Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the U.S. whether banks like it or not, says Icon Solutions Lauren Jones.
The U.S. payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks. Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, drive business value, and stay competitive. But beyond the immediate impact of COVID, what underlying trends are accelerating digitization in the U.S.? Real-time payments have been met with a degree of caution by U.S. financial institutions. Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the U.S. whether banks like it or not. Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate payment adoption in recent years. But the Fed, frustrated with a slow rate of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business. This means holdouts risk their own « Kodak » moment if they miss the huge opportunities in front of them by fixating on traditional revenue streams. Banks are in a position to support innovation across entire industries such as health care, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions.
