It is no mystery that FedNow is set to bring modernization to a whole new level within the U.S. payment system.
Although the launch of FedNow in July is highly anticipated, it will still place the U.S. a bit late in the entire faster payments game. A recent Forbes article quoted a summary compiled by ACI Worldwide, which said:
“As a proportion of electronic payments, RTPs are forecast to be just 5% by 2027 in North America — lower than in all other global regions: Europe (13%), Asia Pacific (APAC – 12%), Middle East, Africa and South Asia (MEASA – 79%) and Latin America (LATAM – 56%).”
“Several of the leading economies are distinct laggards in moving to real-time payments. The U.K., Canada, the U.S., Germany, France and Italy — all top 10 global economies by GDP — are forecast to place 17th, 19th, 33rd, 34th, 35th and 42nd, respectively, for consumer adoption in 2027.”
The U.S. government has never issued a mandate for banks to offer real-time payments to their customers. Additionally, most major banks have been reluctant to offer this feature as well. And this has come with a hefty price for the consumer.
Although the FedNow initiative has been in the making over the last seven years, Aaron Klein, a senior fellow at the Brookings Institution, noted that the “slowness in setting up FedNow, has cost consumers hundreds of billions in the form of overdraft fees, check-cashing fees and late fees.”
Real-Time Payments as Another Revenue Stream for Banks
It’s clear that consumers want real-time payments as a service offering from their local banks. Banks that refuse to offer this service will see their customers go elsewhere, taking away a sizeable market share with them.
It’s time that banks, whose payments represent from 20% to 40% of their revenue, strongly consider implementing real-time payments within their institution. It’s about reconfiguring their current business models and enhancing their current user experience as well as their customer’s journey.
Faster payments is the key differentiator that will determine whom customers will look to for their financial service needs. And banks that enable this capability will come out ahead.