“Fintech Nexus Newsletter: Banks hesitant to embrace real-time payments.”

TLDR:

• Banks are slow to adopt real-time payments because they have focused on receiving funds rather than sending them
• The technology required to support real-time payments is more complex and expensive to develop
• Many banks are waiting on the sidelines until they are forced to move due to customer expectations and pressure from other banks

According to American Banker, many banks have been working towards receiving funds through real-time payments but have not made the necessary investments to start sending real-time payments. This is a significant issue because in order for a bank to receive a request-for-payment through systems like FedNow and RTP, it must also be set up to send real-time payments.

The complexity and cost associated with developing the technology to support real-time payments is seen as a major barrier for banks. Creating the infrastructure to send and receive payments in real-time requires significant investment and IT resources. This is particularly challenging for smaller regional banks that may not have the same level of resources as larger institutions.

Despite the challenges, adoption of real-time payments is increasing, albeit at a slower pace than many industry observers anticipated. The primary reason for this slower adoption is that banks are still focused on receiving funds rather than sending them.

The article suggests that banks are waiting on the sidelines until they are forced to move by customer expectations and pressure from other banks. Once larger and regional banks have fully adopted real-time payments, there will be increased pressure on smaller banks to follow suit. However, the article states that we are still likely years away from this tipping point.

In conclusion, the slow adoption of real-time payments by banks is primarily due to technological complexity, costs, and a lack of immediate pressure to send payments in real-time. While adoption is increasing, it is not happening as quickly as many had hoped, and the industry is still a long way from widespread adoption.