Anticipated 2018 Faster Payments volume set for record-breaking figures
In the rapidly evolving world of finance, the focus on faster payments is gaining momentum, particularly in the United States. This shift towards instant transactions is driven by systems like Same Day ACH and real-time solutions such as Zelle, drawing valuable insights from international systems like the U.K.'s Faster Payments.
Same Day ACH, while not offering truly instant payment, has significantly sped up funds availability, making it a critical bridge in faster payment adoption in the U.S. On the other hand, Zelle, a widely adopted person-to-person payment system across U.S. banks, facilitates near-instant transfers between bank accounts.
The growth of these faster payment networks could potentially lead to increased competition among financial institutions, as well as the entry of non-bank entities like large retailers into the payments space. Walmart's 2025 launch of an instant Pay-by-Bank service is a prime example, aiming to bypass traditional card rails and offer faster fund availability to consumers.
The U.S. Federal Reserve is also working on enhancing security measures for Same Day ACH transactions, including the implementation of stronger authentication and fraud detection tools. This comes as a response to the growth of faster payments, which, as seen in the U.K. market, could potentially lead to increased security and fraud risks.
The future prospects for faster payments in the U.S. include continued evolution and convergence of faster rails, real-time networks, and new merchant-driven Pay-by-Bank models. The launch of FedNow in 2023 aims to cover over 80% of deposit accounts by 2025, boosting the infrastructure for real-time payments and creating a more interoperable ecosystem.
However, as the pace of payments accelerates, stakeholders must remain vigilant about the risks while capitalizing on the benefits of faster payments. Real-time settlement has become critical for individuals and businesses in the management of payments. The report "Faster Payments Forecast, 2017-2021, Update: The Consequences of Faster Payments" highlights the risks and benefits of real-time transactions.
In the U.S., 70% of Zelle transactions are completed within the same bank, enhancing speed and reducing friction in the payment experience. Yet, the growth of faster payments is accompanied by the need for robust security measures in these systems. In the U.K., faster payments have been associated with an increase in fraud and scams, emphasizing the importance of investing heavily in technology and infrastructure to keep up with the demands of faster payments and to maintain a competitive edge.
In conclusion, the future of faster payments in the U.S. promises continued innovation and convergence, building on lessons learned from established markets like the U.K. to improve speed, accessibility, and cost-efficiency of payments for all participants, while maintaining a balance between innovation and investment in fraud prevention and cybersecurity measures.
Technology plays a pivotal role in facilitating faster payment solutions, such as Zelle, which offers near-instant transfers between bank accounts. The enhanced security measures for systems like Same Day ACH, like the implementation of stronger authentication and fraud detection tools, also stem from the advancements in technology.
