F I N Z L Y

Year 2021 – as society heaves with change, it is often difficult to distinguish between those  transformations that have come to stay and those that are more of a passing cult.  

There is increasing appetite for banks to rethink their mechanics and overhaul their offerings to connect  to environmental changes. Payments innovation is no longer optional and banks are matching the muscles  and variable needs of a maturing global market. Imaginative use cases favoring the common man and the  gig economy are leading to innovation-led transformations and significant partnerships with fintechs and  other service providers. The US, already a latecomer to the arena, is still showing signs of inertia in  adopting real time payment solutions.  

While the appeal of having real-time payment capabilities is rewarding, there are many factors which  impede banks and credit unions from pulling the trigger on implementing real time payment solutions.  

While a lot is said about the potential benefits of real-time payments, let us analyze the reasons why FIs  are slow to adopt real-time payment solutions.  

Our conversations with decision-makers in the banking industry have uncovered many reasons that  hamper the adoption of real-time payment solutions. 

1. Which real-time network should we implement?  

Multiple players in an industry opens up challenges of either having to choose one system or offer  multiple systems with interoperability between them. The round-the-corner stance of Federal  Reserve’s FedNow alongside The Clearing House RTP (Real-Time Payments), a system that has  rejuvenated payments after almost 40 years, stalked by other players like Zelle, makes the terrain  very difficult to maneuver. Banks are struggling with their gambit to choose from one or all of these.  

2. Now that the pandemic is almost over, do we still need innovative payment solutions?  

There is no doubt that Covid-19 has had a profound bearing on accelerating the demand for payment  solutions, spawning a host of new and imaginative use cases in the payment ecosystem. But now that  banks believe that the pandemic is almost over, there is a tendency to apply brakes on payment  innovation, envisaging a back-to-normal scenario into a pseudo-safety zone for banks.  

3. To wait and watch or lead the pack?  

Many FIs are playing a waiting game to see what their peers are doing to handle the flux around  payment solutions. Many of the smaller banks are attempting to piggyback on their stronger  counterparts to minimize their risks and costs around the transformation.  

4. Lack of understanding of the concept and approach  

A sticking point when it comes to the adoption of real-time payments is the lack of awareness and  appreciation amidst those who have already adopted and those who plan to adopt real-time payment  solutions. Nevertheless, more and more FIs are proactively seeking education now, especially to  understand the use cases that can add more business value. 

5. Real-time payment systems are too convoluted and elaborate  

The systemic complexity of implementing real-time payment solutions is deterring many banks from  considering solutions amidst other competing priorities and security concerns. Modifying their  existing legacy technology systems is another fear for many banks and FIs.  

6. Cost of real-time payment solutions  

Banks are wary about the cost of implementing real-time solutions due to the novelty and complexity  of the models. Many banks fail to realize that these solutions bring down costs associated with using  checks and cash as instruments to pay. The cost of a scalable infrastructure to operate 24/7,  investment in fraud avoidance and related compliance activities is also dissuading banks from  immediate adoption of real-time solutions.  

7. Fear of losing revenue from existing 2nd-generation payment solutions  

Banks are uncertain if the implementation of real-time payment solutions will eventually displace  banks’ revenue from existing revenue streams like the currently preferred wire services and ACH. The  uncertainty in the transactions costs involved eventually also poses a challenge to the business models  of banks.  

OUR PAYMENTS SOLUTION ADDRESSES ALL YOUR QUALMS

We are always happy to help you, whatever your stage in your innovation journey – whether you  are just getting ready, or in the tactical or strategic stage of your real-time payments initiative.  

Let’s get started:  sales@finzly.com (+1) 844-792-7783

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