As Real-Time Payments Gains Strength, The U.S. Lags Behind

Oct 19, 2020

By 2025, it is predicted that instant payments will make up 17% ($18 trillion worth) of B2B and consumer digital money transfers. According to Juniper Research, there is growing interest in instant payments. Instant payments are transactions that are completed in less than ten seconds and in real time. A vast difference from typically slower bank transfers. 

As it stands, the current value of instant payments is at $3 trillion. This means that the market could expand by well over 500% in the next five years. Western Europe is leading the way in the innovation surrounding the instant payments field. By the year 2025, it is projected that this region will hold 38% of the transactions. 

U.S. Lags Behind

Notably, the same research discovered that the United States is dragging its feet when it comes to adopting instant payments. According to the data found by Juniper research, the information reveals that the American market will only possess 8% of the global market of instant payment transactions by the year 2025. The sluggish progress is largely attributed to the “fragmented nature” of the current U.S. banking system.

According to the Pew Research Center in 2018, only 56 percent of Americans made a mobile payment. This is compared to the 70 percent who used a credit card and 78 percent who chose to use cash.

The biggest drivers to the hold-up could be consumer demand and the population’s fragmented view of what is considered “friction” when it comes to payment methods in the US. The research also found Americans largely skeptical about the security of making payments on mobile devices. Writing checks, although diminishing even in the US, is still not considered a “pain point”. 

John Heltman, reporter-at-large with American Banker, had this to say:

“What the US has is an automated clearing house settlement process, which is designed for cheques. These systems run on what’s called a batch process, where they literally take the cheques and run them like a load of laundry a couple of times a day. The advantage is it’s cheap for the bank. But it’s also slow: it takes a cheque three or four days to clear.”

The largest proponents of real-time payment in the U.S. is New York City-based The Clearing House Payments Co. LLC. It launched its real-time payments network back in 2017. The Federal Reserve also has something in the works. It hopes to launch its FedNow service, its answer to real-time payment service, in the year 2023 or 2024. 

However, since this is still a few years away, it may place the U.S. further behind its European counterparts. In the meantime, it is imperative that payment vendors come up with and create effective digital payment products to “bridge this gap” or run into the plight of an “outdated system.” 

Current Banking System Affects The Most Vulnerable

There are many low-income Americans that are affected by the current, yet antiquated system of waiting for three days to have access to a deposited check. An “expedited solution” is needed, not only to keep up with the rest of the world but to help our own citizens that need it most. 

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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