Meeting accountholder demand with faster payments
The numbers tell the story when it comes to faster payments usage. Over 1,500 financial institutions are now on FedNow®, with 95% of them being community banks and credit unions. In addition, more than 1,000 financial institutions are on the RTP® network. RTP also set a new single-day record in October with 1.8 million transactions. With every new financial institution participant, offering faster payments is morphing from a competitive advantage to a necessity.
Increased limits and additional funds disbursements
Last month, FedNow increased its transaction limit from $1 million to $10 million. The Clearing House® also increased the limit to $10 million on the RTP network earlier this year. The higher limits support the increasing demand for higher value instant payments, which is expected to foster growth in use cases such as real estate closings, portfolio settlements and corporate liquidity management, leading to an overall increase in the value of transactions flowing through the two instant payment networks.
A new type of immediate funds availability is now available for FedNow Service participants — FEMA disaster relief disbursements. It’s the latest example of the U.S. Treasury’s use of the FedNow Service for certain government payments as part of the Bureau of the Fiscal Service’s Digital Pay program. The decision to send disaster relief payments through FedNow coincides with the federal government no longer issuing paper checks for most federal payments.
Managing fraud risk
Fraud prevention and mitigation are a priority for everyone involved in sending and receiving payments. Both FedNow and RTP encourage a multi-layered approach, and both have operating rules that permit sending participants to set their own risk-based transaction limits for their financial institution, accountholder segments or individual accountholders.
The Federal Reserve offers FedNow participants two fraud mitigation tools. Participant-defined negative lists enable financial institutions to specify suspicious accounts their organizations can’t send to or receive from. Also, using the Fed’s account activity threshold functionality, FedNow participants can define value and velocity thresholds by customer segment to fit their unique business needs and risk tolerances. More details about FedNow’s risk management capabilities are in this Managing Fraud Risk PDF.
Additionally, FedNow recently integrated the Fed’s ScamClassifier℠ model into the FedNow Service fraud reporting capabilities. Federal Reserve Financial Services Chief Payments Executive Mark Gould stated in a recent Q&A that this enhancement further strengthens the network by allowing participants to provide additional details on suspicious transactions that can be turned into actionable intelligence.
Meeting accountholder expectations
Accountholders probably don’t know FedNow and RTP by name, but they do know the benefits of getting their money faster. This knowledge is increasingly becoming an expectation from their financial institution.
A recent study from Federal Reserve Financial Services found that 78% of consumers chose faster payments as a preferred option. In the same study, around 6 in 10 consumers stated that it’s important for their financial institution to offer instant payments, with 78% of Gen Z in particular calling it important, a 14% increase year-over-year.
The demand is being fueled by changes in how younger generations work and get paid. Nonemployer businesses, businesses with no paid employees with the exception of the owner(s), are driving economic growth and an increase in gig activities nationwide, according to the U.S. Census Bureau, with the top industries bringing in billions of dollars each year. People who work for these businesses by providing rideshare services, delivering food or working as a freelancer, live in an on-demand world where instant payouts are the new paychecks. And they want to bank with a financial institution offering instant access to those funds.
Offering faster payments with SHAZAM
Expectations have changed. People either financially can’t, or don’t want to, wait days for their money. And with every new financial institution participant, more consumers and businesses have access to what they want — payments that clear and settle in seconds, any time of day, every day of the year.
SHAZAM’s real-time credit receive service is an affordable, easy-to-implement entry point for financial institutions looking to bring instant payments to their accountholders. Our processing services with RTP and FedNow are certified to receive, verify and post real-time payments for financial institutions using the SHAZAM® Core™platform.
Contact your SHAZAM client executive to learn more about SHAZAM’s FedNow and RTP credit receive processing services.