The financial landscape is constantly in flux — and now it’s getting a little faster.
As instant payments gain prominence, the strategies, challenges and potential impacts of the money movement vehicle all hinge on one thing: adoption by both consumers and businesses.
“The user experience needs to be seamless and easy to use,” Mike Storiale, vice president of innovation development at Synchrony, told PYMNTS for the series “What’s Next in Payments: Instant Payments: What Will Turbocharge Instant Payments Growth in 2024?” “If we’re going to make something faster, then the assumption is that it is going to be better for the consumer.”
He highlighted the need for seamless and easy-to-use interfaces, emphasizing that making payments faster should also make the entire process better.
“Ultimately, we need education and trust for the consumers and for the businesses about not only the benefits of instant payments around speed, the convenience and security, but also how to mitigate fraud and make sure that everyone is staying safe in an evolved ecosystem,” Storiale said.
For the widespread adoption of instant payments by both businesses and consumers, security measures to protect against fraud and cybersecurity threats have become paramount.
Storiale acknowledged the need to uphold existing security practices while placing a greater emphasis on knowing the customer in real time.
“It is an ‘everything and’ situation,” he said, explaining that everything that’s already being done in the anti-fraud space should continue to be upheld, while additive measures like instant verification should be bolted on to ensure the security of instant payments.
Shifting from probabilistic to deterministic methods to ensure a high level of certainty before transactions are approved is crucial in this new, real-time payments environment. Collaboration and adherence to common standards and protocols across the financial ecosystem are also essential for effective fraud detection in real time, Storiale said.
Interoperability, a longstanding challenge in the financial sector, is a critical factor in the success of instant payments as well.
“It’s actually more of a business problem than a technical one,” Storiale said.
Creating common standards across payment systems and developing standardized application programming interfaces (APIs) and open banking protocols are potential solutions, he noted.
Communication among financial institutions, payment service providers, FinTech companies and retailers is equally crucial for establishing shared standards and interfaces.
“It is a business problem that comes down to collaboration and partnerships,” said Storiale.
Still, one thing is clear: Instant payments are going to have an instant impact on the existing revenue models and operational structures of financial institutions.
“There’s certainly an opportunity for reduced costs and friction,” Storiale said. “Real-time payments can take operational costs down over traditional payment methods, and FinTechs and non-traditional players could benefit from lower transaction fees and reduced risk.”
“On the other side, it can fuel the embedded finance trend, which perhaps opens up new opportunities for revenue streams or profitability,” he added.
The efficiency gains offered by instant payments could extend to various sectors, from marketplaces to existing platforms, creating a ripple effect throughout the financial landscape, Storiale said.
Instant payments are increasingly being seen as a catalyst for economic activities, allowing for increased participation in local economies and facilitating cross-border transactions for underbanked and unbanked populations.
“When it comes to critical payments, like real estate, housing, rent, groceries … being able to do that instantly should improve that experience,” Storiale said. “And instant payment systems can facilitate quicker and more affordable cross-border transactions.”
He also noted the potential for enhancing financial inclusion, with instant payments offering timely access to earned funds and reducing mismatches between money available and money owed.
So, what does Storiale see the future holding for instant payments?
“Embedded finance is a trend that is not slowing down, and instant payments can empower better products to be built in the embedded finance space,” he said. “On the other side, more government entities worldwide are going to transition to instant payments for welfare programs and public services.”
From prioritizing user experience and security in real-time transactions to addressing interoperability challenges and reshaping the broader financial ecosystem, instant payments are positioned as a transformative force — and a positive one — for the way money moves.
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