Following the success of The Clearing House’s Real Time Payment (RTP) network, businesses and consumers alike are beginning to appreciate the myriad benefits of instant payments. And with FedNow set to go live in 2023, it won’t be long until the bulk of US financial institutions gain the ability to make and receive payments in real time.
In a recent webinar focused on the evolving US payments sector, we asked our panel of experts to highlight opportunities and use cases that they believe will be particularly impactful. Here are just a few that caught our attention:
Supply Chain Management
Between the impacts of COVID-19 and ongoing geopolitical tensions, it’s no secret that supply chain bottlenecks have become a significant concern for both businesses and consumers. Given that even the smallest disruption can have a ripple effect across an entire organization, businesses today must be increasingly agile in how they respond to the unexpected.
By having access to real-time payments, businesses can address supply chain disruptions more efficiently and with greater flexibility. Securing or switching suppliers, for example, becomes much easier when cross-border transactions can be performed and recorded instantly. According to Tim Mills from Regions Bank, instant payment capabilities could very well “become table stakes for how supply chains are managed.”
Individualized Payroll Solutions
The way businesses pay their workers has been gradually evolving over the years alongside technological advancements. New trends such as early wage access and on-demand pay have allowed employees easier, faster access to their paychecks and made payroll processes for businesses more efficient.
While such benefits have yet to become universal, the release of FedNow will result in real-time capabilities for more financial providers in the US than ever before, making it easier for businesses to take advantage of individualized payroll solutions. Instead of waiting until the end of the work week to pay employees, businesses will be able to trigger a payroll transaction the moment a worker clocks out. Additionally, businesses transacting freelance and gig economy workers will be able to benefit from increased transparency and communication around payment timing.
Increased Flexibility for Financial Institutions
Despite recognizing the benefits, many financial institutions have been reluctant to integrate real-time payments. Put simply, banks are tired of time-consuming implementations and costly upgrades. They want solutions that provide immediate value without disrupting operations.
But with FedNow set to become “the plumbing” for real-time payments across the finance sector, as The Federal Reserve’s Dan Gonzalez puts it, and the Payments-as-a-Service (PaaS) industry growing at a rapid pace, banks will enjoy increased access to “out of the box” solutions. Rather than constantly uprooting their entire operations, financial institutions will gain the flexibility to treat their individual needs with fewer disruptions, whether it’s solving for ISO 20022 stability or making onboarding processes for customers more efficient.
Want to learn more about opportunities and use cases surrounding instant payments? Access the full webinar here.
