New Use Cases Needed to Drive Instant Payments Momentum Worldwide

Form3 CEO Dave Scola told PYMNTS that instant payments have a long way before they reach their full potential.

“I’m not disappointed by the rates of adoption, but I am disappointed by not seeing use cases developed by businesses and banks, and businesses built around banks to take advantage of these new capabilities,” he said.

The conversation with Scola was part of the continuing series “What’s Next in Payments: Instant Payments: What Will Turbocharge Instant Payments Growth in 2024?”

Although the FedNow® Service only launched in July, and The Clearing House’s RTP® Network has been around for six years, much hinges on the “ability to demonstrate to consumers that there’s real value in a faster payment, the irrevocability of the faster payment and the potentially higher price point of a faster payment,” Scola said.

Overcoming the Way It Has Always Been Done

Presently, however, firms just don’t care as much as they might about instant payments, according to Scola.

The relatively slow pace of the way it has always been done tends to be accepted by end customers until a shift in the environment fosters a reckoning with the speed of the payments themselves, he said.

Payroll offers a prime example, he noted: We’re used to being paid every two weeks, usually by ACH.

But the emergence of the gig economy in recent years, and the volatility in payments — which can range from daily to a per-project basis — have offered new use cases for instant payments.

Asked if concerns about fraud have stymied the development of new use cases, Scola contended that many stakeholders are not as cognizant about risks as they should be. The introduction of a new payment rail presents new opportunities for fraud, especially via synthetic IDs and social engineering. In the United Kingdom, there has been a demonstrated rise in push payment schemes where unwitting victims are duped by scammers impersonating a trusted counterparty.

Form3 is finalizing new features in the U.K. that leverage new algorithms to analyze the traffic that the company processes there and has seen a double-digit increase in its ability to identify fraudulent activity by examining where fund flows originate — and where they’re headed.

Interconnectivity and interoperability may help give rise to new use cases, as cross-border payments are the lifeblood of trade, Scola said. The linking between far-flung instant payment schemes already has some momentum across Latin America, Asia and Africa.

“The technical aspects of this are not that hard,” said Scola, who noted that Form3 operates as a platform that uses a single code base across all its operating regions to make routing payments simpler and more streamlined.

Along with the connectivity and infrastructure, there’s the opportunity for marketplaces and FinTechs to become more intimately involved with money movement, he said.

Outside the U.S., many of the use cases that have evolved have been created and offered by FinTechs, Scola said. Within the U.S., things are a bit more complicated because to be a direct participant of the RTP or FedNow services, a company must be a bank, have a banking license, or have a sponsor banking relationship in place.

But with those relationships in place, “you’ll see FinTechs step into the P2P space or the B2C space, introducing new solutions leveraging FedNow and RTP to solve some of these new use cases.”