Consumers want instant payments, and businesses are finally gearing up to deliver them.
“I really do think 2024 will be the ‘point of acceleration’ for instant payments,” he said in the latest installment of the series “What’s Next in Payments: Instant Payments: What Will Turbocharge Instant Payments Growth in 2024?”
“It’s becoming top priority for more of the market,” he added.
We’re nowhere near the relevant coverage to get to ubiquity, even though The Clearing House’s RTP® Network has been around for six years. The FedNow® Service, which launched in July, recently crossed the 300-bank milestone of financial institutions using the instant payments network.
As Edwards pointed out, the central bank is an entity everyone knows, so there’s more visibility about real-time payment options. Instant payments are making headway beyond the low-hanging fruit of getting wages to gig economy workers and peer-to-peer fund flows.
“Measuring Consumer Satisfaction With Instant Payouts,” a PYMNTS Intelligence and Ingo collaboration, found that 77% of consumers opt to receive instant payments for income and earnings disbursements.
Edwards observed that in the restaurant industry — where the pandemic shaved off 1 million positions — the competition for talent has grown especially fierce, and instant payout of wages and tips can be a competitive differentiator that is rapidly becoming table stakes.
“Now that FedNow’s come on the scene,” he said, more use cases are relevant. “The mainstream consumer expects instant payments … and [Ingo’s] already seeing companies that were not all that interested before saying that ‘We need to talk about faster payments for next year.’”
Cost reductions and reductions of check volumes are on the long-term road maps for trucking firms, insurance firms and hospitality enterprises, among others, he said.
Although 70% of Ingo’s volume is push-to-card at present, Edwards said, B2B and B2C use cases are likely to gain ground and a wide embrace in the years ahead, as more banks sign on to the instant rails and partner with FinTechs to innovate payments away from paper checks and three-day settlement times tied to ACH.
But market momentum cannot be sustained unless there’s connectivity between the broad range of payments rails — legacy and new rails alike — in mix-and-match fashion depending on different accounts and inbound and outbound flows, Edwards said.
“You’re talking about a mix of payments, including ad hoc payments and B2B payments — and orchestration layers pull all the different options into the equation,” he said. “That’s the only way to make this work” as some payments require invoice flows, some transactions are consumer-focused, and others are for large businesses.
But over time, TCH’s RTP and the FedNow Service are going to underpin the demand for endpoints — wallets and debit cards and accounts — to send and receive money instantly, he said.
“When it comes to getting paid, who doesn’t want their money now?” Edwards said.
That opens the door for banks and other providers to monetize speed and create new revenue streams.
He offered the example of Ingo working with KeyBank to enable the FI to orchestrate payments to the bank’s customers depending on the recipient’s desired method of receipt — whether checks, ACH or instant payments.
“This is orchestration, where you’ve got a recipient and a digital experience, you’ve authenticated them, and you’re going to make sure they get paid in some modality in that session before you close it out,” he said.
Orchestration also retries payments and other identities — opting for bank credentials rather than card credentials, for example — in case a payment is not completed.
Payments orchestration also serves as an effective defense against fraud, he said. Partners like Ingo have internal controls and checks and balances in place to make sure that money gets to the people and enterprises that are who they say they are.
And as real-time settlements become a key desire for consumers and businesses, Edwards predicted, “I’m going to bet that 2024 is a tipping point thanks to FedNow.”