The real-time payments system FedNow has rapidly gained from over 1,600 financial institutions across the United States. However, these participants have so far been restricted to using only Reserve Banks as intermediaries.

This limitation has prevented banks and credit unions from leveraging the network for cross-border payments. The U.S. Federal Reserve, which operates FedNow, is now considering lifting this restriction. This change would align FedNow more closely with the Fedwire model, which has been in place for decades.

Under the proposed plan, a U.S. institution could use FedNow to send funds to a correspondent bank, which would then facilitate the international leg of the transaction. This functionality could broaden the use cases for a system that has already experienced substantial growth in both transaction volume and value over the two years since its inception.

“A move to cross-border via FedNow is the logical next step in the evolution of real-time payments in the U.S.,” said Hugh Thomas, Lead Commercial and Enterprise Analyst at Javelin Strategy & Research. “By moving to real-time, you’re synching up with the speed of domestic funds movements in big cross-border markets like the EU and the UK. With ISO 20022 standards in the mix in all three markets, you open up a lot of possibilities for cross-border payments solutions. This isn’t to say they’ve gotten there with this move, but it’s certainly a step in that direction.”

Stopped at the Border

While using FedNow for cross-border payments could streamline the domestic payments experience, the network’s real-time settlement would not extend beyond U.S. borders. Once the funds reach an overseas correspondent bank, the transaction would follow the same processes as conventional cross-border payments.

The complex correspondent banking system is likely to continue subjecting these payments to transaction fees, currency conversions, settlement delays, and limited transparency—challenges that have long plagued cross-border payments.

These issues have persisted despite ongoing efforts by industry stakeholders and world leaders. For example, leaders from the Group of 20 countries established a roadmap to improve international transactions. Yet, a recent review highlighted that legacy payments infrastructure and cross-country coordination challenges have hindered meaningful progress.

Weighing the Challenges

Such hurdles are why many experts advocate for sweeping changes to the cross-border payments landscape, potentially involving a shift toward new rails like stablecoins or global networks operated by Visa and Mastercard.

The SWIFT messaging system has also played a key role in modernizing the correspondent banking model, and it is working on a framework specifically for retail cross-border payments.

While expanding FedNow’s cross-border capabilities would likely be welcomed by many institutions, the service would still operate within an increasingly fragmented and complex global market. These are key considerations the Federal Reserve will likely weigh as it reviews public comments and decides whether to move forward with the proposal.

The post U.S. Federal Reserve Considers Taking FedNow Global appeared first on PaymentsJournal.

The business case for adopting real-time payments in enterprise settings is compelling. Instant settlement drives efficiency in processes long built around paper checks, while also giving organizations unprecedented control over liquidity and cash flow.

The liquidity advantage is also fueling growth on the consumer side. The Clearing House recently reported that its RTP Network reported two million transactions in a single day and set a new single-day value record of $8.36 billion. The network attributed this growth to adoption across use cases like earned wage access (EWA) disbursements, gig economy payouts, and account-to-account transfers.

“Consumers expect money to move quickly, whether that be from their employer, paying a friend, or a biller,” said Ben Danner, Senior Debit Analyst at Javelin Strategy & Research. “EWA is built around faster access to funds and the same could be said for working gig economy jobs like ridesharing.”

“As budgets tighten, consumers are going to be moving their balances they may have built in wallets and P2P apps back into their banks checking account,” he said. “We’ve seen growth in core deposits suggesting consumers are increasingly relying on their financial institution, which is generally perceived safer than app-based payments.”

Seeking Payments Alternatives

Consumers, meanwhile, continue to navigate persistent inflationary pressures. Many have leaned more heavily on credit cards, but rising default or delinquency risks have prompted lenders to tighten underwriting standards, reduce credit lines, and focus more on affluent segments.

As a result, alternative payment methods have gained traction. Buy now, pay later (BNPL) services have skyrocketed in popularity, even as overall credit card debt levels remain elevated—both a signal of consumer strain and a growing concern for traditional issuers.

Keeping Funds In-House

These factors have made real-time payments an attractive alternative for debt-laden consumers. BY enabling consumers to hold onto funds until the moment a payment is due, these systems provide a powerful cash flow management tool. That dynamic helps explain why the RTP Network has continued to expand even after the launch of the Federal Reserve’s FedNow instant payments service two years ago.

In fact, both networks continue to post new volume and value records. While much of that growth has been driven by commercial payments adoption—particularly after transaction limits were raised to $10 million last year—the same liquidity and timing benefits that appeal to businesses are increasingly resonating with consumers as well.

The post RTP Network Sets Records After Consumer Cash Flow Demand Rises appeared first on PaymentsJournal.

While some may associate Alipay with China’s tremendously popular super app, its sister platform, Alipay+, is a merchant gateway with a rapidly expanding international reach.

As one of Ant International’s merchant platforms, Alipay+ played a crucial role in facilitating more than two billion cross-border payments last year, many of them originating in fast-growing markets like Southeast Asia, South Asia, the Middle East, and Latin America.

Altogether, Alipay+ connects to over 150 million merchants across more than 100 markets. That scale makes it is a significant development that India is considering linking its Unified Payments Interface (UPI) to the network. As the predominant real-time payments system in the world, UPI handles nearly half of global digital transactions.

Building on Dominance

Integrating with Alipay+ would make it easier for UPI’s roughly 400 million users to access instant payments while traveling abroad. This could significantly reduce the costs and settlement frictions that are commonplace in cross-border payments, while also helping keep users within the UPI ecosystem.

As UPI has become the most dominant real-time payments platform in the region, the Reserve Bank of India has aggressively looked for ways to expand the system. These efforts include raising transaction limits to enable higher-value purchases and linking the system to a credit card facilitated by Google Pay.

The Inevitable Expansion

Amid this growth, expansion beyond India’s borders seemed inevitable. Last year, UPI teamed with PayPal World, the fintech’s cross-border payments platform, in a deal that also included Alipay rival WeChat Pay.

However, one of the most intriguing developments for UPI has blossomed from the deepening relationship between India and the European Union. After a successful pilot, the European Central Bank announced plans to move forward with connecting its TARGET Instant Payment Settlement (TIPS) service to UPI.

Even more impactful is the newly established Free Trade Agreement between the EU and India. A central pillar of this landmark agreement is the creation of interoperability between the payments infrastructures of the two economies.

Taken together, these initiatives have transformed UPI from a purely domestic digital payments system into a significant cross-border payments player, with the potential to reshape what has long been a complex and inefficient process.

The post India Considers Integrating UPI with Alipay+ for Cross-Border Payments appeared first on PaymentsJournal.

In just over two years since its launch, the U.S. Federal Reserve’s FedNow real-time payments system has attracted participation from 1,600 financial institutions.

The service added 500 institutions over the course of last year alone, with more than 100 joining in Q4 2025. Currently, nearly all of the nation’s leading financial services companies now participate in FedNow.

This expanding footprint has driven measurable improvements across nearly every key metric for FedNow. The Federal Reserve reported that average daily transactions on the service reached almost 30,000 last year, while total transaction volume increased 460% year-over-year.

Alongside this volume growth, the total dollar value of FedNow transactions reached $853.4 billion last year, with an average payment size of $101,435—up significantly from $38.2 billion and $25,376, respectively, the prior year.

The Obligatory Comparison

As successful as FedNow has been, nearly every discussion of the network includes comparisons to the Clearing House’s RTP network. That’s because the two are the only players in the closely watched U.S. real-time payments space.

Although it was established in 2017 by a consortium of the largest U.S. banks, the RTP network has already been surpassed by FedNow in one key area: network participation. RTP currently has around 1,135 financial institutions on its network.

However, the RTP network still exceeds FedNow in payments value. The Clearing House recently reported processing more than $1.3 trillion in total payments in 2025. This may be partly due to RTP increasing its transaction cap from $1 million to $10 million last February, while FedNow did not raise its limits until September.

A Testament to Real-Time Payments

While comparisons between RTP and FedNow are inevitable, there is substantial overlap between the two services. For example, PNC Bank—a founding member of the Clearing House—was one of the last holdouts to finally join FedNow.

PNC emphasized, however, that its support for FedNow should not be interpreted as a lack of confidence in the RTP network. Rather, the growing participation in both networks by hundreds of banks and credit unions is a testament to the power of real-time payments and their potential to reshape the U.S. payments landscape.

The post With More Institutions on Board, FedNow Notches Volume and Value Gains appeared first on PaymentsJournal.

In today’s world, nearly anything a business or individual desires is available instantly. Yet, for most, receiving a payment still takes two to three days to clear, despite the availability of instant payments networks such as FedNow.

What will it take for instant payments to reach a tipping point and become a standard expectation? In a PaymentsJournal Podcast, Justin Jackson, Head of Enterprise Payment Solutions, Digital Payments at Fiserv, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed potential triggers for an inflection point for FedNow and other instant payment methods, and how financial institutions should be preparing now.

Looking for Hockey Stick Growth

Although instant payments have experienced steady growth and adoption, a defining moment that pushes them into the mainstream has yet to occur. Instant bank-to-bank transfers and digital disbursements platforms process payments in real time, but a breakthrough use case that drives significant volume has not emerged.

One likely catalyst for that critical moment would be the federal government. As the largest payor to both individuals and businesses, any major move toward instant payments could have a sizable impact on the U.S. economy. The government possesses the ability to shift the market.

Steps in that direction have already been taken. The federal government has largely stopped issuing paper checks—with a handful of exceptions—so recipients of government funds increasingly require bank accounts for direct deposit. It’s a small step from there to instant payments.

Europe has already completed a similar transition, with real-time payment methods integrated into everyday financial activity.

“I was in the EU earlier this week, and I met with a large bank that recently deployed instant low-value payments in their markets, the equivalent of a FedNow or RTP transaction here in the U.S.,” said Jackson. “They didn’t do a bunch of marketing fanfare, and they didn’t automate conversion of their low-value batch transactions into instant transactions. They just put it out there so that users could take advantage of an instant payment. Within a matter of weeks, they’ve already seen usage approaching 20% for the instant transaction instead of the batch-based transaction.”

Disaster Payments

A critical opening for government intervention is providing instant payments for disaster relief. Anyone who has experienced a hurricane or wildfire knows the urgent need for immediate funds to cover basic necessities, such as clothing or temporary lodging.

Receiving a check is often impractical in a disaster zone, as cashing it can be nearly impossible. While prepaid cards are sometimes used, they’re limited—recipients can’t pay rent or make other essential payments that require traditional banking access.

What people truly need is direct deposit into their bank account. If their FI can’t process the transaction instantly, recipients are effectively cut off from accessing and using the funds when they need them most.

“Having that instantly delivered transaction is critical, and being the financial institution that enables that is going to engender loyalty that you were part of the solution in their time of need,” said Hirschfield. “As opposed to, well, you weren’t ready, right? You weren’t at the table and able to take that transaction in real time. That’s a very different perception from your account holder as to the capability level for your institution, taking that instant payment at the moment when it was really important.”

Options for the Gig Economy

In the private sector, one promising use case is within the gig economy. Workers in this space are often paid irregularly. For example, someone who spends an afternoon driving so they can pay their rent may need to receive their earnings quickly. But that is not always possible.

“We’ve seen gig economy companies telling workers that because of where they bank, they can’t get their money for another three days,” said Jackson. “Now put yourself in the mindset of that worker. The whole reason they just spent an afternoon doing this work is they need that money right now because the rent is due. Being told to either wait three days or go to a different bank, it might make sense for them to think about a different financial institution relationship.”

The Challenge for Smaller Banks

Financial institutions and banks serving smaller communities have been the least likely to enter the instant payments fray, yet they may be the ones who need it the most. They can’t afford to have a competitor down the street offer this service while they can’t. As more government payments start to flow across instant payment rails, and as more agencies disburse or accept funds this way, nonparticipating FIs will face even greater pressure to join the networks.

That same dynamic will also spur the discovery and utilization of new use cases. Availability is the first step toward mass adoption, setting the stage for a critical mass of FIs nationwide to participate in the networks. As participation grows, so too will adoption and usage, ultimately making instant payments the norm rather than the exception.

Don’t Get Left Behind

So, what should smaller banks and credit unions be doing now to prepare for instant payments? The first step is to consider the implications for their own business. They should evaluate how their products can leverage instant payments—not just in terms of technology, but in how customers—from consumers and small businesses to commercial enterprises—actually want to use them.

Most importantly, don’t wait for the inflection point before taking action. Banks that hold off until the government mandates instant payments for key transactions risk being left behind.

“Social Security payments are not available as instant transactions right now, but don’t wait for that announcement to come out until you sign up,” said Jackson. “Otherwise you will have a whole list of customers asking, ‘Why can’t I receive my payment instantly?’ Because it’s guaranteed that someone else can.”

The post Getting Out in Front of Instant Payments—Before It’s Too Late appeared first on PaymentsJournal.

FedNow has continued to expand its network of financial institutions since its launch two years ago, and now PNC Bank is joining the real-time payments system.

The platform operated by the U.S. Federal Reserve now includes roughly 1,400 participating financial institutions. However, the addition of PNC is noteworthy—not only because the bank is one of the largest financial institutions in the U.S., but also because it was one of the last remaining holdouts.

JPMorgan Chase and Wells Fargo joined FedNow earlier, while Bank of America, Citigroup, and PNC had been more reluctant to participate. With Citi now on board and Capital One announcing its intention to follow suit, the number of major U.S. banks not participating in the platform continues to shrink.

Considering the Competition

One of the main reasons many banks were slow to adopt FedNow is that they are members of the Clearing House, a consortium of the world’s leading financial institutions. The Clearing House launched the RTP network in 2017, a real-time payments platform competes with FedNow.

Although PNC is a founding member of the Clearing House, the bank’s support for the FedNow system shouldn’t be interpreted as a lack of confidence in the RTP network. In fact, the RTP network recently set a new daily transaction record, processing over 1.8 million transactions, and continues to broaden the range of use cases on its platform.

Joining the FedNow Fold

While FedNow may have roughly the same number of institutions on its platform as RTP—or even more—it has not yet reached the payments volume of the more established network.

However, FedNow has continued to make strides. The system recently raised its transaction limits, first to $1 million and then to $10 million, positioning FedNow to handle high-value transactions like the B2B payments that have gained traction on RTP.

The addition of PNC Bank to the FedNow fold is another vote of confidence in the platform and could signal the future of U.S. real-time payments. As instant payments continue to gain ground, there may be room for both RTP and FedNow to coexist and thrive.

The post PNC Expands Real-Time Payments Footprint by Joining FedNow appeared first on PaymentsJournal.

As U.S. real-time payments adoption accelerates, the RTP network set a new daily record on October 3, processing 1,808,967 transactions valued at $5.2 billion.

Since its launch eight years ago by the Clearing House—a consortium of leading financial institutions—the RTP network has grown to become the largest instant payments system in the U.S. The platform now averages over 1.3 million payments daily, and RTP reports that over 1,000 financial institutions are participating in the network.

As the network’s footprint has expanded, so have its applications. RTP said its banner October day was driven by a diverse range of use cases, including gig economy payouts, bank transfers, digital wallet loads, and business-to-business payments.

A Successful Strategy

Expanding the use cases for the RTP network has been a top priority for the Clearing House. Businesses have been the most prolific users of the system, though most of these payments have involved consumers as recipients. To attract more B2B transactions, the RTP network increased its transaction limit from $1 million to $10 million last year.

This strategy has been largely successful. Bank of America was among the first financial institutions to support enterprise transactions up to RTP’s new limit, and the bank recently reported that payments exceeding $1 million now account for more than half the total value of U.S. real-time payments it processes for corporate clients.

Some of the primary use cases for these high-value payments include real estate transactions, corporate treasury operations, and portfolio settlements.

Delivering on Expectations

Payouts are also a key use case for real-time payments systems like RTP. Examples include marketplace platforms paying creators or ride-share companies paying drivers. Increasingly, gig workers expect to receive their earnings—regardless of amount—immediately after completing a job.

For merchants, meeting this expectation helps boost retention and engagement among contract workers. Real-time settlement also provides far greater visibility into company liquidity, enabling better cash management and financial planning.

The Bill Pay Use Case

Another growing use case for real-time payments is bill payment. In fact, Truist recently launched a bill pay solution for the RTP network that leverages an alias-based Request-for-Payment platform. This enables the solution to utilize the roughly 150 million existing mobile and email tokens to protect user data.

While this service is available to consumers, large corporate billers are the primary target audience for Truist’s platform. For these organizations, real-time payments offer several advantages—such as immediate acknowledgment of payment receipt, which can dramatically speed up the reconciliation process. In turn, faster access to funds can improve overall liquidity and cash flow management.

Not Ready for Retail

All of these use cases have dynamically expanded the scope of the RTP network. However, there has been much speculation about when real-time payments networks will take on a larger role in the U.S. retail payments landscape—much like Pix and UPI have taken off in Brazil and India, respectively.

Today, the National Payments Corporation of India handles nearly half of the world’s digital transactions, the majority of which flow through its UPI real-time payments system. The roughly 20 billion monthly transactions on UPI not only dwarf RTP, but also surpass leading payments networks like Visa and Alipay.

Several factors have contributed to UPI’s dominance, including support from India’s government and an aggressive expansion strategy. Additionally, many of the economies where real-time payments have surged were previously cash-based, making digital payments a substantial upgrade. In contrast, some have noted that the established financial infrastructure in the U.S. has slowed the adoption of instant payments domestically.

However, an additional obstacle is affecting both RTP and its rival FedNow, limiting their implementation in retail environments. Currently, the networks allow users only to send money, without a request functionality. This limits the scope of these systems because it is often the merchant who initiates the payment request, even when it is the customer who taps their card.

Although RTP and FedNow may not yet be ready for full retail deployment, adoption of both systems is rapidly accelerating. This suggests that new use cases and functionalities are likely to emerge in the near future.

The post RTP Tops Single-Day Record with Over 1.8 Million Transactions appeared first on PaymentsJournal.

To further foster innovation within the UK’s strong open banking ecosystem, Mastercard has developed a sandbox where financial institutions can experiment with the latest instant payments technology.

The sandbox gives banks access to Mastercard’s fifth generation account-to-account (A2A) real-time payments infrastructure. Within this environment, UK financial institutions can test payment use cases across retail, peer-to-peer (P2P), and B2B transactions.

For example, the sandbox will enable institutions to implement a “5-leg credit transfer,” allowing a consumer to make a real-time payment at a merchant with the retailer receiving instant confirmation.

Far Richer Data

According to Mastercard, the merchant and their financial institution would also receive richer data from these transactions, as the sandbox will adhere to the ISO 20022 format.

This messaging protocol was designed as an international standard for the payments ecosystem, supporting efficient and transparent cross-border payments in both consumer and commercial applications.

ISO 20022 compliance will become even more critical in the coming months, because one of the world’s leading cross-border payments systems, SWIFT, has mandated ISO 20022 adoption by November.

Big Tech Sandboxes

While there are benefits to ISO 20022 adoption, many financial institutions—especially small- to mid-tier banks—have yet to achieve compliance. Beyond the costs associated with upgrading, a key reason for hesitation is concern around risk and fraud.

This is where the sandbox model can provide value for highly regulated financial institutions looking to adopt emerging technologies. For example, artificial intelligence has become one of the most transformative technologies in recent years. Yet, many financial institutions worry it could make errors or jeopardize sensitive customer data.

In response, Nvidia launched its own sandbox, allowing UK banks to experiment with AI and uncover use cases in a controlled setting. This approach helps financial institutions stay competitive while minimizing exposure to risk.

Such environments are equally critical in the context of real-time payments, where faster transactions often come with increased fraud risk. Unlike regulated institutions, bad actors aren’t bound by compliance regulations and tend to adopt new technologies faster than financial institutions—an issue that big-tech-built sandboxes have been developed to mitigate.

The post Mastercard Builds Sandbox for UK Real-Time Payments Experimentation appeared first on PaymentsJournal.

The EuroPA alliance is partnering with the European Payments Initiative (EPI) to explore opportunities for connecting European consumers and merchants across 15 countries. The initiative aims to support all payment types—from peer-to-peer (P2P) payments to enterprise-level transactions.

Under this model, users will be able to use their preferred digital payment solutions both locally and across Europe. Provisions will also be made for countries that don’t yet have established systems of their own.

An Alliance and a Consortium

The EuroPA alliance includes mobile payment players across Europe, such as Bancomat, Bizum, Blik, MB WAY (SIBS), and Vipps MobilePay. Its goal is to create an interoperable mobile platform built on the Single Euro Payments Area (SEPA) real-time payments protocol. Support for SEPA was mandated in the region at the beginning of this year.

EPI, for its part, is a consortium of 16 European financial services companies whose initial focus has been the Wero digital wallet—a product designed to serve as a unified mobile payment solution for retail transactions.

Wero launched last year in Germany before expanding to Belgium and France. One of its initial use cases was to allow users to complete P2P transactions in seconds using a QR code, email address, or phone number.

Functionality for cross-border and merchant payments is in development for Wero, and EPI plans to evolve the wallet into an all-encompassing platform—supporting everything from recurring payments to buy now, pay later.

A Eurocentric Solution

Combining EPI’s digital wallet with the mobile platforms of EuroPA’s members is a logical step, given the organizations’ agenda—to enhance Europe’s sovereignty in payments by building a better cross-border solution.

Concerns have been growing in Europe over the dominance of Visa and Mastercard, especially  as USD-backed stablecoins gain traction in the region.

This reliance on both U.S. companies and the dollar has drawn criticism in Europe, prompting calls for a more Eurocentric solution. Both the European Commission and the Eurosystem have stated that one of the fastest ways to strengthen the payments system is by interconnecting existing payment solutions.

The post EuroPA, EPI Aim to Strengthen European Cross-Border Real-Time Payments appeared first on PaymentsJournal.

Truist is launching a bill pay solution for RTP, introducing an alias-based Request-for-Payment (RfP) platform within RTP, the instant payments platform operated by The Clearing House.

The solution will leverage 150 million available mobile and email tokens to keep user data confidential.

Although the service will be available to both consumers and businesses, Truist highlighted the benefits for large corporate billers. These include immediate acknowledgment of payment receipt—speeding up the reconciliation process—and faster access to funds, which should improve liquidity.

The financial institution also noted that the system would strengthen data management and security, while potentially reducing costs.

Expanding to B2B

There has been much speculation about when real-time payments networks will play a larger role in the U.S. payments landscape, and there have been significant recent strides in this direction. For example, the RTP network saw the total value of its processed instant payments nearly double in 2024.

While most payments on RTP were initiated by businesses, nearly all of them last year were business-to-consumer transactions. In an effort to expand its use to business-to-business payments, the Clearing House raised the network’s payment cap from $1 million to $10 million.

A Step in the Right Direction

Some of the proposed business use cases for RTP have been real-estate and supply chain transactions. However, both RTP and FedNow haven’t gained traction with retailers because they currently only allow users to send money—there is no request functionality.

Although it’s typically the customer who taps their debit card in a retail store, it is actually the merchant who initiates the payment request for these transactions. Currently, this functionality is not supported on RTP or FedNow. Additionally, the networks aren’t yet able to provide merchants with an approval code when a payment is declined.

While these issues will likely keep instant payments on the backburner for U.S. retailers, RTP’s expanded bill pay capability is a step in the right direction.

The post In the Next Step for RTP, Truist Pilots Bill Pay Solution appeared first on PaymentsJournal.

There was substantial buzz when Walmart announced that—with Fiserv’s help—it was launching support for real-time payments through FedNow and the RTP network last year. However, for all the speculation that real-time payments will be the way of the future, there are reasons most consumers aren’t using pay-by-bank at retailers yet—and might not start any time soon.

In the report Implementing Pay-By-Bank: A Guide for Merchants, Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the use cases for instant payments, the limiting factors delaying adoption of real-time payments, and the future of pay-by-bank in retail environments.

The Benefits and the Use Cases for Merchants

Real-time payments appeal to retailers because they don’t come with the 2% to 3% interchange fees that credit and debit card transactions bring. Merchants receive their funds in real time, which means they can reconcile transactions quickly.

Instant payments can also be a powerful tool in many merchant use cases because of their around-the-clock availability.

“If you’re a business and your supplier says, ‘I’m not going to ship you any more pizza boxes until you pay the bill,’ you can use those technologies to push that money out,” Apgar said “If it’s 3 o’clock on a Sunday afternoon, you can say, ‘Fine, supplier, you got the money in your account.’ Unlike Fedwires that require manual intervention—so it’s only business hours—and ACH—that runs in batches and is posted only during business hours—real-time payments go 24/7, 365.”

This functionality could be a boon for a payment processor that is paying a merchant for its daily credit card sales. It could also be a powerful tool for insurance companies because they could resolve claims instantly and get victims of natural disasters and other incidents on the road to recovery.

Both of these use cases are unhindered by an attribute of U.S. real-time payments that is often considered a drawback: There is currently no way to dispute an instant payment transaction. This characteristic also opens up another potential use case.

“Let’s say you’re on a website selling a car and somebody says, ‘Here’s $5,000 for this rust bucket and I’ll FedNow it into your account.’ As a seller, when that money hits—here’s the title, here’s the keys, have a nice day. It’s cash in the bank,” Apgar said. “There are use cases where that is a valuable attribute, but buying stuff from a merchant is not one of them.”

No Dispute Mechanism

This irrevocability is one of the main challenges to the broader merchant use case for real-time payments. Most consumers have become accustomed to having the capability to dispute transactions that are suspicious or erroneous.

In this way, real-time payments operate similarly to peer-to-peer (P2P) payment platforms like Zelle and Venmo. These platforms have drawn criticism because if one of their customers is manipulated into sending money to a criminal, there is no recourse to be reimbursed. This has caused many P2P users to become prime targets for cybercriminals.

ACH, the most common pay-by-bank method in the United States, comes with payment delays but has a dispute mechanism built in. If a consumer notifies their bank of a fraudulent transaction, the bank can reverse it.

“That functionality doesn’t exist on RTP and FedNow,” Apgar said. “So, when we talk about use cases, it’s the sender knows the receiver, and the sender and the receiver agree on the amount. The sender agrees that there’s no dispute, and he’s got no claim to the money once it leaves his account. It’s done, and he has zero recourse.”

Send and Request Issues

Perhaps the main reason RTP and FedNow aren’t quite ready for merchant applications is they only allow users to send money.

“There’s no function where you can request money,” Apgar said. “If you walk into my store and tap your debit card, I’m sending a request and saying, ‘Take money out of his account and put it in my account.’ But there’s no way for me to do that. You have to initiate the payment.”

Additionally, in a card-based transaction, when the customer taps their card at the terminal, the merchant receives an approval code. If there is not enough credit or enough money in the account to cover the transaction, it won’t go through. This aspect doesn’t exist with real-time payments, so the merchant won’t know whether the transaction was approved.

“The way to check that you got the money is to look in your bank account,” Apgar said. “But if you’ve got thousands of point-of-sale stations, how do you do that? You would have to have some kind of AI bot scanning your bank account to see if there was a deposit for $16.33, when it was deposited, and that it wasn’t some other $16.33 purchase made by somebody else in another store.”

The Leapfrog Effect

These issues counter the narrative that real-time payments are sweeping the globe, and the United States is next in line. The first half of this assertion is true; in countries like Brazil and India, real-time payments systems like Pix and UPI have gained significant traction in a short time.

However, these countries are far different environments because their governments mandated Pix and UPI adoption. This regulatory-first approach was successful because a firmly established payment infrastructure was not in place.

“There is that leapfrog effect, and it’s the same thing with card payment technology,” Apgar said. “The infrastructure was not as developed in a lot of these countries as early as it was in the U.S., so card payments weren’t ubiquitous. Now that everybody’s got cellular capability in all these little towns, they can validate card transactions. It’s easy for the government to jump in and say, ‘We don’t need a debit card, we can just do pay-by-bank and tie it all in.’”

However, the debit card infrastructure is so entrenched in the United States that it doesn’t make sense for the Federal Reserve to mandate real-time payments to displace debit cards.

“From the consumers’ perspective, when you use your debit card, you’re already paying by bank,” Apgar said. “The merchant may avoid debit card interchange fees. but now that most debit cards are regulated under Durbin, the price is low. Unless the government is going to subsidize it to make the price even lower—like they do in Brazil and India—you kind of scratch your head looking for the business case.”

Searching for a Catalyst

Though more use cases for real-time payments are no doubt coming, there aren’t any new solutions on the horizon that could be the catalyst for more instant payments at retailers.

“This is fairly typical of the payments industry,” Apgar said. “As soon as something comes out, it’s plastered all over the media. ‘This is the next big thing—everybody jump on this bandwagon because the train is leaving the station.’ Everybody’s desperate to have something new to talk to their merchant customers about, and it is fun to talk about.

“FedNow and RTP are fantastic tools that will do a lot for money movement in the country,” he said. “But one of the things that they’re not built for is for consumers to buy stuff from merchants.”

The post Real-Time Payments Aren’t Yet the Next Big Thing for Merchants appeared first on PaymentsJournal.

The Reserve Bank of India (RBI) plans to lift the transaction limits on its Unified Payments Interface (UPI) system, a move expected to dramatically increase the capabilities of the real-time payments system.

Previously, UPI transactions were capped at Rs 1 lakh (approximately $1,162) for merchant transactions, forcing many users to either split payments for larger purchases or opt for alternative payment methods.

According to the Economic Times, the higher transaction limits will unlock a range of new use cases for UPI. Users could pay their school, college, or hospital bills, or even make a down payment on a car directly through the system.

The change may also benefit international travelers using UPI in countries where it’s accepted. In many of these regions, foreign currencies trade at higher values than the Indian Rupee, further limiting the effective transaction amount under the previous cap.

Though more types of transactions will now be possible, the RBI confirmed that it doesn’t plan to raise the transaction cap on peer-to-peer payments through UPI, which still stands at Rs 1 lakh.

Entrenching the System

UPI has become the predominant payment method in India, thanks to its instant transactions and often fee-free structure. However, while a February report found that transactions on the platform increased by a third year-over-year, the average ticket size decreased by nearly 10%—from roughly $17.50 to $15.85.

By expanding transaction limits, the RBI hopes to reverse this trend—further cementing the payments system’s role in everyday life. The move could also unlock new use cases for small- to medium-sized businesses.

Expanding Beyond Boundaries

Instant payments systems in countries like Brazil and India have expanded beyond simple account-to-account transfers. For example, Brazil’s Pix recently announced plans to include buy now, pay later services on its platform.

On the other hand, the U.S. has been much slower to adopt instant payments because rails like payment cards and ACH transactions have been in place for decades, and there has not been a catalyst to motivate a switch.

However, potential use cases for instant payments in the U.S. have been proposed. One such use case could be for big-ticket purchases. Instead of visiting the bank to obtain a cashier’s check for a large purchase, like a car, the buyer could simply send a real-time payment.

The post UPI Is Expanding the Instant Payments Use Case to Big-Ticket Items appeared first on PaymentsJournal.

The Pix instant payments system has become one of the most successful real-time payment implementations worldwide, and it will soon support buy now, pay later (BNPL) installment loans.

In just five years, Pix has emerged as the preferred payment method in Brazil, Latin America’s largest economy. Now, the system plans to introduce BNPL for its customers in September.

The new feature, dubbed Pix Parcelodo, could further drive Pix’s adoption in retail, particularly for higher-value purchases, providing an advantage to consumers who lack access to traditional credit options.

A Marriage of Two Forces

The addition of BNPL will likely further cement Pix’s dominance in Brazil. The instant payment system processed over six billion transactions per month last year. It was also a year in which Pix passed another milestone, with the platform’s transaction volume exceeding the combined total for credit and debit card transactions by more than 80%.

As the system gained traction, Pix  added more features, such as NFC contactless payment functionality for customers who have linked their bank accounts to Google Wallet.

The introduction of installment loans represents a convergence of two of the most powerful forces in payments: real-time payments and BNPL. While instant payments have gained traction more quickly in areas like Brazil and India, the dominance of card payments has slowed their adoption in the U.S.

Managing the Demands

BNPL, on the other hand, has become a global phenomenon. While it was once seen primarily as a way to split larger purchases in the e-commerce environment, it has quickly evolved into a payment method used for everyday transactions—both big and small.

Despite growing demand, BNPL comes with its challenges. Transparency around users’ total debt is often lacking, and managing the installment loan process can be intensive—one reason Apple shuttered its Apple Pay Later service and moved to Affirm.

Although Brazil’s Central Bank said Pix Parcelado will be available to both consumers and merchants, it has yet to provide details on how it plans to manage the technical demands of the installment loan process.

The post After Surpassing Credit Cards, Brazil’s Pix Is Taking on BNPL appeared first on PaymentsJournal.

A member of the European Central Bank’s executive board voiced frustrations over the persistently high costs of cross-border payments, despite declines in IT and telecommunications expenses.

Speaking at the Regional Governors’ Meeting, Piero Cipollone highlighted the issue with a specific example: a small business owner in Croatia sending a €5,000 transfer to a supplier in a Western Balkans country outside of the EU’s Single Euro Payments Area (SEPA) could face costs up to 12 times higher than when sending to a supplier within SEPA.

Since its launch in 2018, SEPA’s reach and capabilities have expanded greatly, with Montenegro, Albania, and North Macedonia set to join this year. Still, Cipollone noted that fragmentation within the EU remains a barrier to growth.

Interlinking Instant Payments

Because cross-border payments are a challenge on a much wider scale, a better system can be built by linking the existing real-time payment systems across countries.

This approach would reduce costs, increase speed and transparency, and prevent payment service providers from having to engage with multiple payment systems or a chain of correspondent banks.

Targeting Cross-Border Payments

At the heart of Cipollone’s proposal is the EU’s TARGET Instant Payment Settlement (TIPS) service, a multi-currency instant payments platform that already operates within SEPA.

Cipollone proposed implementing a currency exchange service within TIPS so real-time payments can originate in one TIPS currency and settle in another. Initially, this service would operate within the euro area, Sweden, and Denmark.

The system could then be expanded to include other networks globally. One such framework could be Project Nexus, which was established by a central bank consortium, the Bank for International Settlements (BIS). Set to take effect next year, the project is designed to connect payments systems in South and Southeast Asia, such as India, Malaysia, Thailand, Singapore, and the Philippines.

The next step in the proposed plan would be to establish a direct link between TIPS and India’s UPI, which has quickly become one of the leading instant payments systems in the world.

After these steps, the ECB can then work to further achieve its goal, which—according to Cipollone—is to “develop safer, more accessible alternatives that make global payments cheaper, faster, and more transparent, without compromising on integrity, stability and sovereignty.”

The post ECB Official Says Real-Time Payments Systems Could Solve Cross-Border Payments Struggles appeared first on PaymentsJournal.

As more companies pass card fees on to customers, Google Pay has started charging convenience fees for bill payments made by debit or credit card in India.

According to the Economic Times, electricity and gas bill payments will now incur a fee of 0.5% to 1%, including goods and services tax. These payments were previously free for low-value transactions. The Economic Times cited an instance where a customer was charged roughly ₹15 ($0.17) for paying their electricity bill with a credit card. 

However, these fees apply only to card-based transactions—United Payment Interface (UPI) transactions linked directly to bank accounts will continue to be exempt from convenience fees. 

Prominence to Profitability

Google Pay’s move aligns with its competitors, such as Walmart-backed PhonePe and Paytm, which already impose processing fees for card payments on bill transactions and recharges. These fees are a response to the rising costs fintech firms incur when processing transactions on UPI.

The payments platform has skyrocketed in popularity among consumers, with 16.99 billion UPI transactions recorded in January alone. However, this prominence hasn’t translated into profitability for the fintech firms operating on the platform.

According to the Economic Times, fintech companies incurred ₹120 billion ($1.38 billion) in costs for processing UPI payments in the fiscal year 2024, many of which were low-value transactions.

Improvement Initiatives

India’s government has worked to improve UPI’s profitability for payments companies through several initiatives, including waiving the Merchant Discount Rate (MDR) for UPI transactions below ₹2,000 four years ago.

More recently, the country delayed the implementation of market share caps for the platform by two years. The original proposal would have limited fintechs to a maximum 30% share of the total transaction volume  processed on UPI.

This decision directly impacted Google Pay and market-leader PhonePe. PhonePe currently holds roughly 48% of UPI payments, compared to Google Pay’s 37%. Despite these efforts, platforms continue to face challenges in monetizing their services on UPI and will likely keep exploring new revenue streams.

The post Google Pay Adds Convenience Fee for Bill Payments in India appeared first on PaymentsJournal.

The introduction of the Federal Reserve’s FedNow in June 2023 presented many financial institutions with a dilemma: should they adopt the new system, or stick with The Clearing House’s RTP, which has been in use since 2017? As many banks are discovering, the best answer might be to embrace both.

In a PaymentsJournal webinar, Anoop Basavarajaiah, Head of Payments at Volante Technologies, Matthew Brazda, Head of Real-Time Payments Product at BNY, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed the future of both instant payment systems, the emergence of critical use cases, the role of ISO 20022, and the challenges of fighting fraud in real time.  

 The Current State of Instant Payments

Since many U.S. banks already have a relationship with the Federal Reserve, the FedNow network has been able to scale slightly faster than RTP. FedNow currently has more banks live on its network, though this still represents less than half the account reach in the United States. Overall, 70% of accounts can currently receive a payment on RTP, compared to about 30% on FedNow.

The Fed aims to bring that 70% closer to 100% as quickly as possible, with a particular focus on onboarding the long tail of smaller community banks and credit unions.

“I like to say FedNow was the tide that lifted all boats for faster or instant payments,” said Tavilla. “It’s pretty impressive how FedNow went from 35 participants that launched to over 1,100 FIs.”

Since 2017, fintechs have been pushing banks to enable instant payments in 15 seconds. They’re challenging banks: if you can’t offer this, let us know where we can go.

“Everybody wants to reach each other through instant payments and provide that interoperability,” said Basavarajaiah. “There could be somebody on RTP and someone  else on FedNow. How do you make sure that if I can’t send through FedNow, I can send it through RTP. And If I can’t send it through RTP, can I send it through FedNow?

“In the next two to three years, it could be exactly like the European market, where most banks are already on instant payments. The same thing is going to happen here.”

Critical Use Cases

Most real-time payment use cases are business-to-business (B2B) or business-to-consumer (B2C). The new transaction limit for RTP of $10 million (FedNow’s is $500,000) will enable many new B2B or corporate use cases in areas like real estate, merchant settlement, invoices, and payroll. It will provide flexibility for payments that might have previously depended on conventional business hours.

There are also some emerging peer-to-peer use cases, such as when someone wants to send money to their nanny. But the greatest growth may be in B2C, which could allow individuals to receive a loan or an insurance claim in 20 seconds.

“If a customer is booking travel, the bank may offer them 2% cashback to pay through instant payment,” said Basavarajaiah. “Banks want to make sure that it’s all instant so it’s risk-free, and they don’t have to go through the traditional wire or ACH.”

Another promising use case is Request for Pay, which has been a feature of RTP since its inception. Any business purchasing commodities from a seller can make the payment without having to use checks or wires. In these cases, the goods would be delivered before the money arrives, leaving the seller at risk.

“We will hopefully see a lot of bank adoption on Request for Payment received next year, particularly from retail banks,” said Brazda. “We’ll also hopefully see enablement of additional use cases for using Request for Payment.”

Recently, Walmart announced plans to enable pay-by-bank using real-time payments for online transactions. However, e-commerce and recurring payments have yet to be approved by the network. Once approved, these will open the door to increased volume and monetization opportunities for banks and fintechs, benefitting their end customers.

The Role of ISO 20022

The ISO 20022 messaging standard is starting to make a significant impact on U.S. payment systems and instant payment. RTP was the first truly domestic payment network toadopt the messaging standard, and FedNow launched with ISO 20022, migrating their specifications for Fedwire from the legacy forum to ISO 20022.

The types of messages used to send and request payments are very similar. One key similarity is that when banks join either network, they are required to receive a real-time payment message. Many banks are looking to combine access to both networks into one solution to offer to their customers.

“I like to think of ISO 20022 as the lingua franca between the different payment systems,” said Tavilla. “When the FedNow payment rail was being developed, even though the ISO 20022 messages weren’t identical between FedNow and RTP, the Fed team worked closely with The Clearing House to ensure that the messages were close, to ensure compatibility even though the systems aren’t interoperable today.”

Faster Payments + Fraud Prevention

Along withfaster payments, there’s also been an acceleration in faster fraud. Most banks expect the sending bank to handle sanctions and fraud, so the receiving bank doesn’t have to worry about them. However, everything must happen in real-time.

The primary responsibility lies with the institutions that originate these payments. The receiving bank has only five seconds to respond to the payment and post the funds, which isn’t enough time to conduct a comprehensive risk management check.

As a result, the Know Your Customer (KYC) and due diligence aspects of the onboarding process become absolutely critical businesses.

“I’ve had the privilege of working with multiple institutions who prioritized the KYC and due diligence aspects of bringing these clients on, because real-time payments are instantly revocable,” said Brazda. “If you haven’t vetted your customer before that, that’s the risk you run. Those are the things can impact other customers, other financial institutions, and even other non-financial institutions.”

Both RTP and FedNow have what’s called account activity thresholds, which are daily limits that banks can configure by account for sending payments. Any bank participating in FedNow can also add specific combinations of account routing numbers, and the FedNow system will automatically reject payments originated with those accounts.

24/7 Availability & Flexibility with Payment-as-a-Service

With payment-as-a-service, consumers gain the flexibility of a payment system that’s available around the clock. The payment network, regardless of its architecture or software, is offered as a 24/7 service, ensuring constant connectivity to FedNow and RTP.

With PaaS, that’s one less thing the bank needs to worry about. All they have to do is get registered with FedNow and RTP.

“There’s no preference at the end-customer level to choose between the networks,” said Brazda. “They don’t really even see that you’re sending a real-time payment. All they want is for their money to get from point A to point B fast. That’s the main objective for both networks.”

The post RTP or FedNow Instant Payments? The Answer Is Both  appeared first on PaymentsJournal.

Amid the continued push for U.S. instant payments adoption, FIS announced that it is one of the first fintech providers to be certified to enable send capabilities for credit transfers on FedNow.

The U.S. Federal Reserve launched its FedNow instant payments service in July 2023,  and roughly 1,000 financial institutions are currently participating. However, with over 9,000 banks and credit unions in the U.S., FedNow is still far from achieving ubiquity.

Additionally, the vast majority of banks supporting the platform are receive-only. Enabling send capabilities is critical for instant payments adoption to gain momentum. FIS noted that its platform can help its financial institution clients fully harness the entire FedNow service for a unified real-time payments solution.

Sending Benefits

According to Chris Como, Head of Cards and Money Movement at FIS, there’s a continued dependence on credit cards and debit cards in the U.S. economy. In a statement, he noted that these payment methods can create payment delays that can “harm customer loyalty when they need to pay loans, rent, or time-sensitive bills on any given day.”

Real-time payments can solve these issues—if end users are able to both send and receive payments. According to FedNow, the send functionality also allows banks and credit unions to achieve faster and more substantial returns on their investments.

Instant payments can reduce the costs associated with processing time-consuming payment methods like paper checks while helping banks and credit unions uncover new revenue opportunities. More importantly, instant payments help financial institutions enhance customer service, helping them retain existing customers and attract new ones.

A Critical Niche

While instant payments undoubtedly fill a critical niche in the payments landscape, FedNow faces plenty of competition. Although the Federal Reserve’s platform may have more financial institutions on board than The Clearing House’s RTP instant payments rail, the more well-established RTP has a higher transaction volume than FedNow.

Both RTP and FedNow, however, lag far behind Same Day ACH, which processed over a billion transactions last year. While not a fully real-time payment method, Same Day ACH has a key advantage—most U.S. financial institutions already support standard ACH, allowing them to easily accept Same Day ACH without requiring significant system or process changes.

The post FIS Adds FedNow Send Capabilities for Comprehensive Instant Payments appeared first on PaymentsJournal.

Most consumers in Canada use instant payments and will continue to do so, but fraud remains a top concern.

A recent FICO report found that 91% of Canadians have sent a real-time payment, with 87% planning to maintain or increase usage over the next year. However, more than two-thirds would feel reassured if banks could better detect and block fraudulent transactions.

Roughly half of respondents said stronger fraud detection would be the most impactful step financial institution could take. Their concerns are likely amplified by the fact that most Canadians have received a communication they suspected was a scam. In addition, 44% of  respondents reported that a friend or family member had fallen victim to fraud in the past year—a 5% increase year-over-year.

Global Counterparts

Fraud attacks have become increasingly prevalent worldwide, and criminals will exploit any available mechanism to them. However, real-time payments present an added challenge because account-to-account transfers are conducted in seconds and are often irrevocable.

The concerns of Canadian consumers were echoed by their global counterparts. FICO found that a growing number of consumers worldwide reported that their family and friends had been victims of real-time payment scams last year. In North America as a whole, 47% of individuals said their family and friends were scammed, a figure on par with the EU.

In Asia Pacific and Latin America, the percentage of respondents who said a friend or family member had been affected by instant payments fraud last year rose to 56% and 69%, respectively. These numbers were likely higher due to surging instant payments adoption in areas like Brazil and India.

Full Clarity

For all the fraud concerns that come with instant payments, the benefits outweigh the drawbacks. Real-time payment settlement allows both consumers and businesses to have full clarity on where their funds are and make better financial decisions.

While the adoption of instant payments is likely to increase, consumers’ fraud concerns are real and should be top of mind for financial institutions moving forward. According to the FICO study, 12% of respondents in Canada and 13% of respondents worldwide reported they would change banks if they were unhappy with their financial institutions’ fraud detection and mitigation solutions.

The post Canadians Have Adopted Instant Payments, but Fraud Concerns Linger appeared first on PaymentsJournal.

In its continued success story, Brazil’s instant payment system Pix processed over six billion transactions per month in 2024.

A report from Matera, Pix by the Numbers, detailed the platform’s transactions and found dramatic increases in both consumer and business-to-business payments, which were up 94% and 56%, respectively, year-over-year.

December 20, Pix reached its high-water mark, setting a single-day record with 252.1 million transactions. Overall, there were roughly 64 billion Pix transactions last year, a 53% increase year-over-year.

There has long been speculation that Pix payments would eventually surpass card transactions as the preferred method of payment in Brazil. While initial estimates suggested it would take years for Pix to reach that milestone, the platform has already achieved it. Matera’s study found that Pix’s transaction volume in 2024 was 80% higher than the combined total for credit and debit card transactions.

Innovations in Progress

The main reasons Pix has gained traction so rapidly are that it is free to use and transactions settle in real time. While these benefits alone might be enough to drive continued adoption, the platform also has two key innovations in the pipeline for this year.

Pix launched contactless NFC payments through its Pix by Proximity platform last year, but that functionality was limited to Google Wallet. This year, the platform plans to extend the tap-to-pay functionality on a broader scale.

In addition, Pix plans to launch its Automatic Pix recurring payment solution this summer, allowing users to pay bills, manage subscriptions, and even make recurring investments. The launch of Automatic Pix was delayed from its originally planned October 2024 release due to concerns over the dispute process, among other issues.

A Worldwide Shift

Brazil has been at the forefront of the instant payments movement, one of the key forces driving a global shift in payments. A major factor beind Pix’s success is that it is operated by Brazil’s central bank, with government-mandated support for Pix’s adoption.

In the U.S., a government mandate is highly unlikely, which is one of the reasons why real-time payments rails like RTP and FedNow have not reached Pix’s level of ubiquity. However, financial institutions can still create a network that takes its cues from Pix’s success. This would involve developing an interoperable, intuitive, and innovative system designed to accelerate instant payment adoption.

“Pix is used by people to send money to friends, pay in stores, or by reading a QR code,” said Carlos Netto, CEO of Matera, in an earlier conversation with PaymentsJournal. “It’s not only a rail but also a way to move money from one bank account to another bank account. Pix and related technology enable every use case. We have QR codes so consumers can pay businesses instantly. We have the directory so we can send money to our friends. And there’s a standard UI so every bank providing Pix has to offer it in the same way so it’s easy for everyone to use. It enabled Pix to grow fast. Faster than we were expecting.”

The post Brazil’s Pix Set Records, Surpassing Credit Card Transactions Last Year appeared first on PaymentsJournal.

In today’s fast-paced digital economy, instant payments have become a game-changer, redefining the way individuals and businesses move money. Whether it’s splitting a bill, paying a freelancer, or settling invoices in real time, instant payment systems offer speed, convenience, and efficiency like never before. As financial institutions, fintech firms, and regulators push for broader adoption, understanding the benefits, challenges, and future of instant payments is crucial.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Impact Note: U.S. Real-time Payments: Full Speed Ahead After Year 1 of FedNow

Instant Payment Use Cases With Best Revenue Opportunities, by Percentage of FIs Selecting Them

• 85% – Loan disbursements
• 73.5% – Invoice payments
• 69.4% – Loan repayments
• 61.2% – Instant funding of newly opened accounts
• 46% – Payroll processing

Source: U.S. Faster Payments Council and Finzly survey, May 2024

About Report

On July 20, 2024, FedNow marked its first anniversary, solidifying its role in revolutionizing instant payments across the United States. Over the past year, this highly anticipated Federal Reserve initiative has not only accelerated the adoption of real-time payments but also contributed to record-breaking transaction volumes across networks like RTP and Same Day ACH. Financial institutions of all sizes are increasingly prioritizing real-time payment capabilities, signaling a fundamental shift in the industry.

Consumers and businesses alike are embracing faster payment solutions at an unprecedented rate. Recent Federal Reserve Financial Services surveys reveal that 74% of consumers and 86% of businesses used instant or faster payments in 2023. Additionally, 79% of consumers and 74% of businesses expect their financial institutions to offer these services, with over half of consumers (57%) planning to expand their use of real-time payments. This surge in demand underscores the necessity for financial institutions to keep pace with evolving expectations.

This impact note explores FedNow’s first-year progress, examining its influence on financial institutions, businesses, and consumers. It also highlights key use cases and challenges shaping the future of real-time payments in the U.S.

The post Which Instant Payments Drive the Most Revenue? appeared first on PaymentsJournal.

Brazil, a trailblazer in instant payments, reported that its popular Pix platform facilitated transactions worth over 120.7% more this Black Friday compared to last year.

According to the latest data from Brazil’s Central Bank, Brazilians spent roughly 130 billion reais ($21.60 billion) using Pix this Black Friday, up from 58.9 billion reais last year. In addition to the value spike, the platform also saw a significant rise in volume—239.9 million transactions compared to 136.3 million the previous year. This year’s Black Friday also set a record for the most transactions in a single day.

“There is a lot of momentum around Pix in Brazil, and that’s largely because of the way the Brazilian Central Bank set it up,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The Central Bank launched Pix with three important boosts. First, it made it mandatory for all major banks to participate. Second, it standardized user experiences in all use cases, and, finally, there are no fees for either sender or receiver.”

Not a Holiday Phenomenon

These features undoubtedly fueled Pix’s surge this Black Friday, which is generally considered to be the beginning of the holiday shopping season. While the day after Thanksgiving is traditionally the busiest shopping day of the year in many countries, Pix’s upswing isn’t simply a holiday phenomenon.

Since its launch four years ago, the platform has quickly gained popularity as a preferred payment method in Brazil. By next year, Pix is expected to surpass credit cards as the predominant payment method in the country.

The Market Picks the Winner

Instant payments are one of the most transformative innovations in the payments industry and are expected to continue gathering steam worldwide. However, the U.S. has taken a different approach to this emerging payment method, resulting in more tepid adoption.

“In the U.S., the Federal Reserve participates in payments, such as instant payments platform FedNow and wire transfers, but it doesn’t mandate participation,” Apgar said. “The U.S. prefers to have the market pick the winner, if you will.”

“Also, note that Pix is only available for funds you have in your bank account, there is no credit component,” he said. “In the U.S., a scheme like this would offset some debit card volume, but not be applicable to credit purchases, including alternative lending products like BNPL.”

The post Black Friday Instant Payments on Pix More Than Doubled from Last Year appeared first on PaymentsJournal.

The RTP network now averages over 1 million payments per day, positioning the platform for strong momentum going into the holiday season.

Between September and October, transaction volume on RTP, which is operated by The Clearing House, increased by 6.2%. On November 1, the instant payments powerhouse reached a new single-day record, processing 1.45 million transactions valued at $1.24 billion.

“It is exciting to see that the RTP network is supporting real world payment needs of both consumers and businesses with almost half of payments happening after banking hours,” Margaret Weichert, Chief Product Officer at The Clearing House, said in a prepared statement. “With the holiday season upon us, consumers can send money instantly to pay for gifts, holiday meals and other festivities, while small businesses can get paid in real time.”

Compelling Use Cases

The ability to send payments overnight, on weekends, and on holidays makes instant payments a compelling solution for businesses. This capability allows merchants to securely pay suppliers or partners, pay employees or contractors, and complete reconciliation and accounting functions in seconds.

These aspects have fueled a growing number of use cases for instant payments, including in the gig economy, the insurance industry, and even for government disaster relief funds. Cross-border payments are another promising use case, and RTP has explored a connection to SWIFT, a global messaging network, to facilitate payments from the U.S. to Europe.

A Banner Year

Instant payments—and the open banking model—have been adopted much more readily in countries like Brazil and India. Brazil’s Pix has become so popular that it is expected to surpass credit cards as the dominant payment method in the country. Following this success, speculation has grown around how and when instant payments will gain significant traction in the U.S.

Although the government launched its instant payments service, FedNow, last year, the RTP network is still the largest system of its kind in the country. As more merchants recognize the benefits of instant payments, this holiday season could serve as the springboard for a banner year for the RTP network.

The post Instant Payments on the RTP Network Surge Ahead of the Holidays appeared first on PaymentsJournal.

Instant payments have been a global phenomenon, but the momentum for real-time payments  is building in the U.S. There is a growing expectation among both businesses and consumers that when they send funds, the recipient should be able to access them instantly.

In a recent PaymentsJournal podcast, Justin Jackson, SVP, Head of Enterprise Payments, Fiserv, and Robert Clayton, Vice President of Product Management, as well as Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the increasing number of use cases for instant payments and the progress that has made toward adoption.

Instant Use Cases

One of the early use cases for instant payments has been in the gig economy, predominantly in the rideshare market. Drivers are constantly refueling, performing maintenance, and buying food and beverages. To keep them out on the road, it would be a great boon for rideshare drivers to refresh their funds throughout the day, any day of the week, through a real-time payments connection.

“There are similar needs in the marketplace space,” Clayton said. “There is a demand for real-time, around-the-clock payments so marketplace sellers can manage their inventory. Marketplaces traditionally have set payment boundaries around sellers, where they must wait a prescribed amount of time or reach a sales threshold before they can request a payout. Real-time payments have tremendous benefits for those sellers.”

The insurance industry is also seeing traction. Often, clients lose their car or house and it could be a massive competitive differentiator for an insurance company if they are able to settle a client’s claim in real-time during an urgent situation.

Instant payments could serve government agencies in a similar capacity. The Southeastern U.S. was recently hit by hurricanes that did significant damage, which created the urgency needed for many to receive disaster funds.

“Federal and state agencies are extremely focused on getting aid to the people who survived these events,” Clayton said. “They need to make those funds available as quickly as possible, but it can’t be location based. Even if the government could deliver checks same-day to disaster victims, many have evacuated or their homes have sustained extensive damage.  The ability to pay a person digitally in real-time, wherever they might be, could be an incredibly important force for government agencies.”

Shifting the Conversation

Although the amount of use cases for instant payments has increased, some of the financial institutions that were early adopters of RTP or FedNow aren’t using the rails to their fullest potential. Many of these organizations can only receive instant payments; they don’t have the functionality to send.

“Either they didn’t see the use case or the applicability, or those institutions are concerned about the risks,” Jackson said. “However, that mindset has shifted to where it’s not receive-only, it’s receive-first. They may not be ready to send instant payments now, but they want that capability in the coming months or years. They know they will have customers that want to make instant transfers or pay bills in real-time.”

The risks of sending instant payments, and the potential for fraud, has daunted some U.S. financial institutions because real-time payments are guaranteed credit transactions that are instantly available on the recipient’s end.

“It is a significant hurdle to clear to unwind an instant payment transaction if necessary,” Jackson said. “There is a need to have strong risk and fraud controls, many of which are already in place, but some institutions are still reticent on instant payments because they are not sure how they will handle fraud.”

Instant payment volumes will also hit an inflection point where exponential growth occurs overnight. In that scenario, many organizations are concerned they won’t have the infrastructure to support it.

There are additional concerns in corporations or government entities that are still reliant on paper checks. Many of those organizations have built their financial operations to account for the float between the time a check is issued and the time it is processed. A switch to instant payments would mean those organizations would have to drastically adjust their model.

Though it might cause short-term issues, there are benefits to moving from paper checks to a real-time payments model. Chief among those benefits is an increase in customer or constituent satisfaction if they receive their funds instantly.

“In the case of a natural disaster, if a government agency is able to send funds immediately, it shifts the conversation,” Clayton said. “Instead of a citizen who is focused on the hardship they endured, they can say they experienced a terrible act of nature, but their government was there to get them back on their feet. It shifts the conversation to a happy ending.”

Intriguing Frontiers

While there are a variety of domestic use cases, one of the most intriguing frontiers for instant payments is cross-border transactions.

“Cross-border instant payments are compelling because there are already so many instant payments services that have been established in other countries,” Bodine said. “There is Pix and UPI, and there is FedNow and RTP in the U.S., but we can’t do a cross-ocean instant payment right now. It’s intriguing to see who will connect those disparate rails.”

The global card networks operated by Visa and Mastercard could be a solution to that problem. International messaging network SWIFT has also made headway toward creating a cross-border framework.

“There is a bit of reality in that there are so many disparate payment schemes locally across various countries and regions,” Clayton said. “However, RTP has discussed the potential of a SWIFT integration that would enable cross-border transactions from the U.S. into Europe. Europe is advantageous because there are consistent regulations in the region.”

Instant Expectations

Instant payments are quickly gaining ground in the U.S. but are far from being implemented in every use case. Adoption is indeed growing. There will be an increasing expectation from commercial enterprises, consumers, and small businesses that they can send and receive funds instantly.

“Instant payments are very real and they are very here,” Jackson said. “Fiserv has approximately 700 financial institutions signed up or live for RTP and FedNow. We as an industry, including payments processors, financial institutions, merchant service providers, we all have to do our part to support instant payments adoption. Instant is fast becoming the expectation of the day, so we should continue to push that ball forward.”

The post Very Real and Very Here: The Proliferating Use Cases for Instant Payments appeared first on PaymentsJournal.

Instant payments platform Pix will integrate NFC contactless payment functionality for customers who have linked their bank accounts to Google Wallet.

Brazil’s central bank unveiled Pix by Proximity at a joint presentation with the president of Google Brazil. Initially, this feature will be available only to Google Wallet users on Android phones. However, the platform plans to roll out contactless payment support to all customers next year.

“For the user, everything will be done naturally,” said Natacha Litvinov, Head of Payment Partnerships for Latin America at Google in a statement. “The user can choose which account linked to the Google wallet will be used to execute the Pix transaction. Payment confirmation is done using biometrics, and the payment message is sent to the cell phone and also to the machine.”

Wider Integrations

The widescale launch of Pix by Proximity comes after Brazil established a framework for contactless payments this summer that was approved by the Central Bank and the National Monetary Council.

In addition to contactless payments, Pix and Google are working to add a “Pay with GPay” button in e-commerce applications to speed up transactions while keeping buyers on the seller’s platform. This integration comes as Pix’s use in e-commerce applications is soaring—the platform is expected to overtake credit cards as the predominant payment option in Brazil next year.

As the platform scales, concerns about fraud and security have emerged. The Central Bank plans to address these by installing transaction limits for purchases made from unknown devices.

In addition, Pix and Google Wallet are launching Night Mode. When activated, it will block all Pix transactions from personal accounts to unknown beneficiaries between 8 p.m. and 6 a.m.

A New Level

In addition to benefits for consumers, contactless payments offer substantial benefits for merchants. Customers have come to expect mobile payment options because they are fast, secure, and more hygienic. With the growing popularity of Pix, merchants who support contactless payments have a strong opportunity to expand their customer base.

“Today, the number of transactions sent to companies is still lower than that sent to individuals (the ratio was 70% to 30% this summer), but this could change,” Pedro Romero, Director of Wallet & Banking at Brazil’s PicPay, told Valor Investe. “We usually make many more payments to businesses than to individuals, so this new experience—which brings countless advantages to merchants—will take Pix to a new level.”

The post Pix Launches Contactless Payments for Google Wallet Users appeared first on PaymentsJournal.

Open-banking platform Dwolla, which allows businesses to integrate into the U.S. instant payments rails, will expand its partnership with data firm Plaid.

The new integration will bring Plaid’s instant account verification and risk assessment functionalities to Dwolla’s pay-by-bank operations as soon as next year. Businesses will also be able to onboard to Dwolla using Plaid, a platform well known to many organizations.

The new solution is expected to interface with accounts at more than 12,000 U.S. financial institutions, according to a news release.

“Our expanded partnership with Plaid represents a significant step forward in our mission to simplify and streamline pay-by-bank payments for businesses,” said Dave Glaser, CEO of Dwolla. “By integrating Plaid’s advanced account verification and risk assessment features into our open-banking services, we’re providing a single, unified solution that addresses the complex needs of modern enterprises in the evolving payments landscape.”

Significant Deals

The expansion of the Plaid partnership is the latest in a series of significant deals for Dwolla. Earlier this year, Dwolla announced an agreement with Visa that would bring its open-banking platform to the credit card giant’s infrastructure. That deal came on the heels of Dwolla’s agreement with cybersecurity company MX Technologies.

Dwolla’s platform integrates into both U.S. instant payment rails—RTP and FedNow—in a single interface. In addition to real-time settlement, instant payments offer businesses a more secure payment method that can include much more transactional data.

A Prime Position

Dwolla is in a prime position to benefit from the Consumer Financial Protection Bureau’s new rules that should give the U.S. open-banking industry a clearer regulatory framework. The CFPB’s rules are designed to protect consumers but also aimed at increasing innovation in financial services.

Although the CFPB’s new regulations are mostly about giving customers the freedom to switch between financial institutions whenever they want, the agency specifically cited instant payments. The CFPB believes pay-by-bank can be a better option for merchants and consumers because it is more cost-effective than credit cards. Instant payments are also more secure because they require the consumer to authorize the transaction.

The post Dwolla Instant Payments Platform to Expand Plaid Integration appeared first on PaymentsJournal.

Despite recent instant payments initiatives, the Swiss National Bank reported that cash is still the most widely accepted payment method among businesses in the country.

Roughly 98% of the 770 companies surveyed by the central bank said they accepted physical payment, primarily citing customer demand. Many businesses also believe cash is more stable and less expensive than many other payment options.

The Swiss National Bank’s survey included businesses from a variety of industries, including retailers, transportation companies, service providers, and entertainment venues. According to Reuters, the survey found that the overwhelming sentiment among business owners was they “continue to view cash as important.”

Standing Apart

While many of its EU neighbors have readily adopted emerging payment methods, Switzerland has stood apart. One challenge is the country’s shrinking bank network, which has decreased by 21% over the last decade. According to Reuters, UBS plans to close 85 additional branches next year, after its recent acquisition of Credit Suisse.

There have been concerns that the lack of access to the financial system could marginalize portions of the population if the country moves away from cash. It’s not uncommon for Swiss customers to make large transactions, including purchasing automobiles, using physical bills. Notably, the country offers some of the highest-value notes in the world—the 1,000 Swiss franc note ($1,166).

The Costs of Cash

The results of the Swiss National Bank’s survey come shortly after the central bank announced that it made significant strides in establishing an instant payments network among 60 financial institutions in Switzerland. The bank aims to have every bank in the country on board within the next two years.

These efforts have been amplified by some Swiss regulators encouraging alternatives to cash payments. There are also indications that some Swiss public transportation companies could soon limit cash acceptance.

However, many Swiss businesses have pushed back, citing the costs associated with accepting cash, including bank and cash transport fees, as outweighing the benefits. Despite these efforts, the Swiss National Bank’s survey shows that most businesses and consumers in the country remain largely unaffected by the shift away from cash.

The post Cash is Still the Payment of Choice for Swiss Consumers appeared first on PaymentsJournal.

More than half of global consumers have made instant cross-border payments for goods and services, and that market is projected to grow.

Approximately 63% of consumers have used instant payments systems to send funds across borders to friends and family, according to a recent report by GlobalData. The study also estimated that European cross-border payments alone would experience nearly the same level of growth in the next few years.

“We’re seeing the dramatic use of instant payments in India, Brazil, and Asia, and it’s picking up steam in the European Union,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, in an earlier conversation with PaymentsJournal. “The real tipping point is going to be when we see the cross-continent and cross-ocean payments influx, and I don’t think we’re too far away from that happening.”

Prime Candidates

Instant payments are considered the future because they are fast, accurate, and less expensive. They are also a prime candidate for cross-border payments, which often face issues with slow settlement times, regulatory hurdles, and fraud.

There have already been cross-border expansion efforts by some of the largest instant payments players. After India’s success with UPI, the National Payments Corporation of India’s international branch entered talks to explore expanding the UPI model to countries in South America and Africa.

UPI is also set to connect with instant payments services from Malaysia, Thailand, Singapore, and the Philippines over the next few years in a venture called Project Nexus. UPI had already linked with Singapore’s PayNow last year.

Cross-Border Powerhouse

Project Nexus is facilitated by the Bank of International Settlements, a consortium of seven major central banks. BIS has also initiated Project Agora, a collaboration with public and private financial organizations to explore how tokenized commercial bank deposits can be integrated with central bank digital currencies on a single platform.

One participant in Project Agora is the Society for Worldwide Interbank Financial Telecommunication (SWIFT) which has the potential to be a cross-border powerhouse in its own right. SWIFT operates a global messaging network that it has already used to transfer tokenized assets. The organization is moving forward with digital asset transaction trials next year.

Although there are many cross-border payment solutions in development, it’s still unclear which one will scale to become the standard for instant cross-border payments. Last year’s failure of the P27 project in Europe proved that a common standard isn’t the only issue hindering cross-border payments—banks and regulators also have to buy in.

The post Instant Cross-Border Payments Gain Traction Amid Scaling Challenges appeared first on PaymentsJournal.

The international branch of the National Payments Corporation of India (NPCI), which operates the highly popular United Payment Interface instant payments platform, is in talks with countries in South America and Africa to help them develop a similar system.

The NPCI’s International Payments Ltd (NIPL) has met with leaders from over 20 countries but it is close to reaching a deal with a particular nation, though it declined to elaborate further. According to Reuters, Rwanda is the potential candidate and “serious discussions have happened.”

NIPL has indicated it would use UPI as the template for the new systems, with those platforms potentially being implemented within approximately three years. NIPL has already signed agreements with Peru and Namibia, and the instant payments platforms in those countries are set to launch sooner.

Facilitating Inclusion

Instant payments platforms like UPI and Brazil’s Pix have flourished in countries without established banking systems. Instant payments systems can reduce a country’s dependence on cash and facilitate financial inclusion in underserved populations. They can also be a game-changer for small- to medium-sized businesses.

The strong demand for banking solutions has made UPI the most-used payment method in India. The platform processed 15 billion transactions last month, up 41% year-over-year. In addition to supporting payments at the point of sale, UPI can also expedite peer-to-peer payments.

Forging Links

NIPL is also working to forge more international links for UPI. The platform joined Malaysia, Thailand, Singapore, and the Philippines to form Project Nexus, under the scope of the Bank of International Settlements.

Project Nexus is the first step in creating a network for cross-border instant payments in South and Southeast Asia, and it is expected to launch in the next two years. Indonesia has also considered joining the project, and the EU participated in a trial run of the platform.

UPI already established a direct link with Singapore’s PayNow last year, enabling the two systems to tap the estimated $1 billion in cash flow between the countries. UPI has seven such links in place, and NIPL’s leadership indicated there are more to come.

The post India Could Bring UPI-Style Instant Payments to South America and Africa appeared first on PaymentsJournal.

Walmart’s expansion into personal finance continues with the announcement of its upgraded pay-by-bank offering, set to roll out next year. The service will allow Walmart customers to make instant transfers directly from their bank accounts for online purchases, sidestepping card networks and their processing fees. 

Pay-by-bank isn’t new for Walmart shoppers. The existing system, offered through Walmart Pay, took roughly three days to finalize transactions, which are processed through the Automated Clearing House. The retailer has deemed that iteration a success. “It’s certainly surpassed our expectations of the amount of customers that have registered and actually use the payment type,” Jamie Henry, Walmart’s Vice President of Emerging Payments, told Bloomberg News.

However, the new system offers a significant upgrade. Customers using pay-by-bank will see the transaction reflected in their account balance instantly, and Walmart will receive the funds immediately. As with the initial offering, this option will be available—for now at least—only to online shoppers through Walmart.com.

The transactions will use Fiserv’s NOW Gateway, which is integrated with both The Clearing House’s Real Time Payments network and the Federal Reserve’s FedNow instant payments service.

An Array of Personal Finance Tools

Industry observers believe this could showcase the power of pay-by-bank, not just for Walmart shoppers but for merchants as a whole.

“As the world’s largest retailer, Walmart could ignite instant pay-by-bank payments in the U.S.,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Real-time pay-by-bank could offer a number of benefits for consumers.”

“Besides enabling customers to see transactions reflected in their bank accounts instantly, retailers could also credit refunds immediately with real-time pay-by-bank,” she said. “Retailers could also pass along their savings in payment processing costs to customers who use pay-by-bank.”

For some time, Walmart has been working to integrate its proprietary personal finance tools into its offerings for shoppers. In April, the retailer introduced buy now, pay later loans through One, the fintech startup that is majority-owned by Walmart, moving away from an earlier partnership with Affirm.

Earlier this year, Walmart also parted ways with its longtime credit card provider, Capital One, which led to speculation that Walmart might use One to develop its own store-branded card.

The post Walmart Dips Its Toes into Instant Payments appeared first on PaymentsJournal.

Pix, Brazil’s instant payment system, is expected to overtake credit cards as the dominant payment method for Brazilian e-commerce transactions next year.

Research from Ebanx, a Brazilian payments firm, highlights how  Pix adoption has grown much faster than expected. In fact, earlier this year, all indications were that the platform wouldn’t match credit card transactions until the end of 2026.

That is a significant achievement for a platform that was launched by Brazil’s Central Bank in 2020. Part of the reason Pix has caught on so fast is it is free to use, and transactions settle in real time, benefitting merchants.

“This is big news for retailers, and an especially popular topic in the U.S., because merchants and their lobbying groups are relentlessly focused on reducing the cost of payments to their businesses,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The QR-code-based platform is easy for consumers to use through their mobile devices. It also enables identity verification of the buyer in e-commerce transactions where a card validation device like a payment terminal is not part of the transaction.”

Rapid Expansion

Instant payments have gained significant traction in Brazil, where the economy was previously more cash-based. Pix has quickly emerged  and expanded to include more financial services, with speculation that the platform may soon introduce buy now, pay later functionality.

However, one area where Pix still falls behind credit cards is in its provisions for resolving customer disputes.

“Particularly in e-commerce merchandise sales, consumers have chargeback rights for goods that aren’t received or aren’t as described,” Apgar said. “Most of the pay-by-bank schemes, especially where instant payments are involved, don’t provide any after-sale support for consumers. If something goes wrong the consumer is left to deal with the merchant.”

Outweighing the Drawbacks

Though there are still some hurdles to clear, the benefits of Pix outweigh the drawbacks. Brazil’s central bank recently reported that Pix set a record for daily transactions, reaching 227 million.

“There are so many service-based applications that align perfectly with instant payment schemes like Pix,” Apgar said. “That includes ride-sharing apps like Lyft and Uber and food delivery services like Grubhub and Door Dash, along with many app-based transactions like parking costs, movie tickets, or stadium concessions.”

“These purchases now fall under the heading of e-commerce, because the purchase is being made through a mobile app instead of in-person at the point of service,” he said. “That means instant payments platforms like Pix aren’t just about the changing face of payments, they are about the changing face of e-commerce.”

The post Brazil’s Pix Could Surpass Credit Cards Next Year appeared first on PaymentsJournal.

Visa’s A2A pay-by-bank service will launch in the UK and Europe next year, offering consumers a more secure way to pay bills and make purchases directly from their bank accounts.

Currently, when consumers set up direct debits for rent, utilities, or childcare, they often are required to sign over extensive personal data. In addition, they typically need to give advance notice to change payment amounts, and handling one-off transfers might require multiple interactions. Many consumers also lose significant amounts each year due to unauthorized subscription auto-renewals.

Visa A2A is designed to mitigate these issues by giving consumers the ability to monitor transactions and reverse them if necessary. The platform uses variable recurring payments (VRP), enabling users to adjust their direct debits with each transaction. A2A also leverages biometric authentication to reduce unauthorized transactions.

“We want to bring pay-by-bank methods into the 21^st century and give consumers choice, peace of mind and a digital experience they know and love,” said Mandy Lamb, Managing Director, Visa UK and Ireland, in a statement. “Visa A2A will ensure consumer-to-business bank transfer payments have similar levels of protection that consumers are used to when they use their cards.”

Faster Payments

Visa will pilot A2A in the UK in early 2025 before expanding to Europe later in the year. The service will initially have limited scope—it can’t be used to pay for many recurring expenses like streaming services or gym memberships.

As the platform gains traction, businesses could see immediate benefits. A2A uses the UK’s Faster Payment System rails, which can deliver near real-time settlement. Merchants will be notified much faster if a consumer cancels or modifies a payment, and the system’s higher throughput for transaction data should facilitate smoother reconciliation.

Open Banking Trailblazer

Visa A2A should be well-received. The UK has been an open banking trailblazer, and account-to-account payments are one of the core principles of the model. The U.S. has lagged behind many other countries, in part due to the established credit card culture.

U.S. consumers have been hesitant to adopt pay-by-bank solutions because these methods are viewed as less secure, and account-to-account transactions are often irrevocable once authorized. Visa A2A could alleviate these concerns if the service gets a U.S. launch.

The post Visa to Launch Upgraded Pay-by-Bank Solution appeared first on PaymentsJournal.

The rapid growth of instant payments in the U.S. has captured significant attention across the payments and banking industry. As digital transactions become increasingly integrated into daily life, the estimated value of the instant payments market is set to soar, reflecting both consumer demand for speed and efficiency and the ongoing innovation within financial technology.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Movements in Global Commercial Payments and Banking: 2024 Edition

Estimated Value of U.S. Instant Payments 2024-2028

• 2024 – $4 T
• 2025 – $8 T
• 2026 – $16 T
• 2027 – $27 T
• 2028 – $37 T

Estimated value in Trillions of U.S. Dollars

Source: Deloitte Insights and Association of Financial Professionals, 2023

About Report

Global commercial banking and payments are undergoing rapid transformation, spurred by advances in technology, shifting corporate practices, and emerging market trends. Businesses are under pressure to adapt quickly, staying competitive, mitigating risks, and seizing new opportunities. One of the most significant trends is the increasing adoption of instant payments worldwide. As businesses begin to mirror the success of instant payments in the consumer sector, this trend is expected to gain even more momentum.

This report by Javelin Strategy & Research examines these ongoing changes in areas such as cross-border transactions, emerging corporate payment methods, regulatory compliance, anti-fraud efforts, and the prospects for non-systemically important banks. Now is a crucial moment for businesses and their banking partners to adopt modern messaging standards, embrace automation, prioritize sustainability, and more, ensuring they stay ahead in this fast-evolving landscape.

The post What is the Estimated Value of U.S. Instant Payments, 2024 – 2028? appeared first on PaymentsJournal.

The Swiss National Bank announced that roughly 60 financial institutions in the country can now send and receive instant payments, covering over 95% of retail transactions.

The central bank said that more banks will be added over the next few months and anticipates that all of financial institutions in Switzerland will support instant payments by the end of 2026. The platform was facilitated though a partnership with financial services company SIX.

“Instant payments allow private individuals and companies to perform account-to-account transactions with immediate execution and final settlement in seconds, around the clock,” the Swiss National Bank said in a statement. “This market launch represents a further important milestone and reflects the collective stakeholder commitment to the future of cashless payments in Switzerland.”

Cash Affinity

Instant payments have been adopted much faster in other parts of Europe, whether they have been available since 2017. In contrast, the Swiss have had a much stronger affinity for cash payments, as evidenced by a recent Swiss National Bank study that found cash to be the country’s most widely accepted payment method.

According to the central bank, roughly 92% of customer-facing Swiss companies accept cash, while 59% accept payment apps. This reliance on physical payment has raised concerns among some Swiss regulators about the shift to digital transactions.

It’s not uncommon for Swiss citizens to pay for large transactions, including car purchases, with cash. The concern is that a widespread movement to payment apps, coupled with the reduced availability of banks and ATMs, could marginalize young consumers and the elderly.

Slow to Catch On

Instant payments have been slow to catch on in the U.S. as well, though not due to an attachment to cash. The established banking system and the comfort with card payments have kept instant payments adoption on the back burner.

This has begun to change since the launch of FedNow and RTP. FedNow has grown to include 900 financial institutions in just a year, though that is a fraction of the 10,000 institutions in the U.S.

“FedNow adoption is growing, and financial institutions know that instant payments are something that they need, given all the other technologies that we have are immediate and real time,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, in an earlier interview with PaymentsJournal. “Everything else in our lives is real time now—payments should be too.”

The post Switzerland Joins the Instant Payments Movement appeared first on PaymentsJournal.

Popular instant payments platform Pix will delay the launch of its automatic draft feature until next June, according to Brazil’s central bank.

The new feature, called Automatic Pix, allows the platform’s users to pay recurring bills without authorizing each transaction. Originally scheduled for an October launch, no reason has been given for the delay.

The platform is operated by Brazil’s central bank, which has faced a series of challenges over the past few months. In April, the bank’s governor, Roberto Campos Neto, voiced concerns that market uncertainty made it difficult for him to provide proper guidance for the future.

Neto has also called for a constitutional amendment that would give Pix autonomy from the central bank, citing concerns that the bank doesn’t have the budget to run the service after the dynamic growth Pix has experienced in the past few years.

Gaining Traction

Pix launched in 2020 and was quickly adopted by the previously cash-based country. The platform has more than 150 million users and accounts for 90% of Brazil’s payments.

The platform recently introduced Pix Roaming, which allows foreign tourists to use Pix while visiting Brazil. Pix also recently launched International Pix, which allows Brazilian visitors to Uruguay, Argentina, Chile, and even some U.S. locations to use the service to pay for purchases abroad.

All-Encompassing System

Automatic payment support is the next step in Pix’s quest to become an all-encompassing system, like China’s Alipay and WeChat, that eliminates the need for card-based payments.

Brazil’s central bank touted Automatic Pix as a solution that would reduce billing costs for utility companies, schools, streaming services, and other subscription-based services. Pix also believes the new service will reduce credit delinquency.

While there is certainly a demand for the service, Brazil’s central bank has issues to solve first. The Brazilian Report cited multiple reasons for the delay of Automatic Pix, including everything from staffing shortages to a lack of clear payment dispute guidelines. It’s not clear if the central bank can resolve those issues in time to get Automatic Pix online by June.

The post Brazil’s Pix Delays Automatic Debit Feature appeared first on PaymentsJournal.

Instant payments systems have gained traction in countries that had cash-based payments infrastructures. While services like FedNow and the RTP network have launched in the U.S., instant payments haven’t taken hold due to the firmly established financial system.

In a recent PaymentsJournal podcast, Abeer Bhatia, CEO of Personal Lending & Head of Enterprise Payments at Wells Fargo, and Elisa Tavilla, Director of Debit Advisory Services at Javelin Strategy & Research, discussed the past, present, and future of instant payments.

An Infinite List of Trends

The payments space has undergone massive shifts in the past few years, driven by a few central undercurrents.

“There’s almost an infinite list of trends happening, but two stand out most,” Bhatia said. “One is the increase in instant payments and the attention it’s received since the launch of FedNow and RTP. The second is the expanded availability of data that companies have within the new formats.”

Instant payments services allow for much richer data to be transmitted between sender and recipient. It’s facilitated by the ISO 20022 messaging standard, which acts as a universal payment language. So far, countries outside of the U.S. have been swifter to adopt the new model.

“There are unique aspects about markets like Brazilian and Indian which caused instant payments to take off there,” Bhatia said. “The main reason is it’s needed. It’s a compelling alternative to cash payments, and it allows them to conduct both P2P and customer-to-business (C2B) payments.”

Barriers to U.S. Ubiquity

In India and Brazil, the government has effectively mandated the use of instant payment rails, making growth fundamentally faster. The U.S. isn’t likely to get a government mandate anytime soon, but that’s not the only factor slowing instant payments adoption.

“The U.S. is highly card centric,” Tavilla said. “Cards are convenient to use and accepted virtually everywhere. There are also over 9,000 institutions in America and two real-time settlement systems. Getting all the financial institutions on board and connected to the networks will take time.”

“P2P has been a primary instant payment use case in markets like Brazil and India,” she said. “P2P has been adopted in the U.S. but, behind the scenes, it’s not really an instant payment. The settlement is asynchronous, but it appears instant to the customer, so there’s no urgency to transition to something else.”

Future Speculation

There’s been increasing speculation on the future of instant payments, but there are more practical matters at hand first.

“A financial institution might be able to send money immediately, but there’s a separate question,” Bhatia said. “Can the recipient accept money immediately? Oftentimes, that’s not the case. It will require systems that are currently geared towards batch processing to be redesigned to handle real-time payments.”

Once the infrastructure for instant payments is established, much of the initial adoption might be in industries outside of traditional C2B payments.

“It could be in earned wage access for the gig economy or in payouts in the gaming industry, but those are the types of areas where instant payments will take root in the U.S.,” Tavilla said. “Real-time payments aren’t going to substitute for the existing rails that work.”

Once U.S. consumers begin to understand the capabilities of the rails, real-time payments will take off. The newly launched FedNow will play a significant role in that growth.

“I’m excited to see the network has over 700 financial institutions participating now,” Tavilla said. “It’s still growing, but it’s also iterating more robust features and functionality. That drives more use cases which creates greater value and increases transaction volume. It will be interesting to see how the U.S. Treasury leverages FedNow, given the success of government mandates in other countries.”

Instant and Irrevocable

New fraud vectors are likely to emerge, presenting a critical challenge for the real-time payments industry, especially given the irrevocable nature of instant payments. It’s paramount for organizations to remain vigilant in identifying fraudulent transactions and preemptively stopping them. Preventing fraud is far preferable to remedying it after the fact. Both FedNow and RTP have implemented multiple controls to combat fraud.

At the network level, both rails have implemented transaction limits, negative lists, and other fraud mitigation tools. The comprehensive data provided by instant payments rails also serves as a deterrent to fraud. Effective security management is essential to instill trust in the networks amid the transition to real-time payments.

Establishing that trust will involve educating consumers about fraud risks and the irreversible nature of instant payments.

“One feature customers value is payment confirmation,” Tavilla said. “Payments are posted in real time with full transparency, which can also mitigate fees or late charges. The customer starts to feel more confident. And the payment details are there so the merchant or payee can easily match the transaction with the payer.”

A security aspect that is still lacking from instant payments is purchase protection. It’s one of the reasons U.S. consumers have been reluctant to switch from credit cards.

“Another reason is consumers love their rewards cards,” Tavilla said. “Until real-time payments can offer comparable incentives and the customer protection piece, the value won’t be obvious enough for consumers to change their payment behaviors.”

Digital Wallets

Globally, commerce is rapidly shifting towards e-commerce, with card-not-present transactions experiencing much faster growth compared to card-present transactions.

“It’s much easier to use a digital wallet than to type in the card number, address, email, etc.,” Bhatia said. “Digital wallets are a mainstay of online commerce, so maybe the better question is whether one or two wallets will dominate, or if multiple wallets will spring up.”

Digital wallets offer consumers a more convenient checkout experience, which will further drive their adoption.

Tavilla emphasizes that mobile wallets are a permanent fixture, thanks to their one-click checkout simplicity. Financial institutions should prioritize offering customers various payment options to enhance their experience and boost transaction volume. While payments are the primary use case for digital wallets, their potential extends far beyond that.

“It will be interesting to see if the U.S. adopts the super-app concept like Asia,” Bhatia said. “Culturally, Americans prefer to keep their financial operations more compartmentalized. Digital ID cards, however, that’s something that could be adopted sooner rather than later.”

A Powerful Nexus

Instant payments may be catching on slower than expected, but they will play an integral part in the coming payments landscape.

“Speed is one of the top trends,” Tavilla said. “Aside from FedNow and RTP, same-day ACH is growing rapidly. The use cases for real-time payments will only increase in the U.S.”

“Systems and processes will need to be retooled to support instant payments before people truly see the benefits,” Bhatia added. “That will take time. And we’ve just begun to explore the concepts of identity and data. There’s going to be a nexus of payments, identity and data that’s going to be very powerful.”

The post A Powerful Nexus: The Present and Future of Instant Payments appeared first on PaymentsJournal.

For the second year in a row, the Middle East has been the fastest-growing market for instant payments. There were 855 million transactions in the region in 2023, a 33% increase year-over-year.

New instant payments programs launched in Oman, Qatar, and Kuwait last year, and increasing acceptance is expected to drive the Middle East instant payments market up by 28.8% to $3 billion in 2028, according to ACI Worldwide. One of the main reasons for this substantial growth is the strong support from the region’s governments.

“First, the UAE enacted a Financial Infrastructure Transformation Program in February 2023 to accelerate the digital transformation of financial services,” said Sophia Gonzalez, Debit Payments Analyst at Javelin Strategy & Research. “Second, Vision 2030 set a target for the Saudi government’s digital payments participation to hit 70%. Third, Egypt enacted a strategy called Digital Egypt. Finally, Bahrain made a full commitment to becoming a fintech hub.” 

Committed to Instant Payments

As a result of that commitment, Bahrain is now the most developed instant payments market in the region. Real-time payments account for 50% of the country’s payment volume and nearly all of its electronic payments. Instant payments in Bahrain are expected to reach 77% of transactions by 2028.

Saudi Arabia also demonstrated tremendous growth, with 430 million instant payments transactions in 2023. For years, the region has pushed for electronic payments adoption, and instant payments volume in Saudi Arabia is expected to rise 24.6% by 2028.

Though the United Arab Emirates introduced its Immediate Payment Instruction platform in 2019, the platform didn’t catch on. The UAE central bank launched a new payments platform called Aani in October 2023, but it has also been slow to gain traction. Instant payments only account for 1.5% of payments volume in the country.

Nearly Cashless

Instant payments have fueled shifts in payments infrastructures all over the world, but they have especially caught on in Brazil and India. Though both those countries have government backing, instant payments were rapidly adopted because Brazil and India were previously cash-based economies.

While the Middle East is leading instant payments growth, a significant portion of the region’s residents are still unbanked. For that reason, instant payments are expected to continue to rise until the region is nearly cashless. By 2028, cash-based payments are predicted to be just 3% of payments volume in the Middle East. 

The post Middle East Continues to Lead Instant Payments Adoption appeared first on PaymentsJournal.

The United States is a unique banking market, with more than 11,000 financial institutions and some of the most stringent regulations in the world. With the launch of FedNow last year, The Clearing House’s RTP network, and a new messaging standard in ISO 20022, U.S.real-time payments have finally arrived. There’s only one problem: The infrastructure here is not ready. 

In a recent PaymentsJournal podcast, Himanshu Pujara, Managing Director for Euronet Worldwide, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, spoke about how instant payments are happening around the globe today, and how banks can develop payment platforms that take advantage of increased standardization and interoperability, as regulatory bodies push for a more interconnected financial ecosystem.

Playing Catch-Up With the World

The state of global payments varies depending on where you look.

“We’ve connected to many RTP networks and have been processing instant payments for over a decade now,” Pujara said. “In India, the Unified Payments Interface has been a game-changer, enabling billions of transactions monthly with its simple, mobile-driven approach. Then there’s the EU’s SEPA Instant Credit Transfer, which streamlines cross-border payments efficiently within Europe. In Brazil, the Pix system has revolutionized the speed of payments, quickly becoming a mainstay in their financial ecosystem. We process millions of transactions every single month for our customers in the emerging markets, and in all of these markets real-time payments has become a dominant form of payment in the day to day lives of consumers.”

These global trends have not yet matured in the U.S. market. While the United States has had limited access to instant payments in the past, FedNow has sped up the timeline for banks to offer such payments to consumers and merchants. This gives banks the opportunity to enhance transaction efficiency, financial inclusion, and economic growth.  

Seeking Harmony

Although there are different U.S. regulatory and market environments, the future points toward more collaborative efforts to harmonize regulations and technical standards, making it easier to transact instantly and across borders. Financial institutions have the opportunity to use the real-time payment rails to launch innovative use cases for customers such as insurance companies or payroll service providers.

Under the new rails, banking teams could offer a cash management solution or a liquidity management solution to make sure the merchants they support get their funds in real time. In other parts of the world, fintechs have taken the lead by converting their closed-loop stored-value wallet propositions and making them interoperable on the back of real-time payment systems. U.S. fintechs have the same opportunity. 

Architecture and Use Cases

The challenges lie primarily with legacy applications and their architecture. How does a bank make sure it’s able to connect to these systems in the shortest possible timeframe, knowing there will be new services or functionalities launched by the Fed or TCH? And how do consumers recognize the benefits of adopting instant payments?

“We all know consumers in the U.S. are very card-centric,” Tavilla said. “They like using credit and debit cards and have been accustomed to their rewards and incentives, as well as the purchase protection that cards provide. It’s important for providers to offer comparable benefits to give consumers a reason to convert from card payments to other types of payments.”

U.S. consumers often expect inconveniences in their financial transactions, not realizing that an instant payment system could ease issues.  “Last week I unexpectedly had to go shop for a new car,” Tavilla said. “On Sunday, I picked out a car and negotiated the price. The dealer offered to put $3,000 on my credit card but asked for the balance by the day after tomorrow, which was a Tuesday.  I don’t keep tens of thousands of dollars in my checking account, so I had to transfer it from my savings account via ACH, from one financial institution to another.” 

Such transactions can take a few days to transfer and cost the consumer $30 or $40 each. Real-time payments and ISO messaging can help alleviate such pain points by automating and reducing the time and heightening the efficiency of the entire process.

“Elisa’s story is a classic example where the customer would want some sort of a payment rail, where the money can move on a real-time basis,” Pujara said. “She had an urgent requirement, but even on an ordinary basis, we’re all used to instant gratification. Whether it’s ordering a ride or shopping for goods, the real time element is there pretty much in every part of our lives, other than money movement.”

U.S. financial institutions have decisions to make as they move into instant payments. In addition to having connectivity to RTP systems, banks can build an orchestration layer on top to decide on the rules they want to put in. They have the flexibility to scale their processes based on cost, availability, or which network to route the transaction.

A Range of Solutions

To navigate and capitalize on the evolving landscape of instant payments, organizations must be technologically adaptable, savvy with regulations, and customer-centric, ensuring they can meet the demands of a rapidly changing global payments environment. This means investing in payment technologies that can quickly conform to new standards and regulations. Cloud optimization is just one example of innovative technology that can enhance performance, security, and cost-efficiency.

The future points toward increased standardization and interoperability, as organizations and regulatory bodies push for a more interconnected financial ecosystem, enabling seamless transactions and enhanced user experiences globally. We’re likely to see more collaborative efforts to harmonize regulations and technical standards, making it easier to transact across borders. 

As those efforts come to fruition, Euronet offers an example of the flexibility available to U.S. banks. “We have a flexible deployment architecture depending on the size of the financial institution,” Pujara said. “We could provide a license that the bank can deploy in their own data center. For some of the smaller banks, we have a fully managed services offering with a hosted solution, which includes not just processing these transactions, and routing the transactions to instant payment schemes. It also includes services like reconciliation, settlement, unified dispute resolution, fraud, and risk monitoring.” 

The post Getting the U.S Banking Market Ready for Instant Payments appeared first on PaymentsJournal.

Real-time account-to-account (A2A) payments, also known as pay-by-bank has been adopted in many parts of the world. While sending payments directly from one bank account to another has become ubiquitous elsewhere, Americans have been hesitant to adopt the practice.

In the new report, Room for One More? Global Real-Time Pay-by-Bank Lessons for the U.S., Javelin Strategy & Research Director of Debit Payments Elisa Tavilla explores the reasons pay-by-bank has been so well-received abroad, the obstacles to U.S. adoption, and the future of the real-time payments landscape.

Government Backing

In countries like Brazil, Thailand, and India, A2A payments have achieved widespread adoption by consumers, merchants, and financial institutions. One of the key reasons for the rapid acceptance is government support.

Central banks and governing bodies have promoted both real-time payments and pay-by-bank to foster financial inclusion and to establish a digital payments ecosystem. Those countries had previously been largely cash-based economies, which smoothed the transition to digital payments. The Brazilian government has gone so far as to mandate rails for RTP and A2A.

Those governments also worked to standardize common financial technology like APIs, and the digital infrastructure makes new payment types easy to implement. Lawmakers in many countries have put QR code standards in place which promote interoperability.

“Standardized QR codes are essential to ease of adoption,” Tavilla said. “Especially with smaller businesses, QR code-based pay by bank solutions give them a more cost-effective way to move from cash to digital payments.”

A Card-Centric Market

Because of the established payment system in the U.S., A2A payment methods have been slow to take root. Although pay-by-bank options are emerging for both in-store and ecommerce transactions, American consumers still prefer to use their credit and debit cards.

“The U.S. is a very card-centric market from the consumer end,” Tavilla said. “Merchants may complain about the high cost of acceptance, but at the end of the day it’s the standard for purchases.”

Even with the high interest rates and late fees often associated with credit cards, Americans have been unwilling to switch.

“Consumers like using cards, especially rewards credit cards,” Tavilla said. “There’s also the purchase protection that comes with cards. if you order something and it doesn’t get delivered, you’re protected. That same level of protection doesn’t currently exist with pay-by-bank transactions.”

Opportunities for Growth

While A2A transfers aren’t likely to overtake cards in America, the comfort level is increasing. That acceptance has been fueled by peer-to-peer platforms like Venmo and Cash App, which three-quarters of Americans have used.

“Those platforms have grown substantially in recent years,” Tavilla said. “It wasn’t that long ago that cash and checks were the only ways to pay your friends and family.”

Pay-by-bank transfers are increasingly used to pay bills. Many smaller municipalities and utility companies don’t take card payments at all or charge a service fee to process card payments. In those instances, Americans are increasingly moving away from checks to pay-by-bank, which is mostly completed by ACH.

“As FedNow and RTP adoption continue to grow, real-time A2A use cases will also continue to grow,” Tavilla said. “When people use instant payments to pay their electric bill, they will appreciate the speed of the transaction. They’ll also see the added benefits of real-time payments because it allows for more transaction data to be included. It’s much easier for merchants and customers to identify what the payment is for.”

Irrevocable Transactions

Consumers will still be concerned about purchase protection. As with peer-to-peer platforms, once a real-time pay-by-bank payment is sent, it’s irrevocable. That puts the burden on the customer to verify the money is going to the right place.

“Consumer education will have to increase, which is another barrier to adoption,” Tavilla said. “As a consumer myself, why would I choose to pay this other way where if something goes wrong, if I’m not going to be made whole again? There isn’t any standard policy for protection like what exists with cards today.”

Another barrier to A2A adoption is the lack of rewards. Credit card rewards are funded with interchange fees that merchants pay.

“Rewards programs could be implemented for pay-by-bank solutions,” Tavilla said. “If merchants want customers to use a credit card alternative, they could offer incentives to pay-by-bank.”

The Drive to Real-Time Pay-by-Bank and Open Banking

In the U.S., there are two real-time payment rails FedNow, which launched last year, and the Clearing House’s RTP. Still, most pay-by-bank transactions use ACH.

“There aren’t any government mandates for real-time payment adoption in the U.S., participation is voluntary.” Tavilla said. “Governments in the UK and Thailand disburse social benefits and accept tax payments via real-time payment networks, which have accelerated adoption. The U.S. Treasury is a FedNow participant, and could potentially speed up real-time A2A payment adoption in the U.S.”

ACH will likely continue to be the standard for now, but it has its drawbacks. The major downside is the time it takes for transactions to clear. The delay can lead to payments failing for insufficient funds. Customers don’t know exactly when the money will be taken out, so when the transaction occurs the money might not be there. That can create a less than ideal customer experience.

“With real-time payments, the money is moved with more certainty and precision,” Tavilla said. “It also improves the pay-by-bank customer experience, when coupled with open banking technology, which is still in early stages in the U.S.”

The post Real-Time Payments and Open Banking Could Accelerate U.S. Pay-by-Bank Adoption appeared first on PaymentsJournal.

The Federal Reserve Bank of Kansas City examined the capability of U.S. depository institutions (DIs), including banks and credit unions, to send and receive instant payments. It found that many banks, particularly smaller ones, will have to modernize their systems or outsource functions to remain competitive.

The main challenge for many banks, according to the report, is that they were not initially structured to accommodate the 24/7 connectivity that instant payments demand. Wire transfers and ACH transactions typically adhere to specific processing hours, and the receiving bank can adjust the timing of transactions throughout the day.

While larger banks can automate the sending and receiving of funds, smaller DIs often rely on manual intervention by personnel during processing payments. While this approach may suffice for banks with lower volumes of wire and ACH payments, it may not be feasible as instant payments gain traction.

The Global Transformation

Though the trend has been slow to catch on in the U.S., instant payments are inevitable. Smaller banks, which likely can’t afford to build the infrastructure to support it, will have to reach out to third-party companies to outsource their instant payments process.

Fintech companies create payment hubs for banks with connectivity to instant payments rails like Real-Time Processing (RTP) and FedNow. However, many banks will also need to outsource customer-facing operations like mobile banking apps, online banking, and B2B payments.

The adoption of front-end solutions has been slow. Though 1,000 DIs had connectivity with FedNow or RTP as of April 2024, many of those institutions only had the ability to receive instant payments. They could not send payments because they did not have appropriate customer-facing solutions.

Losing Market Share

The Kansas City Fed sees core banking providers, or financial technology companies, as an integral player in the shift to open banking and instant payments. But even though fintechs might be the solution for many banks, they could also be the competition.

“As a result of these developments, DIs may collectively lose market share to fintechs; however, the effects on individual DIs may vary,” the Kansas City Fed wrote. “Proactive DIs may sustain or even increase market share by modernizing their core systems, implementing instant payments capabilities, adopting open banking, and sponsoring fintechs and nonbank businesses through BaaS services.”

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The implementation of FedNow is a chance for financial institutions to entirely rethink their payment systems and carefully assess the technology partners they engage with on this transformative journey. This is especially true for smaller institutions, who can leverage FedNow to enhance payment experiences for their customers and initiate the journey towards payment modernization. 

However, the adoption of FedNow in the U.S. has been slower compared to similar payment systems in Europe and other global regions. In FedNow and Technology Vendors: Setting the Foundation for Future Payments, James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, lays out the incentives for financial institutions as they rethink payments in a real-time era.  

Making Connections

FedNow transactions differ from traditional batch processing because they happen in real time, a distinction that significantly impacts the necessary technology infrastructure.

“When we’re talking about large banks like Chase or Capital One, they are communicating all the time because the number of retail and commercial customers making transactions each day,” Wester said. “Real time is different. There are technological considerations from a platform, from messaging, even from a liquidity standpoint. Our report is addressed to technology leaders who are being tasked with connecting to a FedNow, versus being addressed to a business owner within a financial institution who’s looking at it from a features and product standpoint for their customers.”

In a way, access to FedNow is progressing rapidly. Since its launch in July 2023, 35 financial institutions and 15 certified technology service providers were initially connected to the system. This number has since expanded to approximately 700 banks and credit unions of varying sizes, alongside 30 service providers offering a range of services to partner banks, including payment processing, bill payment, and more.  

“With 11,000 financial institutions in the United States, it’s a small percentage that are connected to FedNow,” Wester said. “But if we do it by number of accounts with access to FedNow, it’s actually doing quite well.”

One contributing factor to the relatively slow adoption is the payments industry’s incomplete communication of the added value of a real-time settlement program to consumers. Small businesses may not be aware that they can utilize instant payments to address challenges such as liquidity and cash management. “A lot of businesses have billings that may not be coming in for 30, 60, or 90 days, but they have to pay vendors immediately,” Wester said. “Real-time gross settlement through something like FedNow would be a benefit to them.”

Differences With Europe

The UK has consistently been ahead of American institutions in terms of faster payments, largely due to their outdated prior system. Before the introduction of FedNow in the U.S., the UK established its Faster Payments Council to modernize the settlement processes of British financial institutions, resulting in the creation of a nearly real-time settlement rail.

The situation in Europe was a bit different. While lacking a robust digital settlement network, they had fewer financial institutions. European financial institutions pushed to develop SEPA (Single Euro Payments Area), which launched in 2017 and manages euro-denominated payments across 36 European countries. “They were ahead because they started out behind,” Wester said.

One factor hindering faster payment system adoption in the U.S. is the multitude of financial institutions and payments providers that need to work in concert. This complexity extends beyond technology to regulatory and risk considerations.

Selling the Benefits

ISO 20022, the enhanced standard for processing data, may help spur the adoption of FedNow. “We’ve created a new standard for data that goes along with payments, and don’t really know what to do with it,” Wester said. “Basically, we bought ourselves a big truck, and now we need to figure out what the fill it with. But it gives us room to send more enhanced data, better data, everything that goes along with the payment.”

But Wester points out that there were also many businesses who did not want payments to be processed any faster. “There is an entire industry built on the fact that payments aren’t due for net 30, net 60, net 90,” Wester said. “Companies aren’t paying for two or three months, so you have an entire sector that’s built up on buying receivables or loaning money out against receivables. We just had a system in place that frankly worked pretty effectively. There were discount rates given for paying on time or paying faster. It supported the largest economy in the world, so there weren’t a whole lot of reasons to change.”

Wester says that we need to do a better job of showcasing the benefits of instant payments. FedNow can benefit small- and medium-sized businesses from a cash flow standpoint. They don’t need to wait three days for a transaction to clear; they are immediately able to turn that cash around and pay somebody else.

“Those are the things that make it advantageous,” Wester said. “Once we start seeing FedNow adopt it in larger and larger numbers, it will become a necessity.”

The post Instant but Slow: The Remaining Hurdles for FedNow Adoption appeared first on PaymentsJournal.

Pay-by-bank transfers are a common fixture in overseas open banking systems. Americans, however, have been more inclined to use credit cards to facilitate their purchases, especially in online transactions.

The popularity of online betting has skyrocketed in the U.S. with the increasing legalislation and social acceptance of the activity. Concerns about the legitimacy of gambling websites persist, and bettors prioritize the ease and security of buying in and cashing out.

There are signs that these concerns may be diminishing, according to gaming payments processor Paysafe. Reportedly, 27% of online bettors would prefer direct bank transfers. In response to this demand, Paysafe has launched a solution for iGaming users.

This service allows bettors to fund their iGaming accounts directly from their bank without incurring any fees. The platform’s usage is funded by iGaming operators, who are expected to integrate PaySafe’s Gateway product into their offerings.

A Nascent Market

iGaming, initially a blanket term including all forms of online gambling, has split away from sports betting to become a category of its own. Now iGaming includes a gamut of online casino-based games and their offshoots.

The iGaming market was valued at an estimated $88.65 billion by the end of 2023 and is forecasted to hit $125.6 billion by 2027. Paysafe’s position in the market contributed to the company’s 7.02% year-over-year revenue increase.

While the company isn’t quite profitable yet, its net loss of $20.3 million in 2023 was a vast improvement compared to the $1.9 billion net loss incurred the previous year.

Unparalleled Choices

Paysafe’s pay-by-bank service uses both ACH and RTP rails, depending on the payment method supported by the bettor’s bank.

While concerns about online betting sites have centered around delayed or derailed payments to bettors, Gateway is also built to protect iGaming operators. All pay-by-bank transactions will be indemnified, reducing risks to operators if a bettor’s bank payment defaults. A faster payments process should also streamline the customer experience.

The post U.S. Online Bettors Get Pay-by-Bank Transfers appeared first on PaymentsJournal.

The commercial banking and payments industry is undergoing a powerful metamorphosis. The onset of new technology has drastically altered corporate and consumer expectations. With so much flux, businesses are constantly working to stay competitive, mitigate risks, and set themselves up for the next wave of transformation.

In his new report, Movements in Global Commercial Payments and Banking: 2024 Edition, Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research examines the seismic shifts in banking trends, including instant payments, ePayables, and cross-border payments. He also points to aspects of the traditional banking system that will be left behind.

The Impact of Instant Payments

Although instant payments may represent the future of banking, their impact is already being felt across the banking landscape. FedNow, launched in July 2023, has seen significant growth, with the number of participating banks increasing from 300 by the end of the year to 400 in early 2024. Bodine expects that positive trend to continue.

The demand for instant payments extends beyond the borders of the U.S.—it’s a global phenomenon. India’s UPI and Brazil’s Pix have led the global instant payments charge, collectively facilitating over 100 billion transactions in 2022.

“We’re seeing the dramatic use of instant payments in India, Brazil, and Asia, and it’s picking up steam in the European Union,” Bodine said. “The real tipping point is going to be when we see the cross-continent and cross-ocean payments influx, and I don’t think we’re too far away from that happening.”

As the instant payments movement gains momentum, certain traditional banking practices are likely to be phased out, with paper checks leading the pack.

“It boggles my mind how paper checks are still around and how prevalent they are,” Bodine said. “I think we’re going to see intentional movements away from checks, perhaps driven by governments or large corporations or banks, where they will look to eradicate paper checks by any means possible. There could even be tax incentives or financial rewards to get consumers to stop using and receiving paper checks.”

Non-Systemically Important Banks       

Checks may not be the only fixture of traditional banking facing obsolescence. Bodine believes the tough conditions in the industry, forced by persisting high interest rates, will continue to put enormous pressure on small-to-midsize banks.

The pressure may lead to an increase in bank failures, with no safety net available for institutions deemed non-systemically important.

According to the U.S. Department of the Treasury, a systemically important bank is defined as one whose failure or disruption could pose a substantial risk to the stability of the U.S. financial system by potentially causing liquidity or credit problems to spread among financial institutions or markets.

Given the growing public aversion to government bank bailouts, Bodine sees issues ahead for non-systemically important banks. If they falter under the weight of high interest rates, governments aren’t as likely to step in and save them anymore.

“The salient point being, if you’re a company, especially a large company with deposits concentrated in a non-systemically important bank, you better be darn sure that bank is on solid footing,” he said. “If you’re not, then I hate to say it, but you should be not with that bank.”

Vehicles of Disruption

The transformation of the banking landscape isn’t over, as technology is changing exponentially. Bodine expects to see the continued rise of Automated Clearing House (ACH), which has been on the steepest trajectory of any payment type.

He also expects to see the continued adoption of ePayables, which are based on credit card lines, even though no physical card is used. EPayables are a strong alternative to wire transfers for sending large amounts, as these transactions often cost less. They could also be a vehicle for cross-border payments, a segment that has seen surging demand.

Even though the use of wire transfers and correspondent banking has continued to be strong, Bodine sees faster, more secure, and more efficient methods displacing them.

“Vehicles of disruption are going to be instant payments and ePayables,” Bodine said. “Cross-continent and cross-ocean payments are likely to be driven by credit card companies. They already have this massive highway built, and they’re in every bank in every country in the world. They just seem to be the obvious choice to do cross-border payments.”

Learn more about the movements in global banking and payments. Also, look for the ePayables Scorecard Report on third-party vendors that will be available in the coming months to Javelin Strategy & Research clients.  

The post Instant Payments Drive Global Banking Transformation appeared first on PaymentsJournal.

Spearheaded by Brazil’s Pix, Latin America has become a global leader in digital payments. According to a new study from Ebanx, there’s still plenty of room for growth in this area.

Seven out of 10 Latin American adults have made or received payments through digital channels, per the Beyond Borders 2024 survey. That’s a significant increase from just four in 10 a decade ago. In the region’s seven largest markets, nearly 80% of the population has made online purchases.

Moreover, cash usage has declined in Latin America. A Mastercard survey across seven countries in Central and South America found that only 15% of respondents relied on cash for more than 75% of their monthly expenses, down from 25% before the pandemic. Nearly all small businesses (92%) in the region now accept at least one form of digital payment. 

Brazil’s Pix Leads the Way

Pix, Brazil’s instant payments system, is a leading reason for this accelerated growth. Since its launch in 2020, Pix garnered more than 160 million users. Digital commerce in Brazil experienced a significant surge during this period, growing from 68% penetration among adults in 2020 to 90% by 2023. As a result, Brazil’s digital marketplace, valued at $275 billion, now ranks fourth worldwide in digital buyers and captures more than half of Latin America’s market share.

The success has been so great that Brazil’s central bank is now exploring Pix’s global opportunities. At the Group of 20 Nations meeting in Sao Paulo in February, the central bank sought opportunities for Pix to interact with foreign platforms, with Italy showing interest in developing a bilateral agreement.

Room for Further Growth

There are reasons to think these trends will continue or even accelerate in the future. With digital commerce in Latin America already valued at $510 billion, Ebanx forecasts that the market will nearly double to reach nearly $1 trillion by 2026. Fueling this is the growth of Latin America’s middle class.

According to Payments & Commerce Market Intelligence figures cited in the Ebanx study, Latin America’s online buying population was about 351 million people in 2023, a 45% increase since 2020. The World Data Lab projects that by 2030, Brazil, Mexico, Argentina, Peru and Colombia are expected to see an influx of 32 million new digital consumers. Mexico, Colombia, and Peru are already seeing annual growth rates of digital buyers close to 30%.

The post The Hottest Area for Digital Payments? Latin America appeared first on PaymentsJournal.

Fewer than 500 banks out of the roughly 4,000 U.S. banks are making use of the Federal Reserve’s instant payment system, FedNow. Fed Chair Jerome Powell mentioned that figure in his comments to Congress this week, noting that the slow adoption rate was not a surprise.

“We expect it’ll take some time, but it’s there, and we think it’ll be beneficial,” Powell said. “We had a lot of support from smaller banks to build it.” Powell compared the use of the new system to the adoption of the Automated Clearing House (ACH) system, which also had an initial slow uptake.

FedNow launched in July 2023, with 35 banks and credit unions, representing a diverse mix of large and small institutions across the country, as its initial users. Other early adopters include the U.S. Department of the Treasury’s Bureau of the Fiscal Service and 16 service providers prepared to support payment processing for banks and credit unions.

Despite Powell’s remarks, it’s worth noting that FedNow is still less than a year old. 

“It’s positive to see the FedNow network with over 500 financial institutions and growing,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “As more participants join, they will want more practical instant payment use cases to drive transaction volume and value.”

Tavilla thinks that more use cases will accelerate adoption of FedNow. “I often use a telephone analogy, even though it’s not exactly an apples-to-apples comparison,” she said. “It was valuable when more people got phone lines and were able to receive and make calls. But then people needed more reasons to call others. Imagine if a phone operator could only let customers check voicemail or call a select group of people for a few limited purposes. Customers would not find much value in such a network. Similarly, customers need more compelling reasons to make instant payments besides moving money between their own accounts.”  

Anticipated Participation in FedNow

Surveys reveal that a sizable number of American banks intend to participate in FedNow, even if they have not gotten on board yet. According to a survey from the U.S. Faster Payments Council, 88% of respondents, whom work for a financial institution or a facilitator, said they intend to implement FedNow and/or real-time payments within the next two years. Currently, FedNow has been or is in the process of being  implemented by 44% of respondents. Only 12% of those polled said they plan to wait more than three years to implement these payment services—or opt out entirely.

The survey also delved into future deployment strategies. Regarding FedNow, 44% of respondents said they will initially support send and receive services, with 48% planning to eventually add send services. Only 8% said they will remain a receive-only organization.

The post FedNow’s Slow Rollout Is Not a Matter of Concern appeared first on PaymentsJournal.

With the Clearing House’s RTP network and the Federal Reserve’s FedNow, the demand for instant payments continues to grow from consumers and small businesses. How can businesses best accelerate this process?

Debbie Smart, Senior Product Marketer at Q2, and Keith Gray, Vice President of Strategic Partnerships at the Clearing House, sat down with Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, for a PaymentsJournal podcast and explored the landscape for instant payments. Although the path can be different for different institutions, it’s clear that customers have come to expect real-time payments. Late adopters beware.

Payroll: A Critical Use Case

From the beginning, account-to-account payments have been driving many of the real-time use cases. The growth of providers like Zelle and Chuck has fueled the expansion of business-to-consumer payments.

One application that has been frequently overlooked is payroll, including daily payroll and earned wage access. These functions are already key users of the RTP network—and they’re growing every day.

“Who would have thought that six years ago when we launched this that a lot of people would prefer getting paid every day for what they do?” Smart said. “Now all of the rideshare companies and the companies like Grubhub are using RTP to push money out to their contractors.”

Exploring Business-to-Business Payments

On the commercial side, especially with business-to-business (B2B) payments, the most significant value is in the data. The rich messaging on the new payment rails doesn’t exist in the older payment rails. Commercial customers are increasingly excited about the possibilities as they learn more about this.

Another important usage involves paper checks. A third of all B2B payments are still made with a check. But 78% of the time, when a business pays another business via ACH, the identity information or remittance information doesn’t go along with the transaction. It goes in an email or via U.S. mail, which makes it time-consuming for these businesses to complete reconciliation. Part of the excitement around the power of instant payments lies with the ability to have that remittance information from the start.

It’s not just the immediacy of the payment. Timing is critical in a B2B transaction as well. “If I owe a supplier a million bucks tonight at midnight,” Gray said. “I can keep that in my account till 11:59 and 45 seconds, and then I’ll shoot it out. I’ll get a confirmation back and everything will be closed and settled literally within seconds. That perfect timing and visibility of an immediate payment is a key part of the value proposition of an instant payment.”

Other use cases are being explored, if not offered already, in payments that traditionally have been limited to business hours. “In the auto industry, most consumers tend to shop for cars after work or on weekends, when the banks were closed,” Tavilla said. “With real-time payments, the 24/7/365 enables more convenience and better business processes.”

Start With Receive Only

Starting real-time payments with receive only makes sense for several reasons. It allows a business to get connected to networks and get the plumbing in place, so to speak, for using the new rails.

“The biggest benefit is what they can bring to their accountholders by receiving instant payments,” Smart said. “I’ll give you an example. We’ve got a customer, a $9 billion credit union, who started with receive only in January of 2021. The first month, they had 3,400 incoming transactions. By December 2023, that number was almost 38,000. They didn’t promote it, or even announce that it was available—they just enabled it. What’s even more interesting to me is the fact that the day they went live, the first payment hit within 60 minutes.”

Smart pointed to Grubhub as an entity where real-time payments grew from demand by the users of the app. When a Grubhub driver opens the Grubhub app, a message says: “Would you like to be paid immediately? If your bank doesn’t support it, click here for a list of banks that do so.”

Eventual Move to Two-Way

Financial institutions should plan to eventually support send and receive capabilities. That enables FIs to take advantage of all the capabilities that RTP and FedNow have to offer. For example, you must be able to receive and send in order to receive requests for payments. If you can’t send, you wouldn’t be able to push payments out, given that RTP and FedNow transactions are push only or credit push payments.

“An analogy I often like is that if you have a phone and can only receive calls, you can’t really take advantage of the technology,” Tavilla said. “It’s just a one-way system. Whereas if you have a two-way system, there are many more possibilities and value that you can take advantage of with the network.”

Joining Multiple Networks

FIs have always had multiple payment networks to choose from, across all payroll and payment types. Since FedNow launched, there has been a lot of concern in the industry about how to deal with these choices.

“My point is that we’re used to it and we’ll figure it out,” Gray said. “In the meantime, what we’re seeing is that most of the banks that are joining FedNow are also on RTP, or are getting on RTP. That’s also true of all of the technology providers that I deal with, both the big guys and the smaller guys.”

Over the long term, it’s possible that the networks will become interoperable, as they are on other payment rails. But the fact that the connectivity partners all support being able to connect to both networks makes it easier for financial institutions.

The bottom line for most FIs is this: What am I doing for my accountholders to enable them to move money the way they want to be able to move money?

“When financial institutions are considering implementing real-time payments, look at your own customer base and their financial needs and pain points,” Tavilla said. “Think about how real-time payments can complement the existing payment methods that your financial institution currently supports. Think about how you can help solve your customers’ problems and improve the customer experience.”

Download the Q2’s Instant Payments white paper, “What to Know and Where to Start“ 

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Zelle saw a significant surge in transactions last year, with consumers and small businesses conducting 2.9 billion transactions, totaling $806 billion—a 28% increase from the previous year.

According to Early Warning, the network operator for Zelle, fully 120 million customers and businesses used the Zelle network in 2023. Small business, in particular, experienced a substantial boost, receiving 217 million payments through Zelle, amounting to more than $100 billion. This uptick can be attributed largely to the growing adoption of Zelle for various organized payments, including employee salaries, vendor invoices and office expenses.

“Powered by our unmatched reach through thousands of participating banks and credit unions – and enabled by our continued efforts to enhance security and educate consumers – Zelle soared to new heights in 2023,” said Cam Fowler, CEO of Early Warning in a prepared statement. “As the digital payments growth engine for the U.S. financial services industry, the Zelle Network remains committed to providing consumers and small businesses a way to quickly and safely pay people they know and trust.”

Zelle’s Goal to Make Payments More Secure

Zelle has prioritized enhancing payments security under the oversight of federal financial regulatory agencies. As a result, reported instances of fraud or scams accounted for less than one-tenth of 1% of transactions last year—a figure that continues to decline as Zelle implements more sophisticated security measures.

To reinforce security protocols, Zelle is continuing to remind users throughout the payment process to only transact with trusted individuals. Notable, Early Warning issued over 700 million cautionary alerts to users before initiating payments, highlighting its commitment to proactive fraud prevention.

Moving forward, Zelle plans to further emphasize the importance of vigilance, collaborating with organizations like the Better Business Bureau and the National Council on Aging to better educate consumers. Additionally, Zelle will be equipping banks and credit unions with educational materials that they can leverage to empower their customers with better security practices.

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