Digital Transactions Authoritative, insightful and timely information for payments professionals
Have you been following developments in the world of faster payments? Probably the most exciting subchapter in this saga is the development and deployment of networks that can deliver real-time transactions, sometimes referred to as instant payments.
But offering the capability for real-time transfers is one thing. Hanging over the payments industry is another question that nobody can answer quite yet, and this is another thing indeed. In a nutshell: With the Federal Reserve’s FedNow service having debuted in July last year and The Clearing House Payments Co.’s RTP network in operation since 2017, just how soon can the U.S. payments industry expect widespread, routine exchange of real-time transactions?
Well, answers to that question are beginning to emerge. According to a report released last month by the Faster Payments Council, a trade group, between 70% and 80% of all U.S. financial institutions will be able to receive instant payments by 2028. Ah, but what about sending? On this matter, the report projects between 30% and 40% of financial institutions will have that capability by the same year—a somewhat less robust forecast.
Between late June and mid-August, the FPC surveyed 25 core banking vendors and payment processors for its report, which also documented the use cases most likely to be launched and developed soonest as banks, providers, and users become accustomed to the service. These use cases include earned wage access, domestic peer-to-peer transactions, and wallet funding and defunding. But which real-time applications will prove most popular? The respondents expected earned-wage access, payroll funding, and supplier payments in response to invoices to attract the most real-time adoption.
Other services, however, will take years to be switched on, according to the report. Indeed, if you’re hoping for real time in e-commerce and point-of-sale transactions, you’re likely to have a long wait. The respondents estimated these applications will require more than four years to be made available.
These survey respondents, by the way, support some 90% of all financial institutions in the U.S. market, according to the FPC. The canvass took place between June and mid-August.
As the report stresses, none of its projections will unfold automatically. Providers will be expected to develop fraud tools that can keep up with the speed of payment, the report stresses by way of example. Other needs involve improved error resolution and suitable user interfaces, not to mention technology such as QR codes for that far-off point-of-sale adoption. Then there’s the tech required for request for payment and APIs to ease deployment and adoption.
The research effort gives us a glimpse of what the industry can expect. We’ll soon see if reality matches up.
—John Stewart, Editor john@digitaltransactions.net
