Panel: Instant payments a must to avoid deposit attrition

Instant payment adoption is a must for community banks to avoid deposit attrition, according to a panel discussion during the second day of UMACHA’s Navigating Payments Conference in Brooklyn Center, Minn. .Panelists during the Sept. 17 discussion included Vinay Prabhakar, chief marketing officer for software company Volante Technologies; Ryan McNaughton, vice president of IT for North American Banking Company; Janet LaFrence, principal product manager, director of SHAZAM Payments Association; and Kevin Miyamoto, chief operating officer for financial services platform Identifee. Viewing instant payments as necessary to survive is a shift from the traditional bank emphasis of risk and ROI, McNoughton said. “Customers are starting to expect this tool in our toolbox,” he added. McNaughton said fraud concerns can be eased through existing KYC/MFA and other protective measures. By adopting instant payments, banks can also differentiate themselves both from local competitors along with national banks, fintechs and software-as-a-service providers, he noted.Financial institutions are in the early stages of building instant payments infrastructure, McNaughton said. Before adopting instant payments, banks must ensure their staff are trained on the option, so they can inform customers of the benefits, he added. In the next five years, FedNow use is projected to increase 193 percent; RTP, 117 percent; push-to-card 103 percent; Zelle, 27 percent; and same-day ACH, 19 percent. Customers are willing to pay to have their money available instantly, McNaughton said. He sees a market for earned wage access as 59 percent of consumers live paycheck to paycheck. More than 59,000 jobs already use same-day pay. Prabhakar said an ecosystem of providers can onboard instant payment platforms for banks in days or weeks. Younger customers in Generations Z and Alpha are beginning to think about payments solely in a real-time realm, he said. Banks in the instant payments space must either have the internal staffing or third-party provider available 24/7, Prabhakar said. LaFrence predicted that the use of instant payments for cash management will increase as RTP and FedNow increase their dollar limits. FedNow, which recently raised its maximum transaction amount to $1 million from $500,000, plans to increase the limit to $10 million in November. In terms of FedNow, most participants still only have receive-only capabilities due to fraud-related concerns and challenges with legacy systems, LaFrence said. However, more FedNow and RTP clients are starting to request sending capabilities as they become more comfortable offering the option.