Can traditional card schemes keep up with demand for real-time payments

Innovations in finance and FinTech have completely transformed how people pay for goods and services. The world has gone from strictly using cash to using a myriad of digital payment options.

Demand for real-time payments

A popular form of digital, cashless payments is card payments. Payments made with either a credit or debit card are convenient and efficient. Card payments were not always the popular payment method that it is today.

Early card payments were slow, and people did not trust card payment systems. These days, card payments have become an integral part of everyday lives.

Technological advances have made card payments faster and more secure than they previously were.

These advancements have led to consumers expecting fast payments, money transfers, and card settlements. Whether it is purchasing items at a store, sending friends money, or receiving wages, consumers now demand real-time payments.

Legacy Card Payment Systems

With increasing innovation, legacy card payment systems are being placed under a growing amount of pressure. Digital behaviours of consumers have transformed drastically in recent years.

Consumers’ spending is shifting more toward online payments. They are using their cards to make e-commerce purchases and to pay for digital entertainment.

Platforms like Netflix and Spotify now allow users to pay for subscriptions using a variety of digital payments, ranging from card payments to PayPal. E-commerce and online video streaming are not the only platforms where users can use their traditional cards for payments.

iGaming platforms, like the safe offshore casinos on casinobeats, also allow players to participate in a variety of online games while paying for game sessions with a traditional debit or credit card.

On these iGaming platforms, payment speed is everything. Players expect fast deposits and even faster payment withdrawals. Offshore iGaming platforms have become popular online entertainment options, with many British punters preferring the variety of game options and near instant payout methods.

Payments in the iGaming Industry

Payments in the iGaming industry highlight an important shortcoming of traditional card payment schemes. Legacy schemes still have high payment fees and long delays.

These delays are caused by payment verifications being done by a traditional bank or intermediary vendor. While card payments can be processed immediately by banking systems, verification and authorisation can often take much longer, anywhere from a few hours to a couple of days.

The delay is frustrating to users, especially iGaming players who want to cash out their earnings as soon as possible.

Coupled with pressure from online businesses that need to clear payments instantly for improved cash flow, legacy payment schemes are on the back foot compared to newer forms of digital payments.

Modern digital payment systems like crypto payments are powered by blockchain networks. Payments on these networks are nearly instant and offer more security.

Online businesses that rely on digital payments for cash flow have turned to integrating these new payment systems for convenience and efficiency.

In addition to increased payment processing speed, transactions on the blockchain are immutable and uncorruptible. This increases the security of payments, resulting in more advanced fraud detection.

The inherent complexity of traditional card schemes like Visa and Mastercard makes it difficult for these legacy systems to keep up with blockchain technology.

Despite this, Visa and Mastercard remain two of the most popular card payment schemes worldwide.

It is estimated that around 90% of card payments are made using either Visa or Mastercard in every market around the world, except China.

This market dominance stems from years of aggressive advertising and building trust with consumers. It is more common to see a consumer paying with a credit or debit card as opposed to cash.

This level of market proliferation is the reason why, despite having slower processing times than crypto, card payments still outnumber crypto payments. Crypto is still new, and therefore still must gain consumers’ trust the way card payments have.

Card payments still face many challenges in today’s demanding payment market. In addition to slow processing times, cross-border transactions are also riddled with delays.

This is due to the amount of verification these transactions must go through. On average, cross-board payments and transactions can take up to 5 days to be processed and reflected.

In today’s market that demands real-time financial infrastructure and payment processing, card schemes have a lot of catching up to do.

Realising Real-Time Payments

Realising the need to adapt to consumers’ wanting real-time payments, traditional card schemes have started exploring ways to facilitate real-time financial transactions.

They have started playing around with the idea of integrating crypto and blockchain services into their existing networks.

A few companies are even experimenting with tokenisation and how that can help them achieve a sustainable real-time financial infrastructure. This shift comes following mounting regulatory pressure from governments across the world.

In the UK, for example, Faster Payments has become an instrumental service that allows the near instant and continuous availability of funds.

Regulators in the UK have pointed out the success of this service and have encouraged other traditional card schemes to follow this example. A call has been made for card schemes to streamline their services and user experiences while increasing transparency about payment speeds.

The EU has been implementing similar innovations and programs. The PSD2 has made it possible for account-to-account payments and real-time data exchange, while it is anticipated that PSD3 will lead to more modernisation of financial services.

As card schemes like Visa and Mastercard try to catch up, more competition is arising in the form of bank-led real-time networks.

The rising adoption of more Open Banking solutions offers merchants and consumers faster and more cost-effective transaction options. Tech companies are also throwing their names in the hat, with companies like Apple, PayPal, and Google developing their own digital wallets and payment systems that offer real-time payments.

With competition mounting, traditional card schemes are implementing a strategy that is focused on innovation and diversification. Visa and Mastercard have acquired leaders in the real-time payment space in efforts to bolster their infrastructure and once again gain favour with consumers.