Real-time payments: Practical use cases driving growth in financial institutions
In today’s rapidly evolving financial landscape, the adoption of real-time payments (RTP) has become increasingly crucial for banks and credit unions. The RTP market size was valued at 17.57 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 35.5% from 2023 to 2030. With the introduction of The Clearing House’s RTP real-time payments network in 2017 and the pending launch of the FedNow® Service by the Federal Reserve, the potential for leveraging real-time payment rails has grown significantly. However, many financial institutions have been hesitant to embrace this transformative technology due to concerns about profitability, customer/member demand, and the difficulty of envisioning its full range of possibilities. This blog post aims to address these challenges and shed light on the compelling use cases for real-time payments that can drive adoption and growth for financial institutions.
Challenges to adoption
Monetization and profitability have been the primary concerns hindering the widespread adoption of real-time payments. Many financial institutions have been cautious, waiting to see how early adopters fare before fully committing to implementation. The lack of available profitability data and the uncertainty surrounding the choice between different payment networks have further complicated the decision-making process.
Additionally, although consumers have shown a preference for instant payments, they may not actively demand real-time payments since they are often unaware of the underlying technology. Financial institutions must draw out demand by meeting consumer expectations and innovating based on their needs, as failure to do so may leave room for disruptors to step in and capture market share.
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