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Real-time payments are gaining momentum in the United States, but research released Monday indicates the U.S. market remains a laggard. The total value of so-called instant payments will reach $18 trillion in 2025, but the U.S. share of that market will total just 8%, or $1.4 trillion, according to a forecast by Juniper Research.
The Basingstoke, United Kingdom-based firm defines an “instant payment” as one in which the transaction is complete within 10 seconds.
The primary movers behind real-time payments in the U.S. market are The Clearing House Payments Co. LLC, based in New York City and owned by the nation’s biggest banks, and the Federal Reserve. TCH’s Real Time Payments network has been operational since 2017, while the Fed, which links virtually every financial institution in the country, projects its FedNow service will come online in 2023 or, at the latest, 2024.
That will put pressure on U.S. processors as they work to catch up with advances made overseas, particularly in Europe, Juniper projects. “With the proposed FedNow service from the … Federal Reserve not coming into service until 2023/24, the U.S. is rapidly falling behind in instant payments. Payments vendors must concentrate on creating innovative digital payments products to bridge this gap or be faced with an outdated system,” says Nick Maynard, a Juniper analyst and the report’s author, in a statement.
TCH in particular has made progress in recent months, announcing in September for example that it now connects to core processors that could potentially bring online some 70% of all U.S. deposit accounts. While TCH is making gains, Juniper characterizes the company as providing “patchy network coverage” so far. Institutions in the western European countries, by contrast, will control 38% of all real-time volume by 2025, the company projects.
Overall, real-time payments volume will grow from a current base of some $3 trillion globally, according to Juniper. Business-to-business payments will dominate real-time activity, accounting for fully 89% of value within five years. This is not particularly surprising, given the higher average tickets in B2B transactions, but other considerations will also play a role.
“The research identifies that instant payments adoption can be particularly transformative in B2B payments, where value-added capabilities, including automation and additional remittance data enabled by ISO 20022, can be valuable in tackling complex accounts payable processes,” Juniper notes in a news release announcing its research. ISO 20022 is a new electronic messaging standard undergoing adoption by financial institutions globally.
