In the United States, she said, “we’ve been talking for years about instant payments — and it’s been more of a ‘future’ concept,” she told PYMNTS as part of the series, “What’s Next in Payments: Instant Payments: What Will Turbocharge Instant Payments Growth in 2024?”
But with the launch of the FedNow® Service this past July and, and the continued ramp of The Clearing House’s RTP Network (which has been in place for six years), she said, faster payments are becoming a “concept of now.”
She said we’re transitioning to a period where biometric authentication and real-time transactions will be standard. Plaid’s own customers, Curran said, are examining the benefits of cost optimization as they examine, too, how quickly their end customers will demand faster payments. Looking to 2024, Curran said FedNow adoption will lag behind RTP in terms of total payment volumes. RTP, for its part, will likely look to have RTP available across all use cases, particularly in commerce.
“Everyone’s looking for the consumer ‘clear value’ proposition,” she said. Early indications are that insurance and government aid will be strong drivers, as will eCommerce. We’re already seeing use of instant options in account-to-account money movement as individuals move funds between, say, brokerage and savings accounts as they plan and save for the future.
In order to spur widespread consumer demand, she added, the payments must be perceived not as convenient, but safe as well.
“Consumers are ready to change,” she said of the new use cases yet to be offered, “and we just need to put [instant payments] in front of them in the right way.”
Bank payments represent a specific area of potential for real-time payments, she said, but she noted that the experience must be digitally native and tied to biometric authentication, which have been twin hallmarks of other payment types. Rewards and loyalty programs, with cash-back options, will also help underpin adoption as companies drive volume with existing customers but also broaden reach and scale and gain new customers, too.
As always, risk management is top of mind, and Plaid’s customer base, said Curran, has been accelerating their anti-fraud roadmaps, in a bid to become predictive rather than reactive. After all, the days-long settlement times that are tied to ACH will be non-existent as instant payments are irrevocable.
Risks are threefold, she contended. There’s identity risk — that merchants, banks and platforms can trust that someone is who they say they are. Solidifying that trust means ensuring that know your customer (KYC) systems are connected to the rest of the commerce ecosystem, she said, and Plaid’s own KYC solutions allow data to be shared among stakeholders to identify risky consumers.
Account risk, she said, mandates that verification and monitoring are robust. And finally, there remains transaction risk, which involves making sure the receiver of funds is legitimate as well (Plaid has an identity match in place to ensure that the user who should own an account does own that account).
“The more that consumers see that instant payments just ‘work,’” said Curran, “and that they won’t have a risk of account takeover or fraud, the more they’ll see instant payments as a top-of-wallet solution.”