The Global Shift to Real-Time Payments (RTP) Brings New Value to Small Business

By: Gail Ball & Peter Davey

(small.news) — Real time payments (RTP) are today’s reality and opportunity for improving the health of consumers and small businesses everywhere.

As a direct result of how commerce, finance, and personal behavior and expectations have changed to support the demands of faster, safer, everywhere and anywhere, it has driven technology and financial systems to also change.

The economy no longer sleeps—customers shop online at midnight, suppliers fulfill orders across time zones, and our employees expect flexibility in pay. Legacy payments, or traditional finance, used by both businesses and individuals are slow, fragmented, and built for a 9-to-5, traditional bank-only world with borders and created inequities and barriers to commerce in different regions in the world.

Instant Payments Becoming The Standard

Instant payments are rapidly becoming the global standard—and small businesses stand to benefit greatly. We are writing not simply as payments technologists, but also as silv=r community members, and we have first-hand experiences with buying from the silv=r small business community around the globe.

Gail’s Experience With Global Purchases

In January 2021, I attended a fashion show through Zoom for Conscious Wear by designer, Aidisho, in Ethiopia where an elegantly designed top made from a custom woven fabric caught my eye, and I was eager to purchase it.

Six months later, payment was finally settled in June 2021 after multiple attempts involving many intermediaries for cross border direct USD electronic payments, USD handwritten checks routed through correspondent banks as well as attempts to deliver local currency through global money transfer businesses were needed before the garment was delivered to me.

The importance of this purchase to this now-global merchant was amplified in September 2021 when I wore that top to a business lunch in Baltimore, Maryland, and a woman in the restaurant approached me and asked where I had purchased it.

When I told her Ethiopia, she smiled ear-to-ear, and shared that she recognized the colors and the shape of the garment as being from Ethiopia. It turns out, she had lived for nearly a decade before returning to the states and asked for the name of the designer.

It is an easy jump to imagine the impact to her business if I and others hadn’t had to wait months before having the garment in hand and wearing it where it could be seen and appreciated by others. How many more people would have seen it, asked about it, and made a purchase sooner from this small business and in doing so, increasing her revenue, her market reach, and her prospects for a richer future?

Peter’s Experience With Instant Payments

In April 2024, I got married in Dublin, Ireland. Organizing a wedding is never an easy task, but add in the element of doing it overseas, and the complications start to multiply.

One of the biggest complications was how to pay our wedding organizer, solemniser (officiant), photographer, and the multitude of other small businesses we were leveraging to make our day special.

As a payments professional, it was frustrating not having a simple way to move money from my bank overseas to another counterparty. Enter the fintech app Revolute. After loading money into the app, I was able to submit a payment directly to every vendor leveraging their IBAN number or other bank account information.

It gave me access to Faster Payments in the UK and SEPA Instant without the need for me to have a foreign bank account, while my vendors were able to see the payments immediately. And, in many cases, they had immediate availability of funds, and they felt confident in moving forward to make our day great.

I believe this shows the power of instant payments and the impact on small businesses when the features of instant payments are available to them and their customers.

The Current State of Instant Payments

Instant payments are known by different names across the world, but they still offer the same great benefits of speed and safety for the flow of funds. All of this supports growth and strength of small businesses worldwide.

The Example of Brazil (Pix)

Launched in 2020, Pix is now the dominant form of payment and reduced cash usage country-wide by 20% since it was created. It is widely and readily adopted and serves over 150 million users, including consumers and businesses.

Small businesses in particular use Pix for instant sales and working capital.

The Example of India (UPI)

UPI has allowed anyone with a smartphone to make transactions instantly. It has now scaled to billions of monthly transactions. It has given cost-effective access to micro-businesses, farmers, and gig workers who need to make mobile interactions.

Other Regions: UK (Faster Payments), Singapore, EU (SEPA Instant)

Other countries have also been working on modernizing their payment rails to include instant payments. Those that have enabled instant payments have seen a surge in economic participation, especially for small enterprises.

The United States Is Playing Catch Up, But The Gap Is Narrowing

Since 2023, the U.S. has had two instant payment rails offered to consumers and businesses. RTP, which was introduced in 2017, was engineered by The Clearinghouse, and FedNow, which was introduced in 2023, was engineered by the United States Federal Reserve.

Most banks’ core deposit systems are cumbersome, old technology that are more difficult to modify to support new payment rails. This has, in part, driven a wide variation in bank readiness for change as such changes are expensive, long-term projects that also influence other strategic initiatives.

In addition to the core banking systems, there is a lack of interoperability among financial institutions and the many payment rails and systems that need to be stitched together, which has hindered participation in the U.S. compared to other countries.

More recently, with increasing access for businesses and consumers, the U.S. has experienced sizable growth in transaction volume and dollar value of transactions flowing in real-time. Over 1,900 financial institutions also live and transact on one or both of the RTP payment schemes, with pressure growing and the increased support coming from a growing ecosystem of fintechs and payment processors.

Instant Payments & Small Business Success

Instant Payments aren’t just for big banks and businesses, either. They are a tool for raising up small business and small business success. We are in a 24/7/365 economy, and just like Brazil and India experienced greater economic activity, small businesses in the U.S. stand to benefit most when payments keep up with the pace of business.

The benefits to small business come from increased customer satisfaction following the simplicity and confidence in completing a purchase. Increased cash turnover also produces internally-generated greater working capital, which drives higher profitability and predictability for a small business owner.

---

Small business looks different around the world, but the need for support is universal. Find that support on silv=r™ today.