Real-time payments are changing the way money moves across the United States. This can be a game changer for consumers and businesses through secure, efficient and instant payment processing. However, to implement real-time payments nationwide, some challenges must be overcome, such as the need for a solid infrastructure.
In a recent PaymentsJournal podcast, Nick BothaAutoRek Global Payments Sales Manager/Sales Executive and Albert BodinDirector of Commercial and Corporate Payments at Javelin Strategy & Research discusses the benefits of adopting real-time payments, operational considerations and what we can learn from the UK implementation.
U.S. adoption of real-time payments requires a pragmatic approach
payment journal U.S. adoption of real-time payments requires a pragmatic approach
What does FedNow mean for real-time payments in the US?
One of the biggest benefits of FedNow’s upcoming launch is that it will provide consumers and businesses with an instant payment option. Users no longer need to wait – transfers and settlements can be completed within seconds. With delays and higher costs associated with other traditional payment methods, FedNow will provide innovative solutions to help modernize the payments landscape in the United States.
“In such a large market, having government organizations run real-time payments is going to be somewhat of a game changer,” Botha said. “With FedNow’s many well-defined benefits, it removes the delays experienced with more traditional digital railroads like ACH transfers. What’s more interesting to me is that it creates new products, encourages innovation, and creates competition.”
Botha explained that this will have an impact on the US market. However, the size of the impact depends on the level of adoption. The adoption rate of real-time payments in the US is much lower than in India, Brazil and the UK.
Botha believes that in the US, organizations and regulators will conduct regular testing and monitoring to determine where this new solution will add the most value.
Operational Considerations for Navigating FedNow
While many organizations are eager and ready to adopt FedNow because of its numerous benefits, including increased competitive advantage in the global marketplace, Botha said there are still some operational considerations to keep in mind.
“The most obvious question on the surface is: how will this affect the existing infrastructure and technology of these organizations?” Botha asked.
“We have to remember that these organizations have built or bought existing infrastructure and technology to accommodate certain payment processes, how flexible can your organization be as new things come along?”
Botha also mentioned that adopting both FedNow and Instant Payments would have considerable costs, especially if it’s a new experience for some businesses.
Compliance and regulations are other considerations. It has not yet been determined what the Fed will include as part of its requirements. Organizations must remain flexible to adapt to these regulations and change strategies accordingly.
The key question to ask when investing the time and effort to implement real-time payments is: How will this affect revenue? What if there is no demand?
He also mentioned training. How will it work? What benefits will customers get? What does this mean for your internal stakeholders?
Bodine asked: “I think we touched on a little bit earlier in the talk on the door. that it The door is wide open for fraud. Training is very important. Occupational fraud is an important part of any security or fraud program. “
The new payment avenue may soon be the next target for fraudsters, but Botha assures us that this may not be a concern.
“Being run by a regulator does have an impact,” Botha said. “We saw the FCA in the UK and how they worked with industry players to make sure that fraud wasn’t being covered up. It was brought to the forefront. It’s very understandable. This way, the industry is able to crack down on some of these fraudsters as well as fraud Potential for increased activity levels.”
Learn from other countries’ implementation
Botha pointed out that while the UK has been successfully implementing real-time payments for some time, the FCA has not rolled it out from day one. Its implementation took a more phased approach, which the US could consider following.
He believes education is key, and communicating the benefits of real-time payments to U.S. users is critical to nationwide adoption.
“India does more than five, 10 or 15 times as many transactions as the UK through its real-time payment scheme, and the same goes for China and Brazil,” Botha said. America can benefit from that.”
Bodin added: “I hope our institutions will listen to us as we move forward.”
FedNow is poised to revolutionize the payments industry and further modernize the U.S. payment system to remain competitive. To ensure successful adoption of instant payments through FedNow, organizations must calculate costs, take a phased approach, and look to adoption strategies in other regions.