Whenever someone asks me what the benefits of instant payments are, the unspoken question often left lingering in the air (or sometimes said out loud – not all of you are as sensitive to my tender feelings … ) is, “My accountholders aren’t asking for instant payments, so why should I care?”
Here’s the plain truth: They aren’t asking. And they likely never will.
But you better by golly care.
What Accountholders Don’t Know and Do Want
Actually, the vast majority of your accountholders don’t even know what an instant payment is. They just want their money in their account as soon as the button gets pushed.
Your accountholders also don’t know WHY you hold their money for one to three days, but they suspect you’re doing something with it that benefits you – the financial institution – not them.
Accountholders do have a vague idea that some banks and credit unions are behind the times and don’t understand them or their needs. I know this because my daughters, despite knowing I’m “in the business,” tell me these things.
Your accountholders are simply marching straight into the arms of PayPal, Venmo, Cash App, Dave, and Chime – all of which dutifully and promptly get their money where it needs to go. Maybe this isn’t the case for your oldest accountholders … the ones still making you print substitute checks … or their younger, slightly more tech-savvy counterparts, Gen X, but we’re grading on a curve here.
And Millennials and Gen Z? Oh boy! They’re making a break for the door without so much as a “goodbye” on their way out.
In fact, according to a recent Federal Reserve Payments Insight Brief, when it comes to payment needs, consumers, particularly those that are younger, prioritize payment methods that are convenient and easy to use.
Presenting the REAL Benefits of Instant Payments
When we talk about the benefits of instant payments, it’s not about the networks themselves.
It’s about how the networks can help you bring value to your accountholders, whether they be businesses or consumers.
Instant payments offer immediate funds availability, which can significantly improve cash flow management for your accountholders – who frankly expect it. Remember, your accountholders aren’t going to ask … they have no interest in the how. They’ve essentially been trained to expect immediate access by other payment methods and overlay systems.
Debit cards post instantly (I know debit card SLAs are 30 minutes, but this is what kids today and anyone who’s not a payments geek thinks) and Zelle® makes the dollars move so fast you can almost hear it. Additionally, instant payments can reduce the risk of payment fraud and errors, as transactions are processed in real-time.
Can we get a shout out for no more day-two activity?!
According to a recent Federal Reserve survey, 86% of businesses and 74% of consumers used faster or instant payments in 2023. Again, consumers don’t differentiate between networks, just on the outcome, which is immediate access. This growing demand highlights the importance of offering instant payment solutions to meet accountholder expectations.
For businesses, the promise of instant payments is streamlined operations and improved financial management.
Immediate access to funds should allow businesses of all sizes to manage their cash flow more effectively, pay suppliers promptly, and reduce the need for short-term borrowing, but this can’t happen if you don’t provide for it, because instant payment network transactions can’t flow if they don’t flow through a financial institution. Leave this technology off the table and your accountholders will break for other methods and providers.
Go for the Gold
It’s true that instant payments can enhance your competitive edge in an age of splintering financial services. But you must make the choice to buy into the benefits, get on board, and encourage your vendors to do the same.
Offering cutting-edge payment solutions enables you to attract new accountholders and retain existing ones. I’m an aging Girl Scout, so this piece of advice makes me hear the “Make New Friends” song in my head. After all, one is silver and the other gold.
It’s about positioning community and regional financial institutions as leaders in the financial services industry, committed to innovation and accountholder satisfaction. And with that, I’ll step down off the soap box and stop singing … it was off key anyway.
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