03 Sep' 15

Real Time Financing – A Game Changer

realtime financing

According to a research report by consulting major PricewaterhouseCoopers (PWC), a business model dependent on and favoring digital ecosystems, sharing economy will rake up revenues up to 335 billion dollars by 2025. Well, going by the behavior of today’s consumers, especially the millennial generation (people in 18-34 years age-group) that are increasingly embracing peer-to-peer (P2P) services such as Uber and Airbnb, we can certainly say that a paradigm shift has occurred in the financial sector – Bye bye brand monopoly, sharing economy is here to stay. With predictions of sharing economy and P2P services soaring high in the coming years, venture capitalists are pouring investments into innovative fintech solutions to facilitate what can be termed as ‘real time financing’.

Real Time Finance Explained

Delivering real time stock quotes is the most crucial part of online trading system, as these feeds enable traders to channelize their investing decision. The concept of real time financing builds on the online trading model, sans even the slightest time discrepancy. In the global e-commerce landscape, where physical goods reach your doorstep in less than 24 hours time, consumers’ craving for real-time payments can easily be justified. A host of digital wallet solutions such as Venmo, Facebook Pay, Apple Pay/Wallet, Android Pay and Snapcash are competing with each other to facilitate real time financing by delivering information at a near instantaneous speed. Given the growing popularity of these new age payment solutions — 18 countries have already implemented real-time payments, and 30 more are following suit —it will not be an exaggeration to say that ‘real time’ is the future of finance.

Benefits of This New Branch of Fintech

Speed: Real time financing practically amounts to debiting one bank account and crediting another through a few clicks on your smartphone. Now this can enable the payment process to take place at a lightning speed, literally, and thereby dramatically enhancing the efficiency of the entire payment process. In a shrinking economy, speed matters, and therefore, no-lag transaction can help organizations – from banks to retailers – to stay ahead of the curve.

Safety: With real-time reporting, a complete, round-the-clock picture of your transactions will always be at your fingertips. This could deter money laundering and other fraudulent attempts. With real time accounting, companies will have more liquid cash at their disposal.

Business-friendly: With e-commerce growing big day-by-day, time to market has becoming crucial for online success. For instance, currently app-developers have to wait for at least a couple of months to receive a payment from the Apple app store. Now this time-lag seriously affects the small-time app developers, for whom it is important to roll on whatever little capital they have at their disposal. Instead of having their money stashed in any intermediary bank account, real time finance can put instant cash in their hands.

Worker-friendly: With the rise of the sharing economy, a large chunk of global work force will choose to work as freelancers. In one of its recent reports, software company Intuit predicted that by 2020, freelancers will make up as much as 40 percent of the US labor force. Real-time payment systems will allow freelancers to receive payments directly in their bank accounts with tax reporting formalities taken care of automatically.

Economic Transformation: This sophisticated payment system is likely to alleviate the status of emerging economies from a cash-based to a digitized system. It will also enable the establishment of centralized clearing and settlement functions, subsequently helping to diminish corruption in these countries.

Also read: Responsive Checkout – How does it add to your e-commerce experience?

How to Achieve

Economies contemplating to go real time, first need to revamp their existing infrastructure, and it is no rocket science to guess that it involves costly processes and massive upfront investments. To make this a reality, the national payment infrastructure as well as the country’s core banking systems will have to work in tandem.

Available Technologies to Overcome Hurdles

Financial-sector stakeholders find an answer in Block chain technology as far as overcoming the real time challenges are concerned. This technology has stretched the frontiers in the online payment space, through the distributed ledger system. It allows organizations and even an entire economy to scale up their processes and protocols embedded in the existing infrastructure. In addition, it allows for the creation of ‘smart contracts’ to make trade finance available to small businesses, who otherwise find difficult to obtain credit approval.

Real time finance will bring in a game-changing impact, only when it is integrated with the existing ecosystem with the right incentives for organizations who adopt it. Smart policies are to be worked out through public-private collaboration to expand its mass appeal.

Sougat Hajra

Global Delivery Manager

Sougat is the Global Delivery Manager with Code{UR}Idea. He is an expert with e-Commerce- development, deployment and design.

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