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Guide to International Real-Time Payments

Real-time payments are already a major part of the economy, and when done within a single, domestic network, they can be practically instantaneous. See, a real-time payment is exactly what the name suggests. It’s a payment that processes in real-time. There are no waiting periods, your money doesn’t sit around in an escrow account for days, and there’s no worrying about whether or not the transaction will go through.

But how do real-time payments function on an international level?  Most banking systems do not work across borders in real-time.  This means that the consumers will have to find alternative solutions that are not restricted to borders and can transfer funds within their internal systems. This has led to the creation of multiple alternative payment services that allow for these types of transfers. 

What are Global Real-Time Payments?

On a global scale, real-time payments function almost exactly the same. They’re just very fast transactions that are initiated in one country and completed in another. For example, let’s say you purchase an item from a store in the UK. That store utilizes a real-time payment network. Rather than waiting for your financial institution to communicate back and forth with the one in the UK, the money is simply sent and received via a streamlined route.

Another common form of payment today that can be regarded as a Real Time Payment is that of eWallets.  With a store of consumer banking information, e-wallets have the ability to facilitate international transfers between consumers or between consumers and businesses in an instantaneous fashion. Using either credit cards, debit cards, or bank accounts, ewallets are able to request, send or hold customer funds securely regardless of their location.

One of the latest additions to the payment industry has been the use of cryptocurrency.  Using a peer-to-peer blockchain network, the crypto industry is able to offer consumers the ability to make international real time payments between one another. These payments are able to be verified globally within moments and are one of the most secure methods of exchanging funds.  

Due to the various differences between banking domestically and sending money between nations with drastically different financial systems, global real-time payments are slightly different than what you experience on a daily basis. However, we’ll go over those differences in the following sections.

How do Cross-Border Real-Time Payments Work?

When you make a real-time payment within a streamlined RTP network, it’s handled in a pretty simple manner. The funds just travel from one account to another within a matter of seconds.

However, when you try to do that between countries, it’s a little more complicated. First, the two banking entities probably aren’t on the same RTP network, and they certainly don’t operate exactly the same. Whether it’s currency conversions that have to be considered, financial laws that have to be taken into account, or just getting ahold of the other bank to determine why the funds are being requested, it takes a bit more time and effort to complete the transaction.

Luckily, there’s a fairly straightforward process in place to make these cross-border RTPs more streamlined and reliable.

There are two main entities that will handle the transaction. First, there’s the correspondent bank. This is the bank the person receiving the money is using. For example, if you’re purchasing a product online from another country, this is the seller’s bank. Then, there’s the respondent bank. This is the bank that is being asked for funds by the correspondent bank, and it’s typically the bank of the person buying something or otherwise making a payment.

When a cross-border RTP is initiated, these two banks communicate and process the transfer of funds in accordance with existing international guidelines. During this period, the respondent bank typically holds the funds necessary for the transaction without making them available to the correspondent bank immediately. Once the transaction is processed, the funds are sent, and the correspondent bank adds those funds to the appropriate account.

The increased back-and-forth communication lessens the main benefit of RTP by taking longer, but it also helps reduce some of the cons of the system by putting more hands-on human interaction into the process and identifying potentially fraudulent transfers.

Real-Time Payments with eWallets

eWallets are a secure way for consumers around the world to store money. Unlike a bank account, eWallets require both parties to have their primary financial institutions or payment methods linked to the ewallet provider. The services offered though from an eWallet provider are greater than a traditional bank.

eWallets act as a centralized portal to manage finances and hold currency. This includes the ability to store and make payments from multiple credit cards, debit cards and/or checking accounts. Customers can fund their ewallet or make a payment for a merchant’s request using these payment types. Consumers can also make transfers between themselves, referred to as Peer-To-Peer payments. 

eWallets are able to operate across borders without many issues since they are not regulated like banks.  Likewise, the ease of sending payments instantly between people next to each other or across the globe can settle in a matter of moments. This gives the eWallet model a huge leg up on traditional banking services.

Real-Time Payments with Cryptocurrency

The ability to accept cryptocurrency has emerged as one of the best new ways to settle funds across the world in Real Time.  Utilizing blockchain technology, cryptocurrency can safely and securely be transferred between user’s wallets.  These transfers take only moments and once completely, both parties are able to confirm the transfers without any additional risks.  

Another benefit to crypto is the fact that it is it’s own monetary value, not pegged to any one country or type of currency. This does create a unique marketplace that trades 24 hours a day with users on all continents, no one is excluded unless they do not have access to the internet or their wallet. Anyone can send or receive instant transfers from around the globe with relative ease using the cryptocurrency in today’s connected world.

Real-Time Payment Settlement Time International:

Traditionally, to send money internationally it required a bank to send the wire and another bank to receive the wire.  These could take anywhere from 24-36 hours depending on when the transfers were initiated and where they were going.  Today, there are actually real time payments designed for a world without borders.

Whether you are using an eWallet solution or a cryptocurrency to transfer money, individuals have the ability to send money across the world with real time settlements.  No more having to wait for banks to confirm payments, within cryptocurrency wallets and eWallets individual holders can nearly instantaneously confirm receipt of money with minimal fees.

The financial industry has become more and more interesting as technology has become more integral to handling transactions.  Increased security coupled with new ideas has allowed for consumers to utilize these services with more possibilities and fewer fees.  It is an interesting path that the financial world is heading down and to see what else they have in store for global finance users.