ACI Worldwide’s Santhosh Rao showcases trends in real-time payments

While the benefits of the region’s move towards a ‘cashless economy’ are somewhat obvious, why is the growing utilisation of real-time payments – essentially a subset of electronic payments – so important?

Real-time payments (RTP) are the pinnacle of electronic payments, allowing the full potential and promise of the paradigm to be unlocked. According to our Prime Time for Real-Time report, real-time payments in the Middle East region accounted for 12 per cent of electronic transactions in 2023 and are expected to grow to 22 per cent by 2028.

As the name suggests, real-time payments are payments that are initiated and settled in real-time. Money is transferred instantaneously between banks and banking systems, providing immediate funds availability and up-to-the-second account information for both the sender and receiver. This brings a host of benefits, such as the ability to instantly transfer funds to family and friends with a few taps and swipes, or conveniently pay for a product or service via a link or QR code.

Payroll is another area where real-time can be immensely impactful, allowing gig workers to be paid instantly for services rendered. For businesses, real-time payment improves cash flow and liquidity.

Apart from enabling instant settlements, real-time payments have proven to be safer than other systems such as cash, cards and checks. Because they have more metadata associated with each transaction, they can help effectively fight fraud and conduct analytics. They also offer robust traceability, with clear delineation of where funds came from, where they go and why.

Given the potential benefits, what are the implications for consumers and businesses of the region being the fastest-growing RTP market globally for a second consecutive year?

According to our report, the Middle East has been crowned the fastest-growing real-time payments market globally for the second consecutive year. The 2023-2028 CAGR for the region is 28.8 per cent, outpacing the global CAGR of 16.7 per cent, and transactions are expected to rise from 855 million to 3 billion by 2028.

Oman, Kuwait and Qatar all launched schemes in 2023, joining the rest of the Gulf Cooperation Council (GCC) members like Saudi Arabia, Bahrain and UAE.

As consumers’ preferences shift towards digital payments with rising expectations for immediacy and frictionless experience, payments go beyond a transaction and become a powerful touchpoint for businesses to differentiate themselves. For businesses, it’s time to rethink where real-time payments sit in the customer journey and the end-to-end payments landscape.

Financial institutions will have to work more closely with fintechs and digital wallet providers to power the rich overlay services that fuel frequent use by enabling differentiated customer experiences across numerous payment channels. We expect to see more merchants and consumers embracing real-time payments through apps, QR codes and mobile wallets.

Can you tell us about the work ACI Worldwide has done in supporting regional governments and enterprises in advancing their RTP maturity. What are some of the learnings from these efforts?

As the real-time payments partner of choice for countless organisations, we specialise in delivering software that enables banks, merchants and billers to bring new payment types to market at speed, adapt to shifting regulatory mandates, and rapidly launch new value-added services according to consumer demand.

Globally, ACI powers 26 domestic and pan-regional real-time schemes across six continents, including 10 central infrastructures, providing solutions to central banks, participant banks, fintechs and other payment service providers.

In the region, we work with several leading government and private-sector financial entities. This includes our close collaboration with the central bank of one of the GCC countries to successfully implement the nation’s real-time payments scheme.

This payment modernisation initiative enables the country’s banks to move forward with the digitalisation of bank branches, offering customers new, innovative financial services.

To protect customers against rising fraud attacks, this central bank also deployed ACI Fraud Management, our enterprise fraud management and prevention solution. Using advanced machine learning, behavioural biometrics capabilities, predictive analytics, and expertly defined rules, this solution helps the nation’s banks identify and mitigate financial crime.

Globally, India and Brazil are far ahead of the pack in terms of RTP maturity. What are some of the most impactful use cases already implemented in those markets that you believe will deliver the most value for businesses and consumers in the Middle East?

Real-time payments thrive in India and Brazil, where innovative use cases have found mass adoption by consumers or businesses. Mobile wallets and QR codes are fast entry points, connecting consumers to real-time payment rails domestically and internationally.

Our report has found a strong correlation between real-time payment growth and mobile wallet adoption. In India, 91 per cent of consumers used mobile wallets in 2023. In Brazil, the instant availability of funds and easy access via mobile have made PIX more popular than card payments. Brazil’s mobile-first consumers can now open bank accounts fully digitally, making PIX widely available for peer-to-peer, bill, retail and e-commerce payments.

Merchant adoption and uptake are crucial for real-time payments growth and ubiquity. Whether utility or tax bills, transport tickets or road tolls, subscription payments or the weekly grocery shop, consumers in successful markets are now paying in real time via QR codes, mobile apps or online accounts.

In India, cross-border linkages are a major opportunity for value growth. Cross-border payment has the potential to significantly reduce the costs associated with international money transfers, spurring trade, tourism and remittances, paving the way for more use cases. Countries like Singapore, France, UAE, Malaysia and Indonesia have already accepted India’s UPI, with more countries rolling it out.

It seems almost inevitable that new financial instruments raise issues with new types of fraud and crime. Are there nuances in securing real-time payments that regional governments and financial institutions should be aware of?

 To effectively address the growing impact of fraud and financial crime and harness the power of payment data, banks and financial institutions are challenged to unify immense volumes of diverse data across the payments ecosystem, in real-time, to facilitate precise, intelligent decision-making with optimal efficiency.

As the financial world moves into the era of artificial intelligence (AI), it is critical to be proactive, rather than prescriptive, in combatting scammers. Generative AI is changing the nature, speed and scale of attacks, and the industry is rising to the challenge with consumer rights, education programs and government interventions.

Failures in legacy infrastructure exacerbate the rise of fraud. Many merchants experience false positives due to outdated payment models, which drives the need to update AI models. However, this incurs costs for merchants and results in either customer friction or lost revenue.

Additionally, the growing variety of digital payment options complicates security management. Denying access to preferred payment methods reduces revenue directly.