What’s Driving Faster Payments?
By Barbara Hudgins, AAP, APRP, CCRS
Director, Payments Education, ePayResources
Bob Dylan nailed today’s faster payments environment with the title of his 1964 song, “The Times They Are A-Changin’.” With so many person-to-person (P2P) and credit push choices, how are consumers to decide what to use? Long gone are the days when accountholders drove to their local branch to make a deposit or withdraw. Today, speed is king.
When looking at any new product or service one of the first considerations is accountholder experience. Gone (or at least going quickly) are the days of writing a birthday check, mailing it, and waiting for it to clear the account. Now a consumer has a multitude of options, to securely and quickly send funds to celebrate a birthday, help a family member, or any other of the countless reasons we have all heard.
Prior to current faster payments options, financial institutions were concerned with how to make their cards top-of-wallet. From the cardholder perspective, cards are as fast as instant payments. Rarely is a cardholder concerned with how long a transaction takes to settle, which is the determinant for whether a payment type is defined as “instant.”
Top-of-wallet cards are still important, but there is also the need to meet consumer demand for faster payments and credit-push options. Financial institutions, neo banks, and fintechs are working to meet the new and growing use of this new technology. Failure to do so creates a real possibility consumers will begin to turn away from their current provider as their first financial choice. They will instead look for something that better fits their needs.
Credit-push from the consumer perspective is still a relatively new phenomenon in this country which means numerous new opportunities for the users and providers of these services. Because most people are change-adverse, there is only a small window for success between encouraging a consumer to try a new service and their successful adoption of it. Failed use attempts quickly lead to abandonment of any new product or service.
Behind the scenes, institutions need to rethink their operations department to accommodate faster payments’ 24/7 environment. There must also be a deep dive into how to integrate new platforms into legacy technology. All payments companies must recognize that today’s competition not only comes from the neighborhood institution down the street, but from various non-financial services that are now available to consumers. There are an ever-growing number of options where consumers may “park” their money; all payments companies must continue to innovate and evolve if they want to keep those funds parked inside their four “walls”.
Other aspects of faster payments that are necessary to explore for a complete picture include generational approaches, the relationship between faster payments and faster fraud, and how open banking fits into the mix. Times are a-changin’ indeed – and at the speed of internet connections!