As the U.S. banking industry moves toward embracing real-time payment systems, a recent survey underscores the importance of strategic planning, the challenges faced by legacy systems, and how collaborating with trusted partners can help organizations navigate this transformative journey.
This fourth annual survey from the U.S. Faster Payments Council, Glenbrook and Volante, a cloud payments modernization partner to financial businesses, asked the opinions of 427 market participants, 60% of whom work for a financial institution or a facilitator. This year’s survey recorded the highest level of satisfaction with the industry’s progress toward the adoption of faster payments. Across the industry, 51% of respondents—including 61% of financial institutions—say they are satisfied.
Implementing RTP® and FedNow®
The most significant development in real-time payments has been the introduction of FedNow in July 2023. That followed the launch of Nacha’s Same Day ACH in 2016 and The Clearing House RTP Network in 2017.
Among financial institutions, plans for these services are robust, with 88% of the survey respondents saying that they will implement FedNow and/or RTP within the next two years. RTP has been implemented more, with 61% of FIs saying that process is underway or complete. FedNow, less than a year old, has been or soon will be implemented by 44% of respondents. Only 12% of the FIs say they plan to wait more than three years to implement these payment services—or won’t implement them at all.
The survey also asked about future deployment strategies. For FedNow, 44% said they will support send and receive services initially, with 48% planning to add send services eventually. Only 8% said they will remain a receive-only organization. The figures are similar for RTP: 50% say they will support send and receive services initially, with another 34% adding send eventually. This leaves only 16% expecting to be a receive-only organization long term.
Reaching for Outside Help
For companies planning to use RTP and FedNow, 46% say they will connect to both via a third-party provider, compared with 32% who say they will connect to each system directly. The preference for working with third-party providers is understandable, as the integration and operations of these systems can be resource-intensive.
To help ease the barriers to adoption, many FIs have been turning to technology providers that focus on simplifying deployment and operations. Outsourcing the entire operation can also reduce overhead, allowing institutions to focus on innovation and opportunities to monetize faster payments. Other important considerations that respondents mentioned included software-as-a-service business models, providing scalability without extensive hardware upgrades and resilient disaster recovery services.
In addition to a faster time to market and lower operating costs, the survey respondents noted that they were interested in many of the value-added services that third-party providers can offer. Among them:
- Enabling proxy/alias (e.g., phone number) for payment initiation
- Confirmations sent to sender and receiver
- Enabling a QR code
- Recurring/automatic payments
- Appending additional remittance data
Changes Over Time
Over the four years the survey has been conducted, the top challenges with faster payments has changed little in the rankings. This year’s survey found that interoperability is considered to be “very important” by 71% and “somewhat important” by 21% of those surveyed. That total of 92% has been largely consistent over the four annual surveys.
On the other side of the coin, lack of ubiquity/interoperability continues to be the most common concern. Roughly 57% of financial institutions and business respondents mentioned it as an issue.
This is the only concern that earned such a strong consensus among these two groups. On other topics, the two groups had some severe disagreements. High upfront implementation costs were the second most common concern among bankers (59%), whereas only 33% of business respondents saw this as a top challenge. Similarly, 40% of financial institutions see “insufficient readiness to manage risks in a real-time environment” as a top concern, compared with only 10% of businesspeople.
Only 27% of respondents say they see an increase in fraud related to their faster-payments operations. Although that’s not a large number, it’s important to note that it has doubled from 13% in 2020.
There is overwhelming support for including dispute resolution as an inherent feature of faster payment systems (81%), similar to what’s done by credit card networks. This support has increased by 10 percentage points over the four years of the survey.
The survey also asked about cross-border payments. With regards to the RTP Network, 39% of the respondents say they are either using or plan to use its cross-border payment capabilities. Some 50% said they are unsure if they will use it, and only 11% said they will not use the feature. With FedNow, 77% said the system should offer cross-border faster payments.
Conclusions
The survey portrays an industry in the early stages of transitioning to a real-time operating environment, particularly for FedNow.
Real-time payments are quickly becoming a necessity for financial institutions to offer so they remain competitive.
The industry needs the freedom to evolve its existing systems and operations through innovation that can complete the transition to a new level of service and a new way of imagining the payments business. Along the way, trusted partners can provide the support and insights to clarify strategy and support complex transitions.
