As per the Reserve Bank of India, digital payments recorded a growth of 30.19% at the end of March 2021, reflecting the adoption and deepening of cashless transactions in India. Today, businesses of all scales and sizes are opting for digital or online modes of payment. 

The ease of digital transactions and the immediacy of the process make digital payments a popular choice among business owners. However, digital transactions can take longer to reflect, sometimes taking up to 72 hours. 

The time gap in receiving digital payments from customers and making payments to vendors can significantly affect a business’s cash reserves. This is true especially for SMEs that need constant cash flow to keep their operations running smoothly. 

What is real-time settlement?

With real-time settlements, you can receive digital payments in your bank account within seconds at any time of the day. You can transfer payments made on your site to your bank account instantly so you can immediately reinvest it in your business and use it to unlock growth opportunities.

How is real-time settlement different from a regular payment cycle?

Once a customer makes online payments in a default settlement cycle, the amount is only credited to your bank account after the settlement cycle. This means it can be T+2 or T+3 days before you have access to funds, leading to a liquidity crunch when you need to make immediate payroll payments or order inventory. 

With real-time settlements, when a payer initiates a payment to the beneficiary, the payer’s bank sends the payment to the real-time payments system. The system validates the request and forwards the payment to the beneficiary bank. The beneficiary bank, in turn, confirms acceptance of the amount and credits it to the beneficiary’s account. 

The payment is irrevocable and gets credited to the beneficiary within seconds. 

Moreover, since the clearing takes place 24/7 and 365 days, one can send and receive money using any payment method, even at 2:00 AM on a Sunday or a banking holiday!  

How can real-time settlement benefit your business?

There are several ways in which opting for real-time settlements can be a game-changer for your business:

    1. Cheaper transaction costs: In the case of card payments, you run the risk of paying a chargeback fee in case of a genuine complaint from the customer. You are also liable to pay the card-issuing bank a pre-fixed amount for every swipe to cover the bank’s credit risk in approving the payment. But real-time settlements significantly reduce the overall costs of accepting payments. You can resolve legitimate transaction disputes with customers without paying additional fees to card-issuing banks. 
    2. Better cash flows: Given the stiff competition in the market, having sufficient liquidity at all times is vital for the survival of your businesses. Real-time settlement cuts down the waiting period before the money comes through and provides immediate access to cash. As a result, you are in a better position to explore more opportunities and respond to challenges.
      Carrying out daily operations of your business, making routine payments, meeting working capital needs and purchasing inventory—with real-time settlements, you can ensure that your business won’t collapse due to the non-availability of liquid funds.
    3. Improved efficiency: Having efficient processes and systems in place is important for small and medium businesses for smoother operations. Real-time settlements minimize the waste of time and resources. Unlike paper-based payments, there are no unnecessary steps involved in receiving your money. 
    4. Keeps you ahead of the curve: Real-time settlement gives you improved visibility on cash flow and greater control over the timing and certainty of payments. This simplifies complex and time-consuming planning, gives you more time to focus on business growth and keeps you ahead of the curve.

 

How is Razorpay helping businesses with real-time settlement options?

If you want to break free from the default settlement cycle, Razorpay Instant Settlement can be of great help. You can get instant access to your money, avoid cash flow challenges and make payouts 24×7 even during non-banking hours, weekends and holidays. 

Who is Razorpay Instant Settlement for?

Every business onboarded on Razorpay that wants to be more cash-efficient and carry out various financial obligations easily can benefit from Instant Settlements. But it is best suited for those businesses that want to reduce daily cash crunch and get early access to payments. 

  • On-demand Instant Settlement gives you the freedom to choose when you want the customer payments to be transferred to your bank account. This is a great option for businesses with uncertain cash flows
  • Scheduled same-day settlements ensure that Razorpay automatically settles payments at specific times during the day. This is perfect if your business has consistent cash flows, but you want to settle customer payments on a T+0 cycle. You can enjoy unlimited settlement every day to make your entire sales process virtually cash-like

     

Summing up…

Real-time settlement is now the new normal in the world of payments so that you never run out of cash. It is an excellent way for small businesses to keep their operations running even with low working capital and meet their unique liquidity needs. 

 

Author

Ashmita Roy is a Content Marketer at Razorpay. When she’s not working, you can find her strumming her guitar or writing poetry. Dislikes writing about herself in third person, but can be convinced to do so via pizza or cheesecakes.

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