Faster payments have been receiving much interest among financial institutions (FIs), given that more solutions are being developed and introduced into the financial ecosystem. Since the announcement of the Federal Reserve’s FedNow, the expedited services from ACH, and many more innovations in payments that focus on speed, smaller banks have more opportunities than ever to leverage these resources to gain a competitive advantage.
However, one must look more closely at what is involved, rather than simply jump on the competitive bandwagon.
Doug Brown, senior vice president and general manager for NCR Digital Banking at NCR Corp, agrees:
“There are mechanisms in place to move money instantly and seamlessly, sure. But there’s more to it.”
Setting The Stage For Adoption
According to Brown, it’s not enough to incorporate the latest “real-time payment rail” and just begin offering it as a solution to your customers. It’s about financial institutions upgrading their current workflows in order to support a “real-time environment”. They also need to come up with the best solutions to seamlessly onboard and come up with the best prices for these services.
The current landscape, however, shows that FIs are merely going through the motions of transformation just to stay competitive. Brown calls these actions “reactionary” and due to “competitive pressure.” There are no talks about price points, as economics have become an afterthought. Brown believes this could potentially endanger a portfolio.
How best to market to both businesses and consumers must be another consideration. This involves, “identifying which potential use cases add the most value”. Of course, this will ultimately depend on the end-user.
For consumers, the clear use case will be instant peer-to-peer transactions (P2P). Corporate customers have great interest in B2B payments, not only to speed payment and when they get paid, but also to monitor their current cash status in real-time.
Confronting Barriers
Banks should not just focus on offering real-time payments. Customers have their payment preferences and therefore, FIs must be ready to offer a variety of choices in payment methods.
Then there are the questions about what real-time payments are and if consumers really need them. Again, Brown suggests not overwhelming customers with too many options, but focusing on what would greatly benefit them. This strategy will suppress any roadblocks to adopting real-time payments.
Taking the time to educate their customers about real-time payments and their value will dispel any skepticism they currently hold. Especially when “horror stories” of real-time payment errors have made the headlines. FIs still need to address the many kinks within the real-time system since it is still in its evolutionary phase.
Smaller banks will greatly benefit from the real-time payments evolution if they learn how to not only market but price their services competitively. Along with these strategies, educating their customers about the value of real-time payments should be emphasized.
Much Work Lies Ahead
What is clear is that many banks’ internal operations are not prepared to transform and ultimately adopt a real-time payment system for themselves or their customers.
Customers are still in the dark as to what real-time payments really are. However, there are some advancements being made. Both corporate and government bodies are the key drivers promoting both the interest and adoption. As consumer education grows, banks will have an easier time adopting real-time payments.