Real-time payments – it’s not always about the money

18 April 2017


Real time means ‘now’, like boom – you have it, just like receiving a WhatsApp message. And if we think of what ‘now’ means for e-commerce, the first things that come to mind are – trending goods, hot deals, live offers, low stock, buy now and Black Friday sales. E-commerce in itself is all about unique personal experiences and emotional purchase; it is a contextual and extremely dynamic environment. Did you ever come across an amazing deal you just couldn’t’ pass by, but you’re a bit short of money? I have. And what do you do? Ask friends, parents or your partner to buy on your behalf – not so convenient, right? 

…But then sometimes fast just isn’t fast enough

In fact according to the Federal Reserve, 47% of Americans cannot come up with $400 to cover an emergency expense and are forced to turn to their peers for a hand out. When time is limited, try turning to your bank or loan provider: think of how long it takes to apply for a loan, get approval (that experience deserves a separate blog post, don’t even get me started), and then finally receive money in your account, sometime later. I am not even talking about waiting for a piece of plastic to be delivered to your door if we are talking credit cards. When it arrives, it is already too late. The deal is gone! In the era of Internet and e-commerce when everything changes in a matter of seconds, speed of payments and availability of funds matter the most. 

The majority of purchases involve impulse

A couple of years ago I worked with a bank in a developing market on defining the user experience for their online platform. The CEO of the bank told me, that their business relies on following their customer’s needs and surprisingly enough according to the bank’s philosophy, their clients didn’t need money; they needed goods and services that come because of spending it. So, their business was shaped around serving the customers at retail stores where the desire is at its peak.

Now if we apply the same concept to the online world, where we shop on the go and our behavior is influenced by our social environment, life events, experiences and context, the demand for instant access to money – whether it is a p2p transfer or a loan from a bank – becomes an inevitable part of the overall experience. Payments in US today just cannot keep up with the pace of life.

If we turn to the most widely used example (nope, not Uber)- WeChat or Alipay (ta da!), the whole concept of money has been built on the instantaneous access and frictionless movement of funds. It gave a major boost to digital payments, removing cash from the picture. Cash simply becomes slow and inconvenient, it just doesn’t work in the world of social and online.

Solutions must embrace people and behaviours not systems and capabilities  

So, banks and fintechs in the US should approach real-time payments initiative as an opportunity to offer robust and instant access to money. Whether it is striking a partnership with an online retailer to offer instant credit at the point of sale, or simply enabling your customers to transact with each other instantly, the effect will be tremendous. It is all about defining the right use cases to benefit the customer.

Kate Nelson