3 Ways FIs of All Sizes Benefit from Higher RTP Dollar Limits
In today's rapidly evolving financial landscape, the demand for speed, convenience, and security in payment processing has never been higher. Consumers and businesses alike expect immediate access to funds, seamless transactions, and innovative financial solutions. For credit unions (CUs), meeting these expectations is not just a matter of member satisfaction but a critical factor in retaining competitiveness. Embracing instant payments is a strategic imperative for CUs aiming to fulfill their members' needs and secure their position in the financial ecosystem.
Despite the clear advantages, a significant portion of credit unions have yet to adopt instant payment systems. Credit unions may make up 20% of FedNow® participants, but that’s only 5% of the total CU market. RTP® adoption is even lower, with fewer than 20 credit unions onboard — less than 0.5%.
Among those that are participating, a majority are only set up to receive payments. Additionally, many CUs have not invested adequately in the necessary operational infrastructure to support a 24/7 real-time environment, leaving their members without the capabilities they increasingly demand.
Not participating in instant payments is putting many credit unions at a competitive disadvantage. Market leading CUs, large banks, and fintech companies have begun offering advanced payment solutions that align with members expectations of a modern financial institution. These solutions include:
Real-time Payroll and Immediate Digital Wallet Unloads:
Providing members with instant access to their earnings and funds enhances financial flexibility and satisfaction.
Development of New Instant Payment-Based Solutions:
Innovations such as alternatives to traditional P2P services and instant bill payment are providing members with improved capabilities and enabling credit unions to lower deployment costs by removing reliance on expensive third-party solutions.
Enhanced Traditional Financial Products:
Features like immediate funding of new accounts and 24/7 auto loan approvals improve current credit union product offerings by streamlining member experiences and improving service delivery.
Support for Small Businesses:
Accelerated merchant settlements and real-time disbursements aid small business members in managing cash flow more effectively.
Credit unions that proactively adopt and promote instant payments position themselves to offer these capabilities to their members. With competitive products at their disposal, these credit unions are able leverage their service advantages to attract new members and retain existing ones. Conversely, those that delay engaging in instant payments risk losing members to more technologically advanced competitors. The gap in instant payments adoption is hard to ignore.
Despite this compelling business case, many credit unions are still on the sideline and are intending to remain there. Recent studies suggest that just 70% to 80% of all FIs will participate in instant payments by 2028 and of those, only about half will set themselves up to both receive and send instant payments. Some of the reasons stated to stay on the sidelines include:
An organizational perception of payments as a cost center:
Many CUs have traditionally viewed payment services as an operational cost rather than a strategic tool for growth and member engagement. It’s no surprise that 87.8% of financial institutions cite high implementation costs as a major barrier to instant payments (Faster Payments Council study).
Revenue Generation Concerns:
Beyond debit and credit card transactions, payments often do not generate direct revenue, making it difficult to justify the costs associated with implementing instant payment systems.
Operational Expenses
The financial outlay required for liquidity support, integration with mobile and digital platforms, payment processing, and system integration can be substantial.
Fraud Management Risks:
The rapid nature of instant payments necessitates advanced, real-time fraud detection and prevention measures. Many CUs may lack the modern solutions and policies required to manage these risks effectively.
Perceived Low Member Demand:
Some credit unions believe there is insufficient demand from their membership base to warrant the investment in instant payment capabilities.
While all of these can be challenging, institutions reaping the benefits of instant payments today have found ways to navigate these challenges. Some of the strategies they’ve harnessed to capture the benefits of instant payments for their members include:
Embracing Instant Payments Proactively:
Shift from a reactive to a proactive stance by adopting solutions that treat instant payments as a unified service, rather than focusing solely on rail-specific systems like FedNow and RTP. This enables credit unions to integrate both send and receive capabilities, delivering the comprehensive instant payment services that meet and exceed member expectations.
Investing in 24/7 Operational Infrastructure:
Develop and implement systems that support continuous, real-time payment processing to provide members with uninterrupted access to their funds.
Collaborate with Modern Platform Providers:
Partner with technology providers specializing in efficient instant payment processing and robust risk management to streamline implementation and operational efficiency.
Engage Strategic Advisors:
Work with experts to develop a holistic strategy for instant payment offerings, ensuring alignment with organizational goals and member needs.
Educate Members on Instant Payment Benefits:
Increase awareness and understanding among members about the advantages of instant payments to drive adoption and utilization.
The business case for adopting instant payments is compelling. With 73% of financial institutions citing outdated systems as a major roadblock and 65% recognizing that offering both send and receive capabilities will drive customer adoption, credit unions can’t afford to fall behind.
Core-independent solutions like Finzly clear the path, helping credit unions to stay competitive and seize new growth opportunities. By seamlessly supporting both FedNow and RTP, Finzly allows credit unions to implement instant payments — both send and receive — in as little as three months, enhancing member satisfaction and bypassing the need for legacy system upgrades.
