Will Real-Time Payments Replace Cards? Majority of Merchants Worldwide Think So

Merchants around the world are warming up to real-time payment, with 77% expecting that it will eventually replace payment cards, according to a recent survey conducted by Ovum and ACI Worldwide. Survey respondents based in the Netherlands, Argentina and Belgium are particularly sanguine on the adoption of real-time payment.

A real-time payment system, as the name suggests, lets one use a smartphone, digital wallet or other channel to conduct interbank electronic transfers instantaneously so that the received funds would be immediately accessible. Although the first real-time payment systems appeared in the 1970s and 1980s, it wasn’t until the past decade that they truly took off globally.

Among the more than 600 merchants who took part in the survey, 78% said that they believe that real-time payment will both help them lower their costs and operate more efficiently. This is a notable change from 2017, when only 59% thought that real-time payment could deliver operational benefits.

More merchants are also expressing interest in accepting real-time payments, increasing from 57% in 2017 to 65% in 2018. This interest is comparatively higher in the hospitality industry. Meanwhile, the share of respondents who do not see a strong business case for investing in real-time payment has dropped from 35% in 2017 to 12%.

Payments Technology Investment Trends

Three out of five merchants in the Americas plan to increase their IT spending on payments-related projects in 2018. Worldwide, about 50% plan to spend more on payments-related projects this year. For 21%, this will be an increase of at least 5%. In contrast, only 6% plan to reduce their spending.

Source: 2018 Ovum Global Payments Insight Survey

As the chart above shows, however, 2017 saw a higher percentage of merchants who planned to increase their investment in payments technology. This year, a significant percentage of merchants will not be changing how much they are spending on payments technology.

For those who are planning on bigger investments, a key motivating factor is increasing operational efficiency, which in turn stems from the need to respond to rising costs. The share of merchants who report that their payment operations costs have risen over the past three years have gone up from 38% last year to 46%. This trend holds true across industries.

Merchants who are increasing their payments infrastructure budgets cite improving the integration between their payment system and other systems as a top priority. Other top factors driving this increased investment include enhanced payment acceptance capabilities, in-house processing capabilities, and a more consistent customer experience across store and digital channels.

Fraud, Data Breaches and Other Concerns

Along with the ease and speed of real-time payment comes security concerns, namely that there would be an increase in attempts of fraud.

But most merchants agree that fraud is less of a concern for them than abandoned transactions in digital commerce. Nearly half say that their organization would not invest in fraud solutions if they detracted from the customer experience, and 47% agreed that they would be willing to take on an increased risk of fraud in exchange for higher sales. Respondents were highly split on this last statement, however, with 17% strongly agreeing and 20% strongly disagreeing.

Data security is a more pressing concern, with 22% of the survey respondents having experienced a data breach in the previous year and 61% believing that they are at higher risk of such a breach compared to a year ago. Respondents from the hospitality sector and respondents who are based in Europe are the most likely to have experienced a data breach.

Check out the full report here.