Real-time payments are expected to see a 29.8% compound annual growth rate (CAGR) through 2026 as consumers and businesses seek faster access to funds and immediate settlement times. This year, the Federal Reserve’s FedNow service will also launch and further boost adoption of faster payments.
As new use cases for faster payments are identified and adoption grows, banks and credit unions must choose payment technology that will effectively serve their customers, both now and long term.
This means flexibility is a key component to faster payments technology. Adapting to the new world of real-time payments is a complex process. That’s why financial institutions should focus on the business of banking and leverage a technology partner that can focus on the intricacies of implementing and managing real-time payments.
The list of potential payment technology vendors is long and many are battling to be vendor of choice at financial institutions nationwide.
However, some vendors lack the expertise needed to deliver the most value, while others might be fine partners for a number of financial institutions, but may not be the right fit for your bank or credit union. If your financial institution is still in search of the right payments partner, consider this your checklist of what to look for:
1. Strategic Planning Support
Real-time payments pose implications for product and service offerings, internal operations and more. Therefore, financial institutions need to find a partner that will support strategic planning with consideration for new product capabilities, technology implications and treasury operations. For example, banks and credit unions should consider how faster payments integrate with and impact their core systems and how, they will impact their institution’s other technology, including customer- and member-facing applications, as well as back-end workflows.
This is where an experienced payments partner can provide value, especially for community financial institutions with limited resources.
2. Flexibility to Leverage Different Payment Routes
Selecting a payments platform that supports multiple payment rails, such as The Clearing House’s RTP network, Same Day ACH, and the FedNow Service, enables payments to be routed according to speed, cost, and network availability. The ability to use multiple payment rails, rather that just one enables financial institutions to add even more value to faster payments for their customers. This will become more important as consumers and businesses see the value of faster payments and look for the financial institutions that will enable them to maximize the benefits of instant payments.
3. Consolidated Transaction Data
Financial institutions often operate a half-dozen or more platforms to process payments based on the payment type, such as ACH, wire and more. For banks or credit unions that have been acquired or merged with another institution, back-end systems are even more complex. These systems are typically siloed, making it very difficult to capture or properly use data and analytics.
However, this transaction data can help a financial institution understand how customers are transacting, as well as which new payment options might be useful. Account holders want the benefits and flexibility that financial institutions can provide though real-time payments. Whether a customer has a business or personal account, they will expect payment options that suit their needs. Therefore, banks and credit unions need to consider how faster payments technology will give them the rich transaction data needed to remain agile to emerging trends and future account holder demands.
As more financial institutions plan their faster payments strategies, they must consider how the right technology partner will help them differentiate their product offerings and ultimately, stay competitive.