What are real-time payments (commonly referred to as instant payments or immediate payments), what exactly do they look like, and what are some of the benefits they offer? Let’s dive in.
Table of contents
Real-time payments, or instant payments, are payments that clear and settle almost instantaneously using an underlying platform or network called payment rails. The key characteristics of real-time payments include immediate availability of funds, settlement finality, instant confirmation, and integrated workflows. Real-time payments offer valuable insights into spending patterns, enabling businesses to improve their financial management practices. With streamlined workflows and enhanced liquidity management, businesses can save costs and concentrate on vital operational aspects.
Additionally, real-time payments contribute to fostering robust relationships with vendors and clients by eliminating uncertainties and delays, thereby promoting trust and facilitating smoother collaboration and innovation. Built on the connection between payer and payee, real-time payment solutions can be used by individual consumers, merchants of any size, and financial institutions to carry out faster payments to customers or peers, transfer money, or settle bills.
Cash is the original real-time payment system — an instant, unambiguous exchange of hard currency. But in today’s digital world, customers and merchants rarely transact in person and almost never handle cash. So, real-time payment is the digital alternative to the immediacy of cash transactions, making payments available instantly across geographic time zones and borders. For businesses and individuals who need a fast, frictionless payment experience, real-time payments can be transformative.
Businesses and individuals are eager to adopt instant payments, as the growth statistics show. A study from Juniper Research has found that the number of real-time payment transactions will exceed 376 billion globally by 2027, increasing from 97 billion in 2022, a 289% growth — driven by the roll-out of instant cross-border payment schemes in multiple countries. The increased time and cost efficiencies, and improved cash flow management, are some of the key drivers of businesses adopting real-time electronic payments.
Some examples of real-time solutions include:
FedNow: FedNow is a service in the U.S. developed by the Federal Reserve as its instant payments solution. Banks will be able to build products on top of the FedNow platform. Meant to service financial institutions of every size in every community, FedNow aims to provide safe and efficient instant payment services in real time, accessible 24/7/365. While FedNow is really no different than The Clearing House’s RTP Network, maintaining both options improves economic security for the U.S.
RTPs® Network by The Clearing House: Introduced in 2017 by The Clearing House Payments Company LLC, the RTPs® Network was the first real-time payments platform available in the U.S. The RTPs® Network is available to all federally insured U.S. commercial banks, credit unions, and savings institutions handling use cases ranging from payroll to credit transfers, business-to-business (B2B) real-time transactions, and more.
P2P Payment Apps: Peer-2-peer (P2P) apps like Zelle, Venmo, and PayPal are now considered real-time digital payments due to their integration with The Clearing House’s RTPs® Network. By sending payments over the RTP networks, these apps are able to perform real-time settlements and complete back-office processing, ultimately improving efficiency and reducing costs.
Euronet’s REN: REN is a payments application built by global fintech provider Euronet. Founded on a microservices architecture that leverages the latest development languages and best practices, REN serves many markets from Fintech and traditional banking to hospitality and online marketplaces.
Australia’s New Payments Platform (NPP): In 2018, Australia introduced NPP. A new payment system infrastructure designed originally for retail payments, NPP now helps Australian citizens access real-time settlements with enhanced transaction messaging. In the second half of 2021, the Australian Government used the NPP to distribute more than $12 billion of payments for COVID-related support and disaster relief.
Real-time payments are as fast and efficient as it gets. And the value of this kind of reliable financial immediacy can’t be understated. Consider the following benefits:
Improved cash flow management: Cash flow is the life blood of a company. Businesses must be able to complete payroll, purchase supplies or services, meet short-term commitments, and pay bills on time. Instant payments make it easier to access the cash you need, when you need it.
Enhanced visibility into payments: Businesses need insight into where and how they’re spending money in order to best manage finances. Instant payments send and track payments easily with precision, giving you a complete picture of your finances in real time so you can make informed, data-driven decisions and forecasts.
Simplified business operations: Money movement workflows are often time-intensive and laden with costly third-party middlemen and unnecessary paperwork. With instant payments and improved liquidity management, businesses can save money and free up employees from doing manual operations and instead focus on more essential elements of the business.
Improved business relationships: Vendors and clients are often caught in limbo waiting for payments to clear, which can undermine trust and impede innovation. Real-time payments solve this issue, eliminating doubt and saving time.
Increased payments innovation: Disruptive innovation breeds new business models and new applications. Real-time payments will inevitably evolve the payment experience for customers, suppliers, banks, employees, and business partners, enabling faster payments and clearer collaboration.
The payment industry is experiencing a revolutionary shift, with traditional transaction timelines reduced from days to seconds. As a result, the demand for real-time payments has prompted these institutions to reassess their innovation priorities and shift their focus toward the underlying data infrastructure that powers these lightning-fast transactions. By leveraging MongoDB's developer data platform, financial institutions can unlock the benefits of offering instant payments with unparalleled speed and efficiency and ensure compliance with regulations while seamlessly integrating payment processes, settlement, and real-time execution.
MongoDB offers financial institutions a JSON-like data foundation to build their instant payment platforms upon. With MongoDB's powerful capabilities, financial institutions can personalize payments, leverage real-time analytics for data-driven decision-making, automate processes, and implement advanced fraud prevention measures. The document data model at the heart of MongoDB and our multi-cloud developer data platform, MongoDB Atlas, allows you to alter the structure, location, and storage of your data in response to changing information and requirements with Atlas Data Lake and Atlas Data Federation.
This leads to an enriched payments experience with data in any structure and format. For established enterprises interested in payments modernization, MongoDB enables new services and products rapidly using existing data via an Operational Data Layer which is an architectural pattern that centrally integrates and organizes siloed enterprise data, making it available to consuming applications.
The instant payment process, supported by MongoDB as the data foundation, involves seven steps (as shown in the figure below):
Once a payment instruction is sent to a clearing function, due to MongoDB’s JSON-like database, the financial institution doesn’t have to worry about translating data structures from the bank to the clearing function. Instead, MongoDB seamlessly integrates with instant payment infrastructures like FedNow, ensuring the secure transmission of payment instructions using a standardized JSON format.
As the beneficiary bank's trusted data repository, MongoDB plays a pivotal role in securely managing payment details amid high transaction volumes. This pivotal role is bolstered by Client-Side Field Level Encryption (CSFLE), a paramount feature ensuring the utmost security. CSFLE operates by encrypting application data before transmission to MongoDB. This guarantees that no MongoDB component accesses unencrypted data.
When it's time to make the funds instantly available, MongoDB ensures a seamless experience by capturing and enriching data with crucial information such as classification, invoice, accounting, and risk scoring data.
Throughout the journey, MongoDB as the central data repository facilitates the efficient and secure communication among the beneficiary bank, clearing function, and originator bank. Notifications, clearance confirmations, and updates flow seamlessly, enriching the payment data and enabling a smooth payment lifecycle.
With MongoDB, financial services are empowered with a reliable, scalable, secure, and efficient data foundation for instant payments.
The real-time payments landscape is quickly evolving with businesses and consumers expecting immediate payments. In order to keep pace with the change, companies need to enrich and update their foundational technology to support payments innovation. That’s where MongoDB comes in. Our flexible document data model and fully managed database can help you go to market faster and better serve your customers. To learn more, check out these resources:
Real-time payments are immediately available to the recipient within seconds of the sender initiating the transaction. It enables businesses and individuals to be paid faster.