Unpacking the Path to Today’s Instant Payments

When it comes to digital payments, we’ve come a long way. Back in the late 90s and early 2000s, we experienced a digital renaissance: Electronic payments became more accessible via new ACH standard entry class (SEC) codes; online payment solutions launched for specific purposes—remember when PayPal was for eBay alone? —and online banking became a thing. Now, global mobile payment transactions are valued at over $2 trillion, and more than three-quarters of consumers cite their preference for banking digitally.

The long and winding road that led us to where we are today was peppered with payments system innovation. From ACH introducing check conversion, online payment, and same-day options to card networks upgrading to EMV technology and contactless solutions, the payments landscape has evolved in line with the needs of the consumers and businesses it supports.

The Path to Innovation

But you know what they say, hindsight is 20/20. At the time, these innovative technologies brought with them a corresponding level of friction for bankers. Common refrains questioned the need for e-check options at all; how to secure online banking; and whether consumers would utilize the systems once the infrastructure was built. They were all valid questions, but ones wrought with anxiety, intensity, and debate.

Yet here we stand on the other side of those innovations, offering remote deposit capture via our mobile apps, P2P payment solutions, and so much more. In fact, Same Day ACH accounted for more than $1.7 trillion in transaction value in 2022, amounting to an average of 2.8 million payments per day. We may have had our fair share of hurdles to get to this point, but we have arrived.

Lessons for Today

I raise these points not for a sense of nostalgia and pride (we should celebrate how far we’ve come), but to call out that we very well may be at a similar crossroads. When we talk about instant payments, I hear a lot of the same concerns: Will my customers even use it? How do I protect my bank and customers against fraud? Again, all the correct questions to ask, but not to the detriment of action; a conclusion supported by the research.

Nearly 70 percent of consumers feel it is an important satisfaction driver to have access to enhanced faster payment capabilities, and nearly nine in 10 businesses expect to be ready to make and support instant payments in the near term.

Not to mention that your competitors plan to implement these faster payments solutions. In fact, the 2023 Faster Payments Barometer from the U.S. Faster Payments Council found that by 2025, nearly 90 percent of surveyed organizations plan to have introduced at least one of the two real-time payments rails (FedNow or RTP). That finding suggests not so much a case of “They’re doing it so I must, too,” as it signals the potential for lost opportunity if you don’t pursue faster payments.

A New Leg of the Journey

With that in mind, I encourage you to consider how instant payments may align with your business strategy. Take the time to process how you can respond to market demand, balancing it with those important strategic questions on volume, costs, revenue, and risk. And check out ICBA Bancard’s resources to support you—including webinars, blog posts, and more—particularly as some of them may directly address your concerns.

But determine how instant payments factor into your next steps as a community bank. Because if history is any indicator, a few years from now, we’ll be talking about the next big thing, with instant payments as a widely implemented solution in the rear-view mirror.