Wake up, America! Fintech is getting away…

Welcome back to Fintech for CFOs. This week, we’re talking about real-time payments.?

America is the world’s leading economy, but its financial infrastructure is dated. Many developing nations now have a much faster banking system than the US.?

Thankfully, the Federal Reserve is finally doing something about it.?

Read on to learn more…?

What you need to know right now:?

America finally gets real-time payments (RTPs) ???

The US is home to some of the world’s most valuable fintech companies. It’s a global hub of tech innovation with the best talent and the deepest capital markets.?

But the country’s core financial infrastructure was built in the 1970s - and hasn’t been updated much since.?

Private companies can do amazing things in fintech, but they are still reliant on systems controlled by central banks like the US Federal Reserve, also known as The Fed.?

And The Fed, sadly, has not shown much desire to innovate.?

That’s finally about to change, according to the Financial Times.?

The Fed is building a real-time payments (RTP) system called FedNow that will let Americans move money electronically in seconds.?

The FT describes this innovation as “the biggest advance in decades for the antiquated US money transfer network.”?

But the paper says that financial services industry figures are already calling the service “FedYesterday”, given that countries like the UK, Brazil, and India have all had RTP networks for years.?

It’s worth noting that around 30% of payments in the US are still made by cash or paper cheque. Some 6 million people (around 5% of the population) don’t even have a bank account.?

What else should I know about RTPs? ???

Real-time payments have been around for a long time, but the RTP trend is taking off in 2023. Here’s a quick RTP explainer:?

?? RTPs are payments between bank accounts that are initiated, cleared, and settled within seconds, even on weekends and holidays.

Japan’s Zengin was the first RTP system, invented all the way back in 1978.?

?? Over 70 countries now support RTPs, handling around $200bn in transactions during 2022.?

?? Global RTP volumes grew by 63% last year.?

Much of the growth is being driven by India, an early adopter of large-scale RTPs.?

?? “Instant payment” apps like Venmo are not RTPs because they don’t have an instant connection to the wider banking system.?

Kenya: pioneering fintech since 2007 ?

While the US is trying to upgrade its aging financial infrastructure, developing nations are forging ahead.?

As we mentioned two weeks ago, countries like Nigeria and Kenya are building mobile-first financial technology that’s as advanced as anything in the world.?

But did you know that Africa has been a fintech innovator for over 15 years??

Kenyans have been making mobile payments since 2007 using M-PESA, a mobile payments network that bypasses the traditional banking system. It’s now Africa’s largest fintech platform.?

So it’s no surprise that the fintech market in Africa is set to reach $150 billion by 2025, according to a report by McKinsey.?

This is probably a conservative estimate, as smartphone adoption continues to skyrocket among a young and digital-savvy population.?

Where growth leads, investors and employers soon follow. Smart companies are already looking for ways to hire emerging African fintech talent via contracting, EoR, and payroll.??

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If that sounds like you, Papaya Global can help.?

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And here’s what you need to know about what makes cross-border payments in Africa a unique use case.?

Who to follow in fintech:?

Every issue, we recommend a fintech influencer to follow on LinkedIn. This time, it’s Simon Taylor.?

With 40,000 followers on LinkedIn, Simon is one of the world’s leading fintech voices. Follow him for bite-size insights into payments, compliance, and much more.?

?Follow Simon here ??

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See you next time for more fintech news and insights,?

The Papaya Global Team?