Technology Banking
finance | 2 minute read

A real-time perspective on real-time payments

As your business grows internationally, sending payments securely, efficiently, and cost-effectively becomes more challenging. While real-time payments could enable near-instantaneous transfer of funds, business concerns have slowed adoption.

Judd Holroyde, head of Global Product Management and Delivery at Wells Fargo, shared his perspective on the influences behind real-time payment adoption, possible short-term benefits, and future trends.

What’s driving the adoption of more immediate payment mechanisms?

Most real-time payment systems — those that send funds and generate confirmation within seconds — originate around a value proposition for the mass-market consumer. Consumer pressure for greater transparency, certainty, and immediacy propels adoption.

A recent survey revealed only a third of corporates found real-time payment initiatives to support their business significantly.1 The primary motivator of corporate decision making was fraud management. Efficiency came in a close second, followed by cost, visibility, then working capital.

Primary motives for businesses to adopt real-time payments are fraud management, efficiency, cost, visibility, and working capital

In our more mobile world, real-time experiences are the norm, and corporates may need to deliver an enhanced value proposition. More than 40 new real-time payment initiatives are in some phase of implementation around the world today.

Why not in the U.S.?

The scale and complexity of the U.S. make implementation fundamentally different. The U.S. has far more financial institutions than markets like Singapore, the U.K., and Australia, where real-time payment schemes are in play. The sheer number of U.S. financial institutions makes attaining consensus around design, approach, and time lines inherently difficult.

The role that regulators play is another differentiating factor. Historically, U.S. regulators haven’t driven new models, instead focusing on oversight, procedure, and governance. Any innovations came from banks and other groups trying to get regulator buy-in.

Elsewhere the regulatory environment seems more oriented toward innovation. For example, U.K. regulatory agencies mandated the adoption of a new, real-time payments infrastructure. U.S. regulators do not have that authority.

The concept of “float” is still an integral part of the U.S. money-movement system, too. Float largely went away when we moved to electronic settlement through Check 21. However, many corporates still consider “mail float” key to their check issuance strategy.

That’s one reason why checks have remained popular in the U.S. The faster you pay, the faster you lose the use of those funds, and that’s why corporates might not value real-time payments as much as consumers do.

What are companies looking for in payments innovation?

Most corporates are much more concerned with transparency and certainty than speed, which is why initiatives like SWIFT’s Global Payment Innovation (GPI) are interesting.

If you’re a corporate sending a wire to another corporate, for example, GPI would enable your bank to confirm the funds were deposited to the beneficiary’s account with another bank. For many companies, that transparency is as valuable as real-time payment and could improve budgeting and financial control.

In addition, if you’re collecting payments, an instantaneous payment mechanism not only enhances the experience for your customer but also benefits accounting and efficiency.

What can we expect in the future?

Progressive markets will continue to push innovation toward real-time payments. The development of faster, more efficient, more transparent payments will be iterative. No one thing will happen in all markets, consistently and at the same time. We’re at the beginning of next-generation thinking about real-time payments, especially at the global level.

Disclosures

1. Strategic Treasurer, LLC, “2016 Global Payments Survey.”

Deposits held in non-U.S. branches are not FDIC insured.

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Disclosures

Securities Products:

Not Insured by FDIC or any Federal Government Agency

May Lose Value

Not a Deposit of or Guaranteed by a Bank or Any Bank Affiliate

© 2019 Wells Fargo Bank, N.A. All rights reserved. Deposit products offered by Wells Fargo Bank, N.A. Member FDIC. Deposits held in non-U.S. branches are not FDIC insured.

Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, and Wells Fargo Bank, N.A. Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC are distinct entities from affiliated banks and thrifts.

© 2019 Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Managed Account Services and Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company. Neither Wells Fargo Funds Distributor nor Wells Fargo Funds Management holds fund shareholder accounts or assets. This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.

© 2019 Wells Fargo Capital Finance. All rights reserved. Products and services require credit approval. Wells Fargo Capital Finance is the trade name for certain asset-based lending services, senior secured lending services, accounts receivable and purchase order finance services, and channel finance services of Wells Fargo & Company and its subsidiaries.

Wells Fargo & Company conducts business outside the U.S. through various companies, including duly authorized and regulated subsidiaries and affiliates in Asia, Canada, and Latin America. In Europe, banking services are provided through Wells Fargo Bank International (WFBI), directly regulated by the Central Bank of Ireland, and Wells Fargo Bank, N.A. London Branch, authorized by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. All products and services may not be available in all countries. Each situation needs to be evaluated individually and is subject to local regulatory requirements.

We provide links to external websites for convenience. Wells Fargo does not endorse and is not responsible for their content, links, privacy or securities policies.

Important notice regarding use of cookies: By continuing to use this site, you agree to our use of cookies as described in our Digital Privacy and Cookies Policy.

The opinions expressed in this document are general in nature and not intended to provide specific advice or recommendations for any individual or association. Contact your banker, attorney, accountant or tax advisor with regard to your individual situation. The opinions of the author do not necessarily reflect those of Wells Fargo Capital Finance or any other Wells Fargo entity.

The information in this report is for educational purposes only and should not be used or construed as financial advice or a recommendation to participate any strategy mentioned herein. Wells Fargo does not guarantee that the information supplied is complete, undertake to advise you of any change in its opinion, or make any guarantees of future results obtained from its use. The concepts discussed in the paper require the assistance of qualified legal counsel and tax advisors, and investors should consult their own attorneys and tax advisors with respect to their own situations.

  1. Silicon Valley Top 150 2017 Silicon Valley Top 150 Public Technology Companies Rankings by Annual Revenue

Disclosures

Securities Products:

Not Insured by FDIC or any Federal Government Agency

May Lose Value

Not a Deposit of or Guaranteed by a Bank or Any Bank Affiliate

© 2019 Wells Fargo Bank, N.A. All rights reserved. Deposit products offered by Wells Fargo Bank, N.A. Member FDIC. Deposits held in non-U.S. branches are not FDIC insured.

Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, and Wells Fargo Bank, N.A. Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC are distinct entities from affiliated banks and thrifts.

© 2019 Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Managed Account Services and Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company. Neither Wells Fargo Funds Distributor nor Wells Fargo Funds Management holds fund shareholder accounts or assets. This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.

© 2019 Wells Fargo Capital Finance. All rights reserved. Products and services require credit approval. Wells Fargo Capital Finance is the trade name for certain asset-based lending services, senior secured lending services, accounts receivable and purchase order finance services, and channel finance services of Wells Fargo & Company and its subsidiaries.

Wells Fargo & Company conducts business outside the U.S. through various companies, including duly authorized and regulated subsidiaries and affiliates in Asia, Canada, and Latin America. In Europe, banking services are provided through Wells Fargo Bank International (WFBI), directly regulated by the Central Bank of Ireland, and Wells Fargo Bank, N.A. London Branch, authorized by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. All products and services may not be available in all countries. Each situation needs to be evaluated individually and is subject to local regulatory requirements.

We provide links to external websites for convenience. Wells Fargo does not endorse and is not responsible for their content, links, privacy or securities policies.

Important notice regarding use of cookies: By continuing to use this site, you agree to our use of cookies as described in our Digital Privacy and Cookies Policy.

The opinions expressed in this document are general in nature and not intended to provide specific advice or recommendations for any individual or association. Contact your banker, attorney, accountant or tax advisor with regard to your individual situation. The opinions of the author do not necessarily reflect those of Wells Fargo Capital Finance or any other Wells Fargo entity.

The information in this report is for educational purposes only and should not be used or construed as financial advice or a recommendation to participate any strategy mentioned herein. Wells Fargo does not guarantee that the information supplied is complete, undertake to advise you of any change in its opinion, or make any guarantees of future results obtained from its use. The concepts discussed in the paper require the assistance of qualified legal counsel and tax advisors, and investors should consult their own attorneys and tax advisors with respect to their own situations.

  1. 2017 Silicon Valley Top 150 Public Technology Companies Rankings by Annual Revenue.