90% of Banks Say Customers Would Benefit From Instant Payments

Many financial institutions remain hesitant to adopt real-time payments due to concerns over legacy system upgrades, fraud risks, and customer demand. A PYMNTS Intelligence report explores these barriers and the importance of partnerships and rethinking consumer interest to drive wider adoption of real-time payment solutions.

Real-time payment systems have been slow to gain widespread adoption in the U.S. financial sector, despite a 7% increase in payment volume on the RTP® network in Q2 2024, according to The Clearing House.

According to a PYMNTS Intelligence report, “Overcoming Obstacles to Widespread Real-Time Payments Adoption,” in collaboration with The Clearing House, many financial institutions (FIs) remain reluctant to embrace real-time rails, citing concerns about the costs of upgrading legacy systems, potential fraud risks, and misconceptions regarding customer demand.

This report examines these barriers and shows how FIs must explore strategic partnerships and reassess consumer interest and the benefits of real-time payments.

Cost and Fraud Concerns

A major obstacle for banks in implementing real-time payment systems is the high cost and complexity of upgrading legacy infrastructure. According to the report, 34% of banks believe their core systems, some dating back to the 1970s, cannot manage the speed and volume required by real-time payments. Another 34% expressed concern about their systems’ ability to support 24/7 availability, with downtime potentially leading to customer dissatisfaction.

Fraud concerns also hinder adoption, with 36% of financial institutions unsure how to oversee refund requests for authorized transaction fraud. Unlike traditional transactions, real-time payments are often irreversible. Experts note push payments — used exclusively on instant payment rails — are more secure, as they require authorization from the account holder. Banks are advised to use advanced technologies like artificial intelligence to detect and prevent fraud.

Third-Party Partnerships

To alleviate the financial and operational challenges of implementing real-time payment systems, many FIs use third-party payment providers for assistance. According to the report, 44% of banks plan to build their real-time payment capabilities outside their current payment systems, with smaller institutions especially likely to seek third-party partnerships. These collaborations can help smaller banks overcome the technical and financial barriers of upgrading their systems.

A notable example is Frost Bank, which partnered with Finzly to integrate both RTP and FedNow® Service capabilities into its existing infrastructure. By using Finzly’s technology, Frost Bank successfully integrated real-time payments and scaled its systems more easily, benefiting both corporate and retail customers. This partnership demonstrates how third-party providers can assist institutions of all sizes in bringing real-time payments to market more effectively.

FIs Underestimate Consumer Interest

Despite concerns that their customers may not be interested in real-time payment options, FIs are overlooking the demand for such services. According to a joint study by Finzly and the U.S. Faster Payments Council, 90% of FIs believe that customers would benefit from instant payments, but only 65% think that customers would actually adopt these methods if they were offered. An ongoing issue is most FIs do not yet provide access to platforms like the RTP network or FedNow Service, even though 64% of corporate bankers report demand for these services.

The reluctance to implement real-time payments may be driven by the fear that such services could cannibalize existing revenue streams, with 32% of bank executives expressing this concern while experts argue this assumption is largely unfounded. While customers may be drawn to banks offering real-time payment solutions, they are unlikely to switch institutions solely for this feature. In fact, not providing real-time payments could push customers toward competitors who offer these options.