Payment Modernization Strategies for Mid-Sized Banks: Preparing for 2025 and Beyond
Over the past few years, engaging with numerous payments industry experts and financial institutions has allowed us to unveil a myriad of myths about instant payments. Their invaluable insights into the future of payments have boldly shattered numerous myths surrounding instant payments. Shattering these misconceptions and embracing the realities is crucial for financial institutions to unlock the full, transformative potential of FedNow® and RTP®. Here are some top myths busted.
Myth 1. Business payments are confined to regular business hours
More than a third of RTP payments occur outside standard business hours, encompassing last-minute supplier payments, managed liquidity payments, and 24x7 payments from the gig economy.
Myth 2. There are no immediate use cases for instant payments on FedNow
The industry drives the innovation around use cases. Early wage access, daily payroll capabilities, weekend mortgage closings and treasury payments are the expected immediate use cases on the FedNow network.
Myth 3. Instant payments will decisively displace ACH
ACH is proficient in meeting its intended use cases, and we haven't witnessed a significant shift away from ACH payments. Nevertheless, certain scenarios benefit from faster settlement than ACH and Same Day ACH. This is where instant payments step in, not to replace ACH but to complement it and address the need for speed in these specific situations.
Myth 4. APIs for instant payments can be an afterthought for financial institutions
The view on APIs is a bit pigeon-holed as a gateway to connect financial institutions to fintechs. However, APIs have a wider remit - they make it extremely easy to integrate your existing products and services to faster payments, allowing you to take leverage the competitive advantage of instant payments.
Myth 5. It is sufficient to receive instant payments.
You meet more of your customer needs with the "send" side. It's crucial to plan to allow your customers to send payments instantly via multiple applications across wholesale banking, consumer applications and SMBs. APIs are vital for making this happen.
Myth 6. Instant payments are more for consumers than businesses
Many businesses are awaiting instant payments to overcome several pain points they currently have. As the network grows and we reach ubiquity, they can leverage the data that ride on the rails and remittance information, which can ultimately simplify the back-office operations at the end of the day.
Myth 7. Customers need to tell the bank if they want payments routed through RTP or FedNow
Customers can instruct banks to send instant payments from their bank account, and with intelligent routing solutions, banks can select the most appropriate payment rail to reach the destination account quickly and efficiently.
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