NCR Voyix warns of delays in adopting instant payments

Real-time payments have enjoyed an optional status until now. But they are quickly becoming an essential competitive factor for financial institutions (FIs), especially in sectors such as real estate and daily payroll.

According Jill CapicchioniProduct Manager, Payments NCR VoyixThere is a lack of urgency in adoption by some FIs, and it could cost them current and future customers.

Financial institutions must be more proactive in considering not only the needs of their current customer base but also the expectations of future customers, Capicchioni told PYMNTS. By doing so, they can secure a fundamental role in the emerging financial ecosystem, characterized by efficiency, immediacy and security.

According to the figures, only several hundred of approximately 10,000 financial institutions have joined the Clearinghouse RTP® network or the FedNow® service network, which is evidence that after a decade of anticipation, banks ( particularly smaller banks) may not believe that real-time payment networks will lead to a true transformation of banking.

“I have been advising anyone who asks me,” he said, “that this is the year of adoption, and of [FIs] preparing to receive [instant payments]and that is a good first step.”

The headwinds

But many banking executives, he said, are concerned about payment security, given the fact that real-time payment avenues, especially in Europe, have experienced higher fraud rates. Moving toward ubiquity, he added, will undoubtedly attract the attention of bad actors and new attack vectors.

Advanced technologies such as artificial intelligence (AI) and its use to detect anomalous transactions will go a long way in alleviating such security fears and also thwarting fraudsters, even before a transaction is sent. AI, Capicchioni said, “must be used within the layers of the digital channel” and can be used on both the sending and receiving sides of fund flows.

Additionally, when asked about other obstacles, he said, “There is also a technology obstacle and a cost obstacle.”

Some banking executives are concerned that preparing to receive instant payments could result in a negative return on investment, as they are concerned about seeing a reduction in fee income from other payment methods. The price associated with installing with suppliers and connecting to real-time rails can also be daunting, he added.

New opportunity

There are some green shoots emerging, as Capicchioni said, although a “killer app” has yet to emerge to spur widespread adoption. There has been significant interest in instant payments from larger business customers, as companies like Uber, Grubhub, PayPal and Venmo have sought to reduce their processing fees in the card lane.

“We’re also seeing a lot of daily payroll opportunities,” he said, with a nod to the transformation of how consumers expect to be paid. “They want to get paid instantly,” she said. There is a huge opportunity to bring instant payments to smaller business customers.

Payment requests “are the most promising” for consumers, he said. And looking ahead, he said “we have to start thinking innovatively about different opportunities” for payment claims. It will take time, but we will see a shift in industries like real estate, where transactions can occur outside bankers’ hours (and windows linked to batch payments and bank transfers).

Interoperability will be key

Capicchioni cautioned that true ubiquity must be supported by interoperability between FedNow and RTP networks.

The lack of interoperability, he said, “has created some confusion for financial institutions as to whether they need to be on one network or both. “I think interoperability would certainly drive greater adoption,” although those initiating larger transactions know they need to be on both networks.

As banks ponder why they should sign up for instant payments now, Capicchioni told PYMNTS that executives “shouldn’t worry about their existing customers asking for this technology. “They should worry about future customers who won’t bank with them” if they don’t adopt instant payments. “Customers of the future are making decisions, right now, about who they want to transact with.”

As he told PYMNTS, “now is the time to get ready, and you don’t want to be late to the party.”