Instant Payments Gain Momentum as We Drop into 2022

Join the discussion as a member of the new Faster Payments Committee!

Consumers and businesses are using faster and instant payments through apps and services like Zelle, PayPal/Venmo, the ACH Network (Same Day ACH or SDA), The Clearing House’s RTP® Network, Visa Direct, or Mastercard Send. Let’s not forget the Federal Reserve’s FedNow^TM Service set to launch in 2023. According to a Federal Reserve study, 9 out of 10 businesses surveyed “expect to be able to initiate and receive faster payments by 2023; many are ready to do so now.” Financial institutions of all sizes need to be knowledgeable in faster payment options, especially real-time payments, to best support their customers and members using these payments.

SDA continues to grow and expand, and more use cases are developing every day. The IRS utilized Direct Deposit to deliver 373.2 million economic impact payments quickly and securely throughout the pandemic in addition to the monthly Advance Child Tax Credit payments in recent months. SDA is used for fast bill payment, payroll, B2B, P2P, and everyday purchases. Nacha reported an overall 38.6% year-over-year growth as of the end of 2020, and we have only seen SDA use rise in 2021.

Instant or real-time payments allow financial institutions to offer fund transfers and availability within seconds of payment initiation. Giving people and businesses access to their money faster is an easy sell! In a Faster Payments Council article, John Burgos, Vice President – Business Development North America, Mindgate Solutions, advocates for RTP to give banks the ability to better follow and understand their customers’ spending habits, offer new services, gain a new segment of customers, save on operation costs, and optimize physical and virtual resources.

Instant Payment Considerations for Financial Institutions

Your institution doesn’t want to miss out on the obvious benefits of offering instant payment solutions. Here are some factors to consider.

Do you have a faster payments strategy? 

This is a new rail and not as easy as downloading an app. You have to look at your data, the app(s) your account holders are using, where the money is going, and what audience you want to target first. There are many solutions for faster payments and we highlight two here.

The RTP® network from The Clearing House is a real-time payments platform that all federally insured U.S. depository institutions are eligible to use for payments innovation. The RTP Network operates 24/7/365, which allows financial institutions to send or receive real-time payments at any time. Learn more about TCH’s RTP Network here.

With the FedNow Service, funds will settle between participating financial institutions (FIs) in real time with 24/7/365 availability. End users should have access to their money immediately. Learn about the upcoming FedNow Service on their new FedNow Explore website here.

What are the risks of faster payments?

With all payment rails there are risks. Immediate settlement and funds availability may be irresistible for the payee, but financial institutions and service providers must have sufficient risk management in place to maintain the integrity of faster payments. Fraudsters find speedier payments just as convenient. The U.S. Faster Payments Council published “Examining Faster Payments Fraud Prevention” to highlight faster payments fraud trends, types, and ways to mitigate fraud.

Join Macha's Faster Payments Committee

When it comes to Faster Payments it is a lot harder than downloading an app. There are many unknowns with this new rail, and you are not alone. This committee will discuss use cases, lessons learned, best practices, risks, and helpful resources for financial institutions and businesses. Before we can educate our account holders, we must understand this new rail as well. Macha will bring in speakers and materials to help, making it a great networking opportunity as well.

Sign up today by emailing info@macha.org. Let’s get started!