Outdated tech could slow instant payment adoption: survey

Dive Brief:

Financial institutions view loan disbursements as a top use case for instant payments, according to the results of a survey by the U.S. Faster Payments Council and the fintech Finzly. In the May poll, 85.7% cited that use case for real-time payments, according to a report on the findings issued July 30.
The financial institutions surveyed also identified invoice payments (73.5%), loan repayments (69.4%) and instant funding of newly opened accounts (61.2%), as potential use cases for the speedier payments, a report on the survey results said.
A majority of survey respondents (87.8%) said the cost of implementing the technology was a challenge, while 73.4% said managing the payments via legacy systems would present difficulties. About 40% said fraud prevention was also a hurdle to adopting instant payment send capabilities.

Dive Insight:

The report from the council and Charlotte, North Carolina-based Finzly comes as U.S. real-time payment systems attempt to attract more bank and credit union participation. Since the Federal Reserve launched its new FedNow instant payments system last year, some of the nation’s largest banks have been slow to join it.

Still, FedNow has added more financial institutions than the private, bank-owned RTP network, which has been operating since 2017. While FedNow has about 900 banks and credit unions on its network, the Clearing House’s RTP network, which launched in 2017, has lured some 650.

The Faster Payments Council and Finzly survey results suggest financial firms see business client demand as the key driver of instant payments. Per the survey results, 77.6% of respondents said corporations will potentially be the “biggest source of instant payments revenue.”

Nearly two-thirds (65.3%) of financial institutions surveyed said being able to send and receive instant payments simultaneously would boost consumer adoption, the report said.

“We’ve reached a crossroads with faster payments becoming table stakes for businesses and consumers alike,” Faster Payments Council Executive Director Reed Luhtanen said in the statement. “Despite significant growth in adoption, many [financial instituions] face challenges in fully leveraging instant payments.”

The goal of the report was to aid banks and credit unions in adopting and implementing faster payments schemes, while moving them past limitations.