Manu Naik

June 5, 2023

Real-Time Payments: The Future of Cross-Border Money Transfers

Real-Time Payments

At Binamite, we’re fascinated by innovation in the payments industry. As a platform that facilitates global money transfers using blockchain, we’re constantly on the lookout for cheaper, faster, and more advanced systems. Recently, real-time payments have garnered a lot of attention within the payments ecosystem, but what are they? How do they work? And what problems can they solve which existing solutions can’t?

Blurred (Border)lines

The modern global economy would only be a fraction of its current size without international payments. From global investment opportunities to intercontinental trade, the advantages are obvious and endless, but facilitating these payments is far from simple.

Though cross-border payments represent only a sixth of international transactions, foreign exchange and transfer fee revenues amount to over $200 billion annually, growing 6% per year. Due to the expansive network of trusted parties needed across different jurisdictions, international payments have traditionally been the banking sector’s department, requiring complex technical and regulatory frameworks, and massive amounts of liquidity. 

Demand for cross-border payments is rising
Demand for cross-border payments is rapidly rising. Source: McKinsey

However, this no longer needs to be the case. With emerging technologies like blockchain, hordes of intermediaries can be eradicated, outsourcing liquidity to decentralized payment networks. Startups like Binamite are doing just this – creating fiat payment rails that are cheaper, faster, and require less resources to maintain – using blockchain.

According to a report from McKinsey, even the most established segments like B2B payments and remittances are seeing increased pressure amid growing investment demand and regulatory tightening.

The past few decades have changed the payments landscape drastically. Global economies have become increasingly interdependent, with cross-border payment volumes growing nearly twofold over the last decade. Today, international payments can take anywhere between two and five days, and as the world marches towards real-time payments, these systems are going to have to innovate.

Fintech solutions like Binamite are finding innovative ways to compete by outsourcing its payment infrastructure to decentralized networks. With Binamite, users can expect international transactions to settle in mere minutes, at fee rates traditional solutions can’t compete with.

What Are Real-Time Payments?

Real-time or instant payments are direct bank-to-bank transfers that make funds available to the payee practically in real-time. This is different from payments made using credit/debit cards, which feel like instant payments, but actually take up to 72 hours to clear and settle.

Digital wallets also give the impression of instant payments, but these require both the sender and the receiver to create accounts with the digital wallet service, and payments simply alter data within the platform’s internal database without actually transferring any funds between bank accounts.

Real-time payments (RTP) have zero float, meaning there’s no downtime between making a payment and funds becoming available in the receiver’s account, and these transfers can be made 24 hours a day, on all days of the week. A 2020 report shows that India, Binamite’s base of operations, has become a dominating force in the real-time payments industry, competing against the likes of China, South Korea, the UK, and the United States. 

RTPs are disrupting the global payments industry, and with a market size estimated at $10.6 billion, they’re creating growth opportunities that are expected to compound year on year into the foreseeable future. Besides making transfers faster, real-time payments are also far more consistent, facilitating seamless economic interactions for consumers, businesses, and governments.

Real-Time Payments on Binamite

An ACI worldwide survey also shows that nearly 80% of merchants expect RTPs to replace physical cash and card payments in the long-term. 

Binamite doesn’t offer real-time payments just yet, but it’s pretty close! Payments transfer funds directly between banks over blockchain networks, with just minutes of downtime between making and receiving payments. Additionally, since Binamite uses blockchain networks to facilitate its global payments, transactions are cheaper, settle faster, and can access jurisdictions that are otherwise too expensive for traditional networks.

Money has existed since before written history, and it’s evolved in many ways over the last few thousand years. From rocks to coins to paper to electrons, real-time payments might be what pushes humanity to rid itself of a thousand-year dependance on physical cash. Additionally, RTPs could boost revenues through increased consumer spending, engaging new segments, reducing fraud, and strengthening cash flows.

Keeping It Real(-Time)

Real-time payments will have a lasting impact on existing players within the global payments industry. From a sector dominated by banks and institutional operators, RTPs are disrupting the system, creating innovative solutions to process cross-border payments using fintech and emerging technologies like blockchain.

Though Binamite doesn’t offer real-time payments yet, the time will come when we’re able to implement such systems in an affordable manner, both for us and our users. With how rapidly technology is advancing, that time might come sooner than expected.

As these new-age platforms continue to gain market share, existing networks will be forced to innovate, providing solutions that are more efficient, user-friendly, and above all, can adapt to meet the ever-changing needs of consumers and businesses.