US Retailers Drive Instant Payment Adoption

Real-time payments has had a significant impact on the retail industry in the last few years, with the recent launch of FedNow® Service likely to contribute to the further adoption of real-time payments.

According to data from The Clearing House, the volume of real-time payment transactions in the third quarter of 2023 — the first quarter after FedNow Service was introduced — reached a historic peak of 64 million. While the FedNow platform is still in development, the growth prospects for real-time payment systems in retail are promising. In anticipation of this growth scenario, retailers plan to enhance and innovate their capabilities in this field. 

These are some of the conclusions drawn from “Corporate Changes in Payment Practices: The Retail Industry is Ramping Up Real-Time Payments,” a collaboration between PYMNTS Intelligence and The Clearing House that explores developing trends in real-time payments. The study surveyed 125 decision-makers at large retailers across the United States to learn more about their interest in adopting, using and expanding their use of real-time payments.

According to the survey, the majority of retail firms made and received real-time payments in the last 12 months. Real-time payments accounted for 17% of all payments issued, which constitutes the majority of transactions for all retail companies and surpassed ACH payments (16%), checks (15%) or credit cards (12%). However, this is not yet a dominant share, and if we listen to retailers, we should expect a further expansion in the volume of transactions in the near future. 

Not only are half of the retailers planning to increase their real-time payments capabilities for the next year, but they also expect that these payments will replace other methods of payments. For instance, nine in 10 retailers said they will replace the use of checks with real-time payments; eight out of 10 will do so with debit cards, and seven in 10 with ACH transfers. 

The expansion of real-time payments in the retail sector can also bring a series of benefits. Beyond increasing the speed of executing payments, retailers can gain a better understanding of customer behavior and preferences by analyzing real-time payment data. This information can be used to tailor marketing strategies, improve inventory management and enhance buyer-supplier relationships.

Real-time systems also offer increased security, which is a major concern for both customers and retailers. Six in 10 retailers cite strong security and data protection as some of the benefits they get from these systems. Traditional payment methods leave room for fraud and unauthorized transactions, but real-time payments use advanced encryption and authentication methods to ensure the security of each transaction.

For all these reasons, one-third of large retailers see payment systems as one of the priority areas of innovation, and they plan to enhance their capabilities by collaborating with external partners. As long as real-time payment system providers can adapt to the changing dynamics of retail clients and offer them value-added solutions that enhance their capabilities, these systems will continue to be the preferred choice for major players in the retail industry and will have promising growth prospects.