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Feb. 24, 2023
The countdown is on. FedNow goes live in just a few months, and its looming launch creates a sense of urgency around the execution of instant payments.
But community banks need not be alarmed. Relying on a phased approach can help lighten the load toward a product release. As you explore how you’ll apply FedNow at your bank, you should consider launching FedNow with receive-only functionality. It not only offers a way to test the instant payment waters, but also meet customer expectations in three key areas.
Earned wage access has claimed the top spot among real-time payments use cases, with The Clearing House reporting it as the fastest-growing use case on the RTP network. Substantiating that data, a recent PYMNTS.com article indicated that 71 percent of middle-market companies are already using earned wage access.
“I initially thought this [earned wage access] was for the gig economy, or contract associates, or maybe payroll exceptions—like a bonus you can make in the moment—but actually, I saw a study that said that even those who make greater than six figures want to get paid on a daily basis,” said Stephanie Miracle, director of product management, FedNow Service, Federal Reserve Bank of Boston, during a recent ICBA Bancard webinar on FedNow use cases.
By becoming a receive-only bank, your customers have access to instant payroll—a benefit they are certain to appreciate and will notably miss if your bank doesn’t provide it and their peers’ banks do.
When you’re displaced from your home or have fire, water, flood, or storm damage, the ability to receive insurance payments immediately can be a lifeline during a difficult time. According to one study, upwards of 75 percent of consumers want to receive instant payments for these insurance claims because they gain instant access to funds.
For a financial institution, which could be a receive-only use case where account holders get the benefit of immediate access to those funds.
While new scenarios continue to emerge, the most popular consumer use case for faster payments is sending money to friends and family, according to the Federal Reserve. During ICBA Bancard’s webinar The Fed’s Miracle cited ability to collect funds from multiple parents for tournament fees, as a person-to-person use case example.
RTP participating banks have also noted P2P payments are among the first transactions they see when receive functionality goes live.
Having the ability to receive instant payments for your customers creates surprise-and-delight moments and allows you to stay ahead of customer requests, but it also means banks will need to maintain robust fraud oversight to limit fraud risk or potential liability transfer.
While sending instant payments broadens opportunities for community banks, starting first as a receiving institution provides a way to ease into instant payments and ensure you remain competitive by delivering the services your customers will come to expect.
And with FedNow’s launch mere months away, now’s the time to act. Check out ICBA Bancard’s full FedNow webinar series for strategies to help you better meet customer demands and put a plan in place for your instant payments journey. Because with customer expectations climbing, it won’t be long before instant payments become a necessity.