time insights on payments transactions and liquidity positions. But this can only become a reality when and if banks modernize their core systems for corporate payments. Cloud solutions can help accelerate banks’ access to RTP systems.
Moreover, banks and payment firms can collaborate with fintechs to add digital overlay value streams for businesses on top of real-time payments.
Talent will likely be another key priority. Specialists who genuinely understand ISO 20022 appear to be in short supply in the industry. Training professionals across business lines and processes to create “skill at scale” should help enable a smoother transition in payments processing and support client education and engagement efforts.
Banks should also check and validate RTP instructions, given the irrevocable nature of payments. They should focus on using emerging technologies, such as artificial intelligence and data analytics, and bolstering controls, such as dual approval and multifactor authentication. More collaboration between banks, payment firms, fintechs, and regulators will likely be required to hone defenses, promote awareness among businesses, and develop new leading practices.
Over the next few years, banks can do their part in helping clients adopt successful and safe real-time payments systems. Given the potential benefits, successful implementations may not only improve operational efficiency; they could also empower clients with insights to make better decisions to manage their money and business relationships.
Our B2B real-time payments prediction uses historical B2B ACH and commercial check transaction data from the National Automated Clearinghouse Association and the Federal Reserve respectively (2013–2022) to forecast their dollar transaction volumes up to 2028. Our research and technical discussions with Deloitte payments specialists helped build two scenarios for the percentage shift from B2B ACH and check payments to RTP. Applying these percentages to the forecasted ACH and check volumes yielded us numbers that could shift from these traditional methods to real-time payments from 2024 to 2028.
Prove, “Swift and secure transactions—A quick look at some popular real-time payments systems across the world,” January 26, 2022.
View in ArticleVicki Hyman, “Your real-time guide to real-time payments,” Mastercard Newsroom, May 4, 2023.
View in ArticleElena Whisler, “Why faster payments will dominate payroll in 2023,” The Clearing House, March 6, 2023.
View in ArticleFederal Reserve, “Federal reserve announces that its new system for instant payments, the FedNow Service, is now live,” press release, March 15, 2023.
View in ArticleFederal Reserve, “Federal reserve announces July launch for the FedNow Service,” press release, March 15, 2023.
View in ArticleDeloitte and Mastercard, Economic impacts of real-time payments, July 2019.
View in ArticleNacha, “Overall ACH network volume—Growing fast. Going strong,” 2023.
View in ArticleJuniper Research, “Cross-border B2B payments to surpass $40 trillion globally by 2024, as marketplace e-commerce models surge,” press release, January 26, 2023.
View in ArticleRapyd, The state of B2B cross-border payments, accessed July 11, 2023.
View in ArticleU.S. Bank, Real-time payments, 2023.
View in ArticlePYMNTS and The Clearing House, Corporate changes in B2B payment practices: The future of real-time payments in real estate, April 2023.
View in ArticlePYMNTS, “Treasurers will have ‘cloud moment’ as real-time payments gain traction,” October 27, 2022.
View in ArticleDeloitte and Mastercard, Economic impacts of real-time payments.
View in ArticleOffice of the Comptroller of the Currency, “Comptroller’s handbook—Payments system version 1.0,” October 2021.
View in ArticlePYMNTS, “Mastercard launches instant B2B payments,” January 20, 2022.
View in ArticlePYMNTS, “Global CBDC real-time payment network launches in Davos,” January 19, 2023.
View in ArticleTom Groenfeldt, “Real-time USD-Euro payments set to launch in 2023,” Forbes, October 17, 2022.
View in ArticleProve, “Swift and secure transactions.”
View in ArticlePYMNTS, “UK APP fraud rules will keep faster payments safer long term, experts say,” May 2, 2023.
View in ArticleThe authors would like to thank Tushar Puranik and Shalvi Saruparia from Deloitte Consulting for their insights and the following Deloitte Center for Financial Services colleagues for their extensive contributions and support: Jim Eckenrode, Patricia Danielecki, Samia Hazuria, Karen Edelman, and Paul Kaiser.
Cover image by: Natalie Pfaff
