Pandemic Emergencies Could Be Moving Businesses to Push for Real-Time Payments

With consumers and many businesses wary of cash and checks in the midst of the coronavirus pandemic, businesses may be more inclined than ever to pivot to real-time payments, according to research released Tuesday.

Out of 252 corporate executives surveyed in June, a slim 9% said they had no plans to participate in real-time networks, with the other 91% reporting at a wide range of interest, according to Citizens Financial Group Inc., the Providence, R.I.-based bank whose commercial-banking unit conducted the survey as part of its second annual Real-Time Payment Outlook Report. In its release on the survey results, the bank, one of the oldest in the United States, referred to the ongoing move to real time as “the biggest upgrade to the U.S. payments system since the Automated Clearing House (ACH) in 1974.”

The pandemic, which became a national emergency in the United States in March and has ravaged businesses and households alike, is a key motivator for real-time service, according to Matt Richardson, head of product solutions at Citizens. “The pandemic has …exposed the downsides to relying on paper payments,” he said in a statement.

The urgency to get money into the hands of business owners and households became particularly acute with federal programs this spring to transfer stimulus aid to businesses facing restrictions and consumers thrown out of work. In the survey, the respondents rated a financial institution’s ability to provide real-time transfers as the second-highest priority for businesses looking for a bank.

In general, the urge to adopt real-time payments stems from a general tendency toward digital payments, according to the research. Nearly two-thirds of the respondents said they expect to stop making or accepting payments made with cash or paper checks. Perhaps more surprisingly, more than three-quarters said they “agree that digital currency will play a valuable role in the future,” according to the release.

Reflecting the urgency brought on by the pandemic in recent months, respondents rated payroll third among possible uses for real-time payments, with 43% citing this function. Only managing cash flow more accurately (52%) and conducting general accounts-payable activities (46%) outranked payroll.

CFG’s survey canvassed companies in a wide range of revenue bands and business sectors. Thirty-two percent had annual revenue between $1 million and $25 million; 18% reported revenue of $25 million to $100 million; and half reported revenue of more than $100 million.

The mounting sentiment among U.S. businesses in favor of real-time payments comes as the Federal Reserve works on developing FedNow, a real-time system it announced a year ago. Earlier this month, the Fed gave an update indicating it is sticking with its original plan to have the network operational nationwide by 2024 at the latest. A rival system already in operation in the private sector is run by The Clearing House Payments Co. LLC, which is owned by many of the nation’s biggest banks.