Real-Time Payments: The Rise of Instant Debit Transactions

Faster payment methods are experiencing a surge in popularity as more consumers seek quicker ways to send and receive money. Real-time and faster payment networks a peer-to-peer payment platform are witnessing significant increases in transaction volumes and values. This growth is driven by consumer demand for speed and convenience in their financial transactions.

Let's explore how merchants are navigating card fees, the future of debit payments, and what both customers and merchants desire.

How Merchants Navigate Card Fees

Conducting business inevitably comes with costs, and for merchants, credit card fees are a persistent pain point. These fees, paid to credit card providers for completing transactions, range from 1% to 3% of the transaction amount. These fees can erode profit margins, prompting merchants to seek ways to mitigate these costs. One strategy is encouraging consumers to use debit cards, which have a current interchange fee cap of 21 cents and 0.05% of the transaction value.

Companies like AT&T and T-Mobile have adapted by requiring customers to set up autopay with a debit card or bank account to receive monthly discounts. Similarly, Everlane, a clothing retailer, offers an alternative payment method called "Catch." This method allows customers to pay via their bank account and earn store credit for future purchases, providing a niche but effective use case.

The Future of Debit Payments is Instant

The future of debit payments appears promising and increasingly instantaneous. Consumers are progressively using mobile wallets, such as Apple Pay and Google Pay, with many funding these wallets via debit cards. Contactless cards are also on the rise, with 64% of consumers possessing at least one contactless debit card. Shoppers frequently use these cards and mobile phones for everyday purchases, tapping to pay for convenience.

As more financial institutions adopt real-time payments, the movement of funds will become much faster than the current ACH system, which still requires a few days for payment settlement. While transferring money from P2P platforms to bank accounts can take several days, some banks now support instant fund transfers if they utilise real-time payments.

What Customers and Merchants Want

Ultimately, both customers and merchants share the goal of reducing costs. Customers are budget-conscious and seek to maximise savings while receiving value. Merchants aim to control costs and maintain profitable margins by minimising transaction fees. Regardless of whether you’re a consumer or merchant, cost reduction, savings, and discounts are top of mind and an objective.

The increasing popularity of faster payment methods reflects a significant shift in consumer behaviour towards speed and convenience. As real-time payment solutions become more widespread, both consumers and merchants will benefit from more efficient and cost-effective financial transactions.