Instant Payments and Digital Transformation Go Hand in Hand

At ICBA Bancard, we continue to arm bankers with information and resources to support their instant payments and digital transformation (icba.org/digital-transformation) journeys.

To that end, it’s important to remember how intertwined these journeys and business strategies are (and should be). As we look ahead to the next three to five years, it's not one or the other in terms of importance and prioritization. Both are business imperatives that complement each other and if done right will ensure competitiveness in the years ahead.

The July launch of the FedNow Service is a good reminder that instant payments are officially upon us; however, as we’ve observed instant payments accelerate around the globe, one thing is clear – the mere presence of instant settlement rails and options doesn’t automatically lead to usage. The proliferation of value-added overlay services riding ‘on top of’ instant payment rails is what is really driving adoption. While the speed is attractive, it’s the user experience that drives usage and consumer behavior.

With this in mind, banks should consider the bigger picture when they are planning their instant payments implementations. This is particularly important when implementing ‘send’ capabilities. Think about specific customer segments and use cases in which you will be able to deliver value via instant payments, and this is where the rubber will really hit the road in intersecting with your digital payments transformation efforts.

As you seek to ensure you are prepared to offer these value-add services, consider the following three keys to effectively blend and execute your strategies around instant payments and digital transformation.

1. Focus on customer journeys rather than product silos. Digital transformation requires shifting from evaluating how to optimize legacy products in silos, to leading with a focus on the journey of touchpoints your customers take (or could take), and how you can leverage digital capabilities to improve their life and reduce friction. Talk to customers informally and through surveys and seek to understand these opportunities and pain points. In doing so, you will likely find some use cases/opportunities involving instant payments.

2. Ensure you are not singularly reliant on one technology provider. There are an endless number of providers and solutions focused on community banks and their customers. The banks that will be most successful will be those that can effectively engage and assess a diverse pool of providers and solutions, and onboard best-of-breed products best suited to their target customers. Those that tend to wait for their one trusted legacy provider to point them in the right direction will struggle to keep pace. Engagement with ICBA Preferred Service Providers (icba.org/psp) and ThinkTech Accelerator programs (icba.org/thinktech) are great places to start, and the FedNow Explorer tool’s Showcase Theatre (fednowexplorer.org) is also a great resource when searching for providers.

3. Improve your speed-to-market. Not every payments product endeavor has to be a huge modernization effort. Competition from nimble fintechs requires that community banks improve their ability to quickly get product concepts to market once they are identified. The best way to enhance your speed-to-market is to pursue smaller ‘bite-size’ solutions that don't take up two years' worth of roadmap, but that also move the needle for customers. The. smaller efforts also provide great opportunities to shorten runways for underlying activities such as analysis, vendor selection, vendor due diligence, and implementation.

Giving consideration to the three keys noted above will help your bank be successful and capitalize on these instant payment and digital transformation opportunities, which will go hand-in-hand in the years ahead. Bancard is here to help, so check out our resource pages on these topics and/or reach out directly ([email protected]) to let us know how we can help.