Why Banks and Credit Unions Are Moving Slowly to Real-Time Payments

Although the adoption of real-time payments (RTP) continues to grow, most banks and credit unions still do not see real-time payments as a future profit center.  

According to a recent report from Cornerstone Advisors, fewer than 20% of American banks anticipate that commercial real-time payments will become a revenue generator for them in the next three years, and only 10% expect retail real-time payments to generate revenue. The number is even lower among credit unions, with just 7% expecting either commercial or retail RTP to become a profit center.

Nevertheless, these institutions plan to make more use of real-time payments. Half of the banks and credit unions surveyed expect to be up and running with RTP by the end of 2024.

Roughly half of respondents said they plan to offer real-time payment services through FedNow. In contrast, nearly a quarter of banks plan to offer payments through The Clearing House’s RTP rail, while 12% of credit unions said the same.

Seeking Profits

The study points out that many banks see real-time payments as a cost, potentially cannibalizing their profits from wire transfers. But businesses have been willing to pay extra for speed in these transactions. Cornerstone said that if $2.50 is a fair price for sending $1,000, then $100 should be reasonable for sending (or receiving) $100,000 much more quickly.

Banks and credit unions recognize that business-to-business (B2B) payments are likely the biggest reason to move towards RTP. B2B payments were the most commonly cited as the most important potential use case, followed by payroll payments.

Account-to-account (A2A) transfers are also a notable use case, and for credit unions, they remain No. 1.  For banks, A2A payments are tied with last-minute consumer payments as important real-time payments use cases.

Overall, increased interest in real-time payments has manifested in new attention toward payments hubs. The survey found that more financial institutions are planning to invest in a new payment hub or replace an existing one. In both 2022 and 2023, just 4% of banks and credit unions mentioned a new or replacement payments hub.