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The multi-rail payments opportunity for small and medium financial institutions

By Patricia Reynolds and Andres Aguirre, Mastercard Data & Services

Consumers want to choose what to pay, when to pay and how to pay - securely and with certainty regardless of the payment method. This has opened a door for financial institutions in multi-rail payments, where digital payments are helping consumers shift away from cash and cheques. Global cashless payment volumes are set to increase by more than 80% from 2020 to 2025, from about 1 trillion transactions to almost 1.9 trillion, and to almost triple by 2030.1 Within the multi-rail payments ecosystem, RTP could reach $193.1 billion by 2030.2

The opportunity for small and medium-sized financial institutions to launch a multi-rail strategy that includes an offering of various payment solutions, such as cards and non-cards, and with an integrated customer experience in the same banking app is tremendous. But many struggle with the business case and a go-to-market strategy for new payment solutions.

These questions face organizations of all sizes, but small and medium financial institutions, including community banks and credit unions, have special challenges due to their limited resources, reliance on third parties for many services, and the required investment to compete and, in some cases, comply with regulations.

In reality, small and medium financial institutions can tap into multiple revenue sources and benefits. While real-time payment (RTP) transaction fees boost revenue for financial institutions, net interest income on certain associated lending products and cross-sell opportunities to both current and new customers, unlock further value. Perhaps even more valuable than new revenue streams are protecting existing revenue– offering RTP demonstrates to consumers and small businesses that their financial institution is responsive to their needs and may prevent them from switching to competitors. Nearly a quarter of US consumers admitted they would be willing to switch to banks that offered a RTP capability.

Retention of customers may be especially important for institutions that rely on loan offerings for revenue, as retaining existing customers’ deposits sits at the foundation of this business. It’s expected that 25% of online bill payments for loan servicing will be real-time in 2022.3 For lenders, this means improved collections, a reduction in operational costs associated with collecting and reconciling payments, and greater customer satisfaction for borrowers.

RTP eliminate the monthly guesswork of figuring out when the payment has been processed as accounts are immediately updated by the due date. On the receiving side of the payment, RTP provides the benefit of immediate funds availability, allowing immediate use of funds.

The advantages of RTP go beyond revenue-generating applications by offering an opportunity for increased internal efficiency. The infrastructure adaptation and modernization requirements of RTP can automate processes, increase speed of innovation, reduce fraud, enable faster collection and disbursement of payments, and enable greater productivity. Modular systems design can lead to greater scalability of solutions across the enterprise.

Payment disruption is happening in some of the most advanced countries, such as the United Kingdom and Singapore, where consumers opt for new ways to pay and non-banks seize the opportunity to provide payments services
Innovative ways to get everyday products to consumers

RTP adoption also has the potential to add indirect revenue streams for small and medium intuitions, such as:

  • Interest revenue from cross sales: New banking customers, including consumers and small businesses, can be offered interest-generating products, such as loans and credit cards.

  • Increased deposits: New customers acquired through the financial institution’s RTP offering are likely to make deposits there, opening up the opportunity for float interest rates when funds are invested.

  • Cost savings in fraud management: Due to increased security and customer authentication requirements in real-time payments, fraud rates are expected to decrease substantially, leading to lower costs incurred by the financial institution.

  • Cost savings in cash management: Large-scale real-time payment adoption is expected to significantly decrease the amount of cash in circulation, which could allow small and medium financial institutions to avoid the overhead costs of cash management.

Get more insight and direction on the multi-rail payments opportunity and a framework for developing a multi-rail payments strategy in our newest report.


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1“Payments 2025 & Beyond-Navigating the Payments Matrix”, PwC, 2021
2“Real-Time Payments Market Growth & Trends”, Grand view Research, 2022
3“Increasing collections & satisfaction: Real-time payments for loan servicing”, ACI Worldwide, 2018

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