Dive Brief:

• Payments processors and core bank technology providers that responded to a U.S. Faster Payments Council survey said they expect that 70% to 80% of U.S. financial institutions will be capable of receiving instant payments by 2028.
• By contrast, respondents anticipate that a much smaller percentage of such banks and credit unions, between 30% and 40%, will be sending instant payments by 2028, per the report. 
• The factors driving firms to receive instant payments include mobile wallet funding or defunding, earned wage access and government disbursements. However, fewer banks may send instant payments due to fraud threats, a lack of alias tools and limited end-user interfaces, among other reasons, the report said.  

Dive Insight:

“There's definitely work to be done on send,” the council’s executive director, Reed Luhtanen, said in an interview last month. “In order for your customers at a financial institution to really have the full benefit of a network, you need to be able to send transactions as well. So, I think the focus is definitely expanding to include, ‘hey, we need to get not only financial institutions up and connected for receive, but also having that conversation about, how are we going to transition and expand into send.”

The latest U.S. Faster Payments Council’s report offers a closer look at bank adoption rates and possible use cases for instant payments in the near future.

“With recent increases in the number of institutions adopting faster and instant payments and the need to help bring these services to the fuller market, it is important to get a more quantitative baseline of adoption, drivers, headwinds, tailwinds and quantified insights to next priorities,” the report said in its introduction.

The potential use cases for government agencies range from emergency payments to benefit and loan disbursements. On an individual consumer basis, instant payments could be deployed for paying friends and family, online gaming and digital subscriptions. Businesses could also use them for earned wage access payments and payroll funding.

The report is based on findings from a survey completed by 25 payments processors and core bank technology providers between late June through mid-August of this year.

As banks prepare to receive instant payments, other factors threaten the adoption of instant payments overall, according to previous research from the U.S. Faster Payments Council. Rolling out instant payment technology, overseeing such payments through legacy systems and preventing fraud are challenges for adopting instant payments, according to a U.S. Faster Payments Council report in August. 

Meanwhile, U.S. government efforts to establish its instant payment infrastructure, with the new system FedNow, and to integrate more financial firms continues. A year after its launch, FedNow, the Federal Reserve’s instant payment system, has attracted about 1,000 financial institutions, surpassing the count for its private rival, The Clearing House’s RTP network.

Amid its efforts to add more banks and credit unions to its instant payments network, the Federal Reserve is working to mitigate potential fraud headaches. While the central bank has developed value limits and negative list features, it said in August that it continues to seek to introduce more FedNow features aimed at preventing fraud.