Are Challenges Still Holding Back Instant Payments Adoption in the US?

Traditional payment methods persist in the face of instant — for now.

Despite the allure of instant payments, businesses are clinging to traditional methods for a substantial share of their business-to-business (B2B) transactions. PYMNTS Intelligence research spotlights a notable gap between potential use and practice. In 2023, checks still accounted for 15% of retailers’ and manufacturers’ B2B payments and 21% of those made by real estate businesses — regardless of concerns over the heightened risk of delayed payments and check fraud.

Consumers choose instant — when they can.

Consumers’ appetite for instant payments is undeniable when given the option to receive them. A recent PYMNTS Intelligence study revealed that 72% of consumers who were offered disbursements through instant payments opted for this method. This share rose to 77% for income and earnings payouts, peaking at 81% among respondents performing freelance, contract or consulting work — with 58% of freelancers even willing to pay a fee to receive instant payments. Among those who were not given a choice, 62% said they would have chosen instant had it been offered.

Instant Payment Rails Affirm the Method’s Strong U.S. Future

For financial stakeholders, the rollout of FedNow in addition to the RTP network is affirming the future of U.S. real-time payments, helping to popularize the method for use cases throughout the economy.

Instant payments are becoming increasingly woven into the fabric of daily transactions.

FedNow is helping the RTP network bring real-time payments further into the mainstream. FinTech Plaid, for example, partnered with Cross River Bank to showcase new offerings via FedNow’s platform, ranging from money movement to investment accounts, payroll to loan disbursements and even insurance claims disbursements. Instant microdeposits are now possible too, dramatically reducing the time needed for consumers and businesses to authenticate linked bank accounts — thus largely eliminating payment failures and fraud associated with the process.

Instant rails could fuel an explosion of innovation in the payments space.

Astra’s integration of FedNow showcases the versatility of instant payment rails. The company’s solution facilitates a unified payment experience by enabling instant payments across a variety of payment types, such as payments from debit cards to bank accounts or from bank accounts outside the FedNow network via automated clearing house (ACH) that may then be deposited in the destination accounts via FedNow. The model demonstrates novel ways in which financial institutions (FIs) and FinTechs can innovate using instant payments infrastructure to meet consumer and business expectations for fast, reliable money movement.

Could instant rails shatter the hourglass that dominates margin calls?

The application of instant rails to resolve margin calls could represent a dramatic improvement in the management of securities trading risk. A margin call is triggered when an investor’s account value dips below the broker’s minimum required threshold. Currently, settling a margin call can take hours or a day, amplifying the risk exposure for both investors and brokerage firms. An innovative solution that integrates FedNow, for example, could fundamentally improve the speed and reliability of settling margin calls.

PYMNTS Intelligence breaks down how this could work and why it would be impactful:

1. Instant notification: Brokerages could leverage an instant request for payment (RFP) feature such as FedNow’s to instantly notify investors of a margin call requirement, minimizing the lag between the identification of the margin deficit and an investor’s awareness of the need to add funds.
2. Instant funds transfer: Brokerages’ integration of services such as FedNow could ensure that investors can respond to margin calls with instant payments to settle the calls immediately, avoiding the delays associated with traditional payment rails.
3. Market risk: By settling margin calls nearly instantly, the market risk associated with the time gap in traditional fund settlement processes would be largely eliminated. This matters because the faster that margin calls are resolved, the sooner the required margin levels are met, thereby protecting both investors and brokerage firms from further market volatility and regulatory noncompliance.

Instant Costs: Assessing the Financial Hurdle to Implementation

Assessing the technical and operational requirements for the integration of instant payment rails offers a window onto the practical complexities of deploying these next-generation payments platforms — a crucial view for financial stakeholders evaluating their payment innovation agendas.