Now That Real-Time Is on the Horizon, Fee-Weary Merchants Look for Card Displacement

Financial institutions have been pushing real-time payments because they are supposed to be not only faster but also more cost-efficient. But now results of a global survey released Monday indicate merchants not only expect faster payments to be less expensive to accept, but also to displace the payment cards banks rely on for steady revenue.

Indeed, some 77% of surveyed merchant executives across 19 countries agree with the proposition that “immediate payments will replace the use of payment cards over time,” though “over time” is left indefinite. Agreement, at 100%, was strongest in the Netherlands and weakest, at 60%, in Thailand. Agreement in the United States equaled the overall average.

“While merchants expect to enjoy benefits from real-time payments in the near term, the longer-term impact is expected to be transformative for the retail payments landscape,” says the survey report, produced by the London-based research firm Ovum Ltd. and sponsored by ACI Worldwide Inc., a Naples, Fla.-based payments-technology provider. The canvass drew responses from 604 merchant respondents representing companies with anywhere from $10 billion to $200 billion in assets.

Not only is “over time” an indefinite period, it’s also unclear whether the introduction of real-time payments will necessarily shoulder aside cards in all cases. The card networks have already introduced real-time or near-real-time capability on cards with services such as Visa Direct and Mastercard Send. Still, while alternative rails for faster payments may in some cases be owned by banks, it remains unknown whether these transactions will ultimately earn the same income that issuing banks receive in interchange fees.

Merchants are clearly looking to real-time payments to generate efficiencies that will result in cost savings. In the survey, some 78% agreed with the proposition that “immediate payments will save my organization money.” Indeed, “[t]he potential for merchants to reduce card-acceptance costs, and particularly chargebacks in e-commerce, makes [real-time payments] a potentially attractive proposition,” says the report.

Attitudes about faster payments have changed significantly in a short time. The same survey a year ago found just 57% of merchant executives agreeing with the cost-saving proposition. Some 63% now agree that “immediate” payments will cut payment-acceptance costs specifically, compared to 53% in 2017.

“The rollout of new real-time payments infrastructure in 2017, notably in the U.S., Australia, and the SEPA [Single Euro Payments Area] zone, has driven a marked change in attitudes among both merchants and consumers,” said Kieran Hines, head of industries at Ovum, in a statement. “Where real-time was perhaps seen as a financial-plumbing issue, it is now more widely viewed as the key to delivering a series of operational benefits.”