With digitization taking over businesses of all scales and sizes, it would be safe to say that cash is becoming a thing of the past. More and more consumers are choosing digital routes to complete payments for purchases. As per the Reserve Bank of India, the volume of digital transactions in the country grew at an astonishing rate of 58.8% in 2018-19, in addition to the 50.4% growth in 2017-18.
The ease of online transactions and the immediacy of the process make digital payments a popular choice in recent times. However, from a merchant’s point of view, real-time digital transactions take longer to reflect in their bank accounts, sometimes taking up to 72 hours. Depending upon the time settlements take, liquidity may become a problem, especially for small and medium businesses that need constant cash flow to keep their operations running smoothly. This has given rise to the demand for real-time settlement options for merchants.
What is Real-Time Settlement?
Real-time settlement systems allow instant transfer to merchant accounts instead of waiting for it to reflect on a later date. As opposed to batch settlements, under which several transactions are grouped and cleared at once, real-time settlements or instant settlements offer the option to transfer funds individually for each transaction right after they are complete.
The lag time between money leaving a consumer or payer’s account and the time it is deposited in the merchant or the receiver’s account is reduced drastically. Such a system allows money transfer on all 7 days of the week, 365 days of the year, including on bank and public holidays.
How Can Real-Time Settlements Help Businesses?
Adopting real-time settlements has many business advantages, including improved cash flow, better cash management, and reduced risk. Here are some of the benefits of real-time settlements from a business’s standpoint:
- Better liquidity
Having immediate access to money through real-time or instant settlements can support the liquidity needs of small and medium businesses by taking out the waiting period before the money comes through. This improved cash flow can result in smooth daily operations of businesses, with more money available for inventory purchase, routine payments, wage payments, or other working capital needs.
- Reduce Short-Term Loan Reliance
Many times, poor liquidity can force a business to take on short-term loans to meet immediate working capital needs. The interest on these loans puts additional pressure on the bottom line. Real-time settlements reduce liquidity crunches drastically and hence, help businesses avoid frequent short-term loans.
- Smarter Growth Projections
Quicker availability of cash means businesses can budget better, improve the accuracy of financial and business projections, plan their spends carefully, and invest smartly. Better cash flow management leads to improved business efficiency, aids in business growth, and ensures businesses do not hold back from pursuing growth opportunities due to lack of liquid funds.
- Better Risk Management
When settlements are delayed, chargebacks and refunds become complicated. Businesses may end up processing these from their balance, even before receiving the initial payment. In case the initial payment fails to come through, then the merchant stands to lose the amount twice. Real-time and instant settlements eliminate this risk, thereby ensuring an efficient process for both parties.
- Reduced Fraud
In addition to better chargebacks and refunds, real-time settlements also help reduce fraudulent transactions. The immediacy of payments allow instant reconciliation and checks, thereby helping identify and prevent frauds faster.
Paytm’s Settlement Options
Keeping in mind that different merchants have different needs, Paytm offers a wide range of settlement choices, including batch settlements, same-day settlements, and real-time settlements.
Under batch settlements, merchants can collate payments from a specific period and have them all transferred to their bank account in a single move. Same-day settlements allow the merchant to receive payments from all transactions on a single day into their bank account on the very same day, without having to wait until the following day. Paytm is also rolling out real-time settlements soon so that merchants can transfer individual payments as soon as they are complete.
With Paytm as a digital payments partner, merchants get access to the Paytm for Business dashboard where they can monitor their payments and settlement in real-time, raise settlement-related, or change settlement options depending on their requirements. Paytm’s settlement options support the unique liquidity needs of small and medium businesses and aim to make the whole process smoother and easier-to-use.
