The Acceleration of Faster Payments
Reed Luhtanen, Executive Director, FPC
COVID has accelerated the development of faster payments and digital solutions and services, adoption of these products, and use by end users. This view isn’t new. It’s the opinion we’ve heard about, read in articles, and shared with others for some time now. What is new, or at least what is just so incredible about this point, is how fast that acceleration has occurred.
This idea was one of the interesting takeaways from our most recent Faster Payments Council Member Meeting, which took place virtually September 13-15. While it wasn’t a topic or theme that was presented directly, a number of the points in various keynotes and sessions alluded to this very idea.
Take for instance one of our keynote speakers, Andrew Tarver, Founder, Jigsaw XYZ. He shared stats that showed that in 2000, there was essentially no e-commerce penetration in the United States. In 2019, there was 10.97% penetration. Pre-COVID, forecasters projected the penetration to get to 21.67% by 2030. Post-COVID that number is expected to rise to more than 34%. That’s significant. It took us nearly 20 years to get to 10% penetration, but in less than 10, we’ll have more than doubled the penetration percentage. Even more staggering is the fact that Tarver maintains that the velocity of change due to COVID has created more digital adoption in the last 18 months, than in the previous 10 years.
And it wasn’t just Tarver, who discussed this idea. Connie Theien, SVP, Industry Relations, Federal Reserve; Ross McFerrin, VP Enterprise Growth, Trustly, Inc.; Michael Sklow, Managing Director, Goldman Sachs; and Perry Starr, Director, Target touched on this idea during their panel discussion, “A New Frontier: Exploring Faster Payment Use Cases for Corporate Customers.” Based on a new study released by the Fed, the pandemic spurred business demand for faster payments.
According to the study, while a majority of businesses have made or received some form of a faster payments during the last 12 months, a full 90% of businesses expect to be making and receiving faster payments by 2023. So essentially in less than two years, they’ll be just a few businesses still working through their plans to make faster payments a reality for their customers.
Additional panelists in other sessions agreed. During the Network Operator Roundtable Discussion, Kirstin Wells, Principal Economist, Federal Reserve Board, shared similar sentiment regarding businesses and their implementation of faster payments. “What I am seeing is that businesses are anxious to start taking advantage of benefits of instant payments. Five years from now, everyone’s going to be doing instant payments. It is going to unlock a whole bunch of new use cases. All the customers are going to want it. In the future, this is the way things are going to be done. And we’ll get there.”
And I completely agree. We’ll definitely get there. And based on the pace at which we are moving, we may even get there sooner than we think. But there is still much work to be done. As Tarver indicated, although we are moving to a more digital environment at a rapid rate, “90% of interactions remain physical based within retail.” And as Theien shared, while faster payments use by business is growing, “It is grandly overshadowed by the use of checks. There are still 14 billion checks being written every day. So, it is promising that businesses are beginning to adopt these services, but there’s still a big opportunity and a long way to go.”
The FPC believes that it is through the continued dialogue, problem-solving, and consensus building that takes place within the FPC at meetings such as the recent Member Meeting, through Work Groups, educational offerings, and resource development and dissemination, that we’ll get to our ultimate goal of ubiquitous faster payments. COVID may have provided some additional momentum, but we need to continue to make progress at a similar rate to meet the new, faster expectations of end users.
We invite you to help us continue moving forward. Consider joining the FPC, if you haven’t already. Or attend a meeting as our guest. To learn more about how you can engage with us, please visit fasterpaymentscouncil.org.