Americans still have a payment landscape dominated by cards and checks – it was only in 2017 when Zelle and The Clearing House (TCH) pioneered immediate payments services and then in 2019 that the Federal Reserve announced that it would develop the FedNow real-time payment rails. The U.S. is a large country with a huge number and variety of banks and credit unions, and industry change is not always driven through regulation. This adds up to a state of relative inertia around payments innovation and a slower than expected transition from legacy to immediate payments.
Without centrally-driven modernization initiatives to accelerate growth, in the ways we’ve seen elsewhere around the world, what are the prospects for immediate or real-time payments in terms of reaching more American consumers and businesses?
Use cases and consumer demands will force U.S. payments modernization
Given the characteristics noted above, immediate payments growth in the U.S. could be expected to be almost imperceptible. However, according to data in ACI’s Prime Time for Real-Time report, the U.S. is expected to realize 42.1 percent CAGR growth in real-time payments volume over the next five years – albeit starting from a low base. This will largely be a result of consumers coming around to the benefits and seeking out those that can facilitate immediate payments, rather than a major industry or regulatory shift.
The additional transparency benefits and rich data attached to transactions will also, over time, catch the eye of corporate customers. Improved cash flows and automated invoice reconciliation are just a couple of the many tangible use cases this data allows, which will likely lead many corporate customers to demand real-time readiness from banks.
That demand puts banks in a race with fintechs and other financial services providers to meet corporate customer needs. Those that succeed will be the ones recognizing that real-time is more than a complementary option to traditional payment types. It is very likely to become the payment type of choice for both businesses and consumers over the long term.
Revenue opportunities beyond immediate payments: Digital overlay services
When a bank offers its customers an immediate and more economical payment solution, the time margin gained compared to legacy payments gives the customer the advantage of being able to send the money immediately. However, there’s even more value gained when digital overlay services enter the equation.
Digital overlay services bring a wide range of possibilities to create new revenue opportunities around payments. For example, by using Request to Pay (RtP), companies can eliminate the process and cost of issuing paper bills and instead request payments for users to action with a click or a tap. In addition, this request can contain more information, thanks to ISO 20022 capabilities that would benefit both B2B and B2C transactions.
In this respect, the U.S. can look to other countries to identify which services are likely to capture the attention of customers, while also relying on its world-leading technology sector to provide its own solutions.
It has been a slow start, but there is much more to come
Many in the U.S. believe that current payment habits will endure. However, the lessons of digital disruption in other industries tell us that change can come suddenly and swiftly.
The U.S. has many of the ingredients for this kind of change. Banks must be prepared to embrace real-time payments as a long-term growth driver, while remaining alert to the opportunities of digital overlay services and the risks of allowing fintechs to gain first-mover advantage.
Actively seeking the right partners now will help them overcome the myriad challenges that are coming down the pipe, such as building the business case for modernization and updating legacy payments systems.
Discover more on how the U.S. will move toward immediate payments and download our eBook “The U.S. Real-Time Opportunity”
ACI Low Value Real-Time Payments 
