Fundamental competition and market practice impacts of real-time payments

Abstract

Real-time processing has long been employed in a variety of industries. In the retail payment industry, however, it has only just started. National-level implementation has begun in several countries and seems to be catching on, one country at a time. Real-time payments are mostly seen as an exercise in improved delivery speed. This paper analyses the more fundamental changes that the financial market will face due to immediate payments as well as the profound effects on economic incentives. Real-time payments will particularly affect competition between payment instruments and service providers. However, much wider impacts can be expected with respect to business and market practices in currency, money market, and securities trading and settlement. Real-time payments will change the roles and business opportunities of many intermediaries and stakeholders in the payment and banking industry when infrastructures will become more ‘flat’ and based on direct end-to-end connections.