Consumers ‘Leading the Way’ on Real-Time Payments, According to Bank of America

As consumer behavior goes, the corporate response follows.

Miyoshi Lee, head of U.S. real-time payments at Bank of America, told PYMNTS that consumers have become used to instant gratification. That’s setting the stage, she said, for faster payments — and, specifically, instant payments — to gain wide embrace in the U.S. in the months and years ahead.

Real-time is nothing new, stretching back over a few years to the RTP network introduction in 2017. And since then, she said, the movement toward faster payments has been market-driven.

“We’ve allowed the U.S. real-time payments market to just evolve naturally based on basic supply and demand and client expectations,” Lee told PYMNTS. FinTechs — those often digital-only upstarts that have “plugged” in the gaps of innovation in financial services — should be credited with helping develop the real-time market.

“But in order for this space to really take off,” she said, “we’ve needed the safety and the trust of the banking world, in order for most corporations to really sit up and pay attention.” The banks, of course, have been working with the Federal Reserve to launch FedNow in just a few weeks.   

“Real-time payments are about more than just making a payment faster,” she said. “They are about releasing funds at the precise moment that you want those funds to leave your account — and having those funds received by a recipient at the precise moment that those funds are needed.” Requests for payment, and other functions, will do much to improve payment flows between businesses and consumers, and between businesses too, improving fund flow visibility and accounts receivable management. 

Gearing Up for FedNow 

And as that new, central bank-driven payments ecosystem launches, said Lee, consumers are already making their wishes known — which, in turn, offers up some roadmap for Bank of America’s enterprise clients. End users want more transparency and more security as they begin to embrace real-time payments with more regularity. The desire for better fraud controls, she said, can give financial institutions (FIs) a chance to introduce “speed bumps” into online commerce, where the goal is to get individuals to “slow down” and think about the ways, and the use cases, in which they are transacting.

The speed bumps should work with, and go beyond, multi-factor authentication and biometrics and add additional guardrails to ensure money sent out the door gets to the right party. Those tools include account validation and pay by bank, she said.  

Lee cautioned that real-time payments will not replace traditional modalities — and there will remain a place in the world, depending on the use case, for ACH and other transaction types that may take time (even days) to settle.

Bank of America clients, she added, will have to look at the portfolio of payments they are making and to whom they are making those payments to “decide, categorically which payment requires the level of data, the level of detail, the level of transparency that real-time payment brings versus other payments that really don’t require that level of information.”

That said, she noted that real-time payments can and will deliver a “huge benefit” to FI clients who have just-in-time deliveries, who are in the factoring business, who have time-sensitive payments.

“There’s no getting lost in the payments flow and having to trace where your funds are, out in the ether,” she said.

In the next three to five years, she said, we’ll see “convergence of payment types, which will force FIs to be more fluid and more nimble — and banks will get better at responding to their customers’ needs in real time.”