Three ingredients that made real-time payments inevitable
In 2016, India launched the Unified Payments Interface (UPI), a real-time payment system that now serves more than 350 million users. The country went from nearly 90% of transactions conducted in cash to less than 60% in just a few years. Similar transformations are playing out across the globe: more than 50% of people in Spain now use Bizum, 150 million Brazilians use Pix, and over 70% of Thais use PromptPay. Eight years after UPI's debut, real-time payments (RTPs) have moved from a niche experiment to a mainstream infrastructure that is reshaping how economies move money.
What made this possible? Payment methods are deeply embedded in a country's economic and social fabric, and historically, dominant methods of exchange rarely shift. But RTPs have succeeded where other innovations (like expanded buy now, pay later options or cryptocurrencies) remain on the margins. Three ingredients consistently appear when a new payment method takes hold:
- Infrastructure that provides access to funds and a way to move money
- Motivated consumers who want to change how they transact
- Buy-in from businesses that have to embrace accepting a new form of payment
These three forces had to converge—and understanding how they aligned helps explain both the rapid rise of RTPs and what it takes for any new payment method to achieve critical mass.
Illustration by Álvaro Bernis
The rails existed long before the user interface
Real-time payments consist of two layers: the interface (an app or portal) and the underlying payment rails that move money instantly. The infrastructure has been in place for decades. Japan's Zengin system launched in 1973, Mexico followed with SPEI in 2004, and the UK introduced FPS in 2008. Central banks built these systems primarily to reduce credit and liquidity risks inherent in traditional bank transfers, which can take days to settle.
These early rails worked well for bank-to-bank transfers, but they were never designed for consumer convenience. Using them required visits to a branch, interaction with a teller, and paperwork that made them impractical for everyday purchases. Online banking in the early 2000s removed some friction—users could initiate transfers from home—but the process still demanded careful entry of long routing and account numbers, and it was useless for point-of-sale transactions. Cards filled that gap, serving as an overlay that made bank rails usable on the go.
The real shift began in the early 2010s, when smartphones and mobile banking apps put the ability to trigger bank payments in everyone's pocket. But technology alone didn't drive adoption. For RTPs to take off, banks, consumers, and businesses each had to see a clear benefit.
Banks took the first step—for their own reasons
Mobile banking made real-time transfers technically possible, but banks had to make them practically useful. That meant allowing payments to aliases like phone numbers instead of routing numbers, and investing in marketing to teach users about the new capability. Both required real investment.
Banks' motivations varied by market. In some countries, they acted to counter the rise of digital wallets, which threatened to intermediate their relationship with customers. Elsewhere, they were pushed by government policy. In 2005, Sweden shifted the cost of handling cash onto commercial banks. The banks responded by pushing digital payments—first cards, but that still left millions of peer-to-peer transactions in cash. In 2012, Swedish banks jointly developed Swish, an app for instant P2P bank payments, creating the country's first real-time payment method.
Consumers and businesses found their own incentives
Once banks made RTPs accessible, consumers embraced them as digital substitutes for cash. Sending money to a phone number was simpler and safer than carrying bills, and the convenience was substantial enough that in some countries the payment method became a verb (e.g., "to TWINT" in Switzerland).
Small businesses were the first merchants to get on board. Bank transfers carry lower processing costs than cards, lower fraud risk (transactions are typically irreversible, with no chargebacks), and require no card terminals or cash registers. Larger businesses moved more slowly because they needed richer features for integration and reconciliation, but they eventually came around due to lower costs, reduced fraud exposure, and consumer demand.
Nigeria's NIBSS Instant Payment (NIP) system, launched in 2011, demonstrates how merchant benefits drive adoption. Before NIP, most Nigerian businesses relied on cash because they needed immediate access to funds—a delay of days could mean the difference between staying afloat and going under. NIP gave them instant settlement while eliminating the cost and risk of moving physical cash across long distances.
Governments became the catalyst where markets stalled
The three constituencies—banks, consumers, and businesses—don't always move in sync. Banks, for instance, earn significant revenue from card transactions and may resist cannibalizing that income. Where RTPs haven't emerged naturally, governments have often stepped in.
In Brazil, India, and Nigeria, the dominant real-time payment systems are all government-supported. Policymakers viewed them as tools to lower payment costs, improve financial inclusion, reduce cash circulation, and decrease reliance on foreign payment networks like Visa and Mastercard. The Brazilian Central Bank built Pix from scratch and mandated that banks offer it, even dictating how it appears in mobile banking apps. Consumers adopted Pix because it's more convenient than cash for P2P payments and easier than the entrenched voucher-based Boleto for ecommerce. Businesses found it faster and cheaper than Boleto, and less fraud-prone than debit cards. Five years in, Pix is the largest payment method in Brazil.
What makes a payment method stick?
Looking back at how real-time payments (RTPs) evolved over decades, a clear pattern emerges. A new payment method only gains traction when three conditions are met simultaneously.
- Infrastructure: The underlying rails must be accessible. For RTPs, banks provided the critical piece by offering easy access to account balances and instant bank transfer networks.
- Consumers: There has to be a compelling reason for people to change their existing purchasing habits. RTPs won users over with frictionless peer-to-peer transfers.
- Businesses: Merchants need a tangible incentive to overhaul their current processes. In the case of RTPs, the promise of lower transaction costs was the draw.
The same framework explains the recent surge of buy now, pay later (BNPL) options, which have multiplied alongside RTPs over the past decade.
- Infrastructure: BNPL services run on existing debit card networks.
- Consumers: Shoppers get access to interest-free credit at the point of sale.
- Businesses: Merchants benefit from attracting customers who lack traditional credit cards, plus measurable lifts in conversion and revenue.
This lens also clarifies why RTP adoption has been rapid in some regions yet sluggish in others. As RTPs face growing competition from digital wallets, BNPL products, and newer payment types, their continued relevance will depend on expanding beyond basic bank-to-bank transfers. The next phase involves broadening the value proposition to cover use cases like in-person checkout, credit offerings, and recurring billing arrangements.
