Some financial institutions (FIs) are still grappling with when and how to adopt instant payments. For First Internet Bank, founded in 1999 on the principle of digital-first banking, the decision was less about “if” and more about how to lead the charge.
In a panel discussion, Real-World Experiences Offering Instant Payments, Kathy Duffer, then VP of Payment Operations at First Internet Bank, shared the strategic motivations and operational lessons learned from their journey into the world of real-time rails.
Why Move Now?
First Internet Bank’s move toward instant payments was catalyzed by a combination of executive vision and shifting market demands. Duffer noted that their CEO, David Becker, viewed the launch of the FedNow® Service as a pivotal moment. “He came to us and just said, ‘We’re doing this, this is great. We’re going to be at the forefront of this.’ So he wanted to be one of the early adopters. It was never a question of, let’s put this off for a little while or wait till it’s ready. We were full steam ahead, right away,” she shared.
Beyond leadership’s mandate, the bank observed a clear trend in customer behavior. As the market shifted toward faster money movement, staying competitive meant evolving past the current standards. “We knew what our customers were asking for when they were asking about Same Day ACH, and how they could get their money movement faster. ACH is not fast enough, so we could do Same Day. Well, what’s faster than Same Day? So we knew that we had to be a part of whatever was going to happen to bring faster payments to our customers,” Duffer explained.
Strategic Use Cases and Partnerships
For First Internet Bank, the business case for instant payments centered on serving their core customer segments: fintech partners and business customers. The bank recognized that for these clients, liquidity and speed are not just conveniences—they are structural requirements.
“We feel that real-time payments really provide those substantial benefits—the rapid access to the money funds flow, the management of their cash flow, and they don’t need any processing delays,” Duffer said.
This focus on fintech also influenced their monetization strategy. While the bank currently does not charge consumer or business members for sending or receiving, they utilize a fee structure for its fintech partnerships, ensuring the service provides value back to the institution while remaining a competitive offering.
Lessons From Implementation
Reflecting on the implementation process, the journey wasn’t without its initial hurdles. One major takeaway for other FIs is the critical importance of vendor selection and technical compatibility. Duffer explained how. “Well, the biggest lesson that I learned was all about API connectivity. I knew about APIs. I knew that they existed; we didn’t have a lot of them, but the API connectivity that Alacriti shared with us, it integrated into our core system extremely well. They worked with our core provider, and they did all the heavy lifting. We didn’t have to do a lot. We were there to test and make sure everything was working correctly in the sandbox environment, but really, Alacriti did all the heavy lifting for that.”
Duffer also explained that an institution’s roadmap is often limited by the capabilities of its existing tech stack. She advised FIs to look closely at their online banking providers before diving in. “Make sure your online banking provider actually has some sort of a customer-facing approach so they can support this. If they don’t have it, and it’s not on their roadmap to build, you can never implement this.”
A New Standard for Banking
Ultimately, First Internet Bank views instant payments as the new “table stakes” for the industry, comparable to the necessity of wires or checks. By moving early, the bank has been able to establish trust with customers through consistent, rapid service.
For other FIs still on the fence, Duffer’s advice is straightforward: “Just go for it, because again, it’s not going anywhere. It’s going to be a table stakes offering, just like a wire, ACH, check, and get on board.”
