In our last two posts we covered why real-time payments (RTPs) emerged and how they’re continuing to evolve. This last installment looks at the most important factors that will shape the future of RTPs. In particular, with the meteoric rise of RTPs, some might wonder whether they’ll eventually rival cards as a global payments network. We think whether that happens depends on how two key questions play out:

1. Will big, card-heavy markets such as the US or the UK get their own consumer RTP? 
2. Will RTPs make the jump from domestic to global payment methods?

If the answer to both of these questions is yes, we can imagine a network of RTPs emerging that would rival the scale and reach of today’s card networks. Without these two pieces of the puzzle though, RTPs are likely to remain a mostly domestic (or at best regional) payment solution focused on specific markets. 

Will big, card-heavy markets such as the US or the UK ever get their own consumer RTP? 

Consumer RTPs are still not mainstream for retail payments in many of the largest economies, including the US, the UK, France, Germany, and Japan. This isn’t for lack of trying. Instant payment rails—the underlying infrastructure that makes RTPs possible—have existed in some of these markets for decades. There have also been efforts to create a consumer product on top of those rails: the UK’s Faster Payments Service debuted more than a decade ago, and the US launched FedNow last year. Consumers, however, have not adopted either for retail transactions at scale.

To understand why, it’s helpful to return to the “recipe” for a new payment method that we outlined in our first post. There we said that to gain popularity, any new payment method needs buy-in from banks, consumers, and businesses. In large economies where RTPs have not been successful so far, that buy-in is lacking from at least one of these constituencies, and often all three:

1. Banks: In countries where RTPs have succeeded, such as India and Brazil, there are only a few hundred banks. In the US, there are 3,985 commercial banks alone, which makes the challenge of coordinating between them to launch an RTP much harder. US banks also earn around 2% in interchange fees on credit card transactions, decreasing their motivation to invest in RTPs.
2. Consumers: RTP adoption has tended to lag in markets such as the US and the UK where credit cards are popular. This is because, as we saw in our second post, cards are some of the most full-featured payment methods—especially in the US where consumers redeemed almost $35 billion in card rewards in 2022. To spur adoption in these markets, RTPs will need to outperform cards on rewards, credit, or consumer protections.
3. Businesses: This is where RTPs have the best opportunity to gain a foothold in reluctant markets, by providing a lower-cost alternative to cards. Large US retailers, such as Walmart (which announced a pay-by-bank initiative in September), are leading the charge. But even if customers start paying by bank at Walmart, that’s unlikely to change their payment behavior everywhere else they transact.

Absent a coordinated effort among banks and businesses, card dominance in big markets is unlikely to change any time soon. While US banks came together to create Zelle, which allows for instant peer-to-peer (P2P) bank transfers, they have not yet made the jump to supporting retail use cases. For now, banks seem more inclined to invest in card-based initiatives for ecommerce, such as Paze, than to push consumer RTPs forward. 

In this context, some fintechs are taking matters into their own hands to create payment experiences that mimic RTPs for consumers and businesses. For example, Stripe launched Instant Bank Payments, built into Link, which allow customers to pay with their US bank account in just a few clicks. Payments are then confirmed instantly and are settled in two business days—just like card payments—and Stripe guarantees the risk of bank-initiated returns. Other companies have focused on enabling payments by drawing down stored balances, which can also be instant and low cost. If these solutions see meaningful adoption, it might create incentives for banks to invest in consumer RTPs.

Will more governments mandate RTP adoption?

In our first post we saw how in some markets, such as India or Brazil, governments solved the coordination problem by mandating RTP adoption. They were motivated by a desire to lower the cost of payments, increase financial inclusion, reduce cash circulation, and minimize reliance on foreign payment networks such as Visa and Mastercard.

Some of these motivations—such as reducing the cost of payments or the amount of cash in circulation—could appeal to governments in the US or the UK. But most of them, such as increased financial inclusion or reduced reliance on foreign card networks, are less relevant. In the UK, for example, 97% of adults already have access to a debit card, while the US has already achieved payments sovereignty given that the dominant card networks (Visa and Mastercard) are both headquartered in the US. 

Finally, there’s the matter of political philosophy. In Brazil, the central bank mandated everything from where the Pix button was placed in banking apps to the details of the menu that banks had to offer to their users. Central governments in the US or UK have historically been less inclined to intervene so directly.

Will RTPs make the jump from domestic to global payment methods?

Today, RTPs are primarily a domestic payment method: Brazilians use Pix in Brazil and Poles use BLIK in Poland, and when they travel abroad, they have to default to cash or cards. Similarly, tourists who visit Brazil or Poland today typically can’t use the local RTP since it requires a local bank account. 

That’s a big limitation, especially compared to cards, which work virtually anywhere in the world. Could RTPs ever match that coverage? There are three possible paths toward creating a global RTP network.

Path 1: Domestic RTPs expand internationally 

The first path to RTPs becoming global is for existing domestic solutions to launch in more markets. For example, we’re seeing this with Wero, which started in Germany and France and is launching as a single real-time payment method covering France, Germany, Belgium, and the Netherlands. The same is happening with BLIK, which is expanding beyond Poland into neighboring countries such as Slovakia and Romania.

This path works best when a domestic RTP expands its reach into markets that don’t yet have their own RTP; but it’s harder for it to work where an imported RTP has to compete against a domestic one. Existing real-time payment methods have significant customer loyalty and deep business footprints, which make it hard for an RTP without local roots to displace them. Local banks and governments also have a stake in homegrown payment methods and won’t give up their markets easily.

As a result, while this path might create subregional clusters, it’s unlikely to drive full regional or global coverage.

Path 2: Bilateral agreements between RTPs

Another way for RTPs to go global is via bilateral agreements that allow them to work across borders. India’s UPI has done this successfully and is now available in countries such as Singapore, Sri Lanka, Nepal, and Malaysia, among others. Here, the idea is not that local consumers will adopt UPI, but rather that Indians traveling abroad will be able to use UPI in these markets.

Bilateral agreements work well across highly trafficked corridors where both countries stand to gain from the agreement. They’re also advantageous for RTPs such as UPI, which already has a huge user base that other countries would like access to. But they work less well when the up-front investment doesn’t seem worth it—for example, for small countries, or for pairs of countries that have less economic exchange (e.g., Nigeria–Sweden or Brazil–Thailand).

Bilateral agreements are also subject to scaling challenges. If each country had to set up bilateral agreements with every other country, that would result in nearly 20,000 bilateral agreements across 195 countries. That’s probably never going to happen.

Path 3: Becoming interoperable 

The last path for global expansion is interoperability. This is similar to bilateral agreements except instead of each country pair negotiating individually, countries join a “network of networks” and gain access to all the other participating RTPs at once. The advantage of this approach is that consumers continue to use their preferred payment methods when they travel, and businesses do not need to reintegrate any new payment methods to accept payments from tourists.  

These types of agreements are harder to negotiate up front, but they are simpler in the long run because each additional payment method only needs to make a single connection to join the system. 

What’s challenging about this interoperability approach is that it requires all participating payment methods agreeing to a common standard, and it requires teaching consumers how to “roam” abroad with their payment method. For example, if you are a TWINT user on holiday in Sweden, where Swish is the local RTP, you would need to understand that you can pay with TWINT where the Swish logo is shown. That behavior might be hard to build. 

Europe is experimenting with this path through the European Mobile Payment Systems Association (EMPSA)—which is already piloting commercial interoperability between TWINT (Switzerland), Bancomat (Italy), and Bluecode (Austria)—and just announced peer-to-peer interoperability between Bancomat (Italy), MB WAY (Portugal), and Bizum (Spain) last month. The Bank for International Settlements (BIS) is also exploring a similar concept via Project Nexus, which is looking to build a central platform to connect the real-time payment systems of India, the Philippines, Malaysia, Singapore, and Thailand.

The reach of RTPs will likely only continue to grow

To make RTPs a truly global payment method will require elements of all three paths: regional networks, bilateral agreements, and broad alliances. Different regions will likely lean into different models more heavily, but across the three paths, we believe that RTPs will be able to solve the global puzzle in the coming years. This is because the basic premise of RTPs offers considerable value to everyone involved.

While the growth of RTPs over the last 10 years has been striking, there’s reason to believe they’re only getting started. The last global payments revolution took place decades ago with credit cards. With the development of real-time payments networks in many markets around the world, we’re likely witnessing another one take place today, right before our eyes.