In case you missed it: Nacha Smarter Faster Payments insights
Use of different payment methods in the US.
Real Time Payments (RTP) make it possible for banks, consumers and organizations to process transactions instantaneously. Despite RTP having been used in the US for several years, the upcoming implementation of the FedNow Service by the Federal Reserve is sure to impact the market when it goes live in July 2023.
The upcoming launch of the new payment method leads to the interesting debate of how and when organizations will benefit from the use of instant payment methods in the US, namely ACH, TCH and FedNow. While ACH has been in use the longest, indicating both its reliability and cost-effectiveness, TCH and FedNow offer the opportunity to make financial transactions at any time or day, including bank holidays, federal holidays and non-business days.
The Federal Reserve brings important information about FedNow and how the institutions can engage in the service and adopt it. Currently, slightly more than 100 institutions have participated in the initial release of FedNow. With the involvement of these institutions, banks and other organizations will soon have access to new use cases, which may influence how US institutions embrace this innovation within the instant payments framework.
We can learn from other RTP networks released in various countries, such as Pix in Brazil. In just two years, this network has become one of the most widely used payments methods in the country. Here are the biggest lessons we can learn from Pix:
- Become experts in law and regulation
- Actively participate in discussions that influence decisions
- Invest in partnerships
- Prioritize user experience
- Test the process for issues to enhance security and ease-of-use.
Read more about the key takeaways from Brazil’s implementation of PIX here.
The dimension of the challenge to implement new networks on the vast and decentralized US market will likely be driven by competition and innovation. Among the long list of variables that may affect the implementation of new networks are the technologies and approaches that institutions may pair with payment systems. Technologies such as tokenization, AI, Pay by Bank and cross-border payments have the potential to support and impact FedNow and the adoption of other new payment methods in the US.
With the adoption of these new technologies, we have reached two main conclusions. First, the growing risk of fraud from these new technologies proves that there is a demand for heightened cybersecurity within organizations. Second, Open Banking is inevitable and will become a major component of the financial industry within the next couple of years.
The incredible keynotes for Nacha 2023 deserve a mention with their intriguing insights and motivational stories. Ben Nemtin presented his five steps “to make the impossible possible,” which you will soon be able to see his story produced as a film adaptation.
Shola Richards talked about team cohesion and the ubuntu concept, roughly translated as “humanity toward others”. His talk reminded the event’s attendees to value the spirit of collaboration. Lastly, Molly Bloom shared the amazing anecdotes from her life, some of which you may recognize from the popular motion picture, Molly’s Game.
As always, Nacha’s event leaves us with more insight on the current trends and exciting future of instant payments. We look forward to next year’s event, held from May 5-8 in Miami. In the meantime, if you would like to discuss how GFT can help you benefit from RTP, please contact us.