Posted by Bethany Frank on 08 Jun 2016
The digital disruption has left many of the world’s foremost financial institutions concerned about increasing competition from the technology sector. One avenue banks could take towards modernizing antiquated infrastructure is the development of real-time payments systems. Consumers are among the largest potential beneficiaries of this push towards faster payments.
Banking transactions can take up to three days or longer to fully process, earning financial institutions their long-standing reputation for slow service. Consumers accustomed to digital speed and instantaneous results are often frustrated by reconciliation delays. With so much readily available at people’s fingertips through smartphones, tablets, and other mobile devices, consumer demand for fast and efficient service is at an all-time high. Banks that fail to upgrade the user experience to modern standards could see sharp declines in customer satisfaction and alienate future consumer bases, especially as new players step into the space and make the market more competitive.
Real-time payments have the potential to completely transform the banking experience for consumers. Updated rails could turn a painful necessity into a quick and efficient process for all parties — most importantly the consumer. Beyond pure convenience, real-time payments would give consumers more control over their finances and help them better manage budgets. Quick transactions and faster availability of funds could help consumers prevent financial oversights and reduce the risk of overdrafts.
Furthermore, immediate payments platforms often utilize next-generation security features to make transactions more secure and reduce the risk of fraud. Tokenization, for example, masks account numbers and personal details by instead utilizing a unique, secure one-time token. The token enables a transaction to take place without revealing sensitive or identifiable information about the consumer. With biometric authentication - another security measure now being utilized by the financial services sector - access to real-time payments applications would also remain limited to authorized individuals. Consumer adoption of these kinds of applications is likely to increase as technologies like fingerprint scanners become standard in electronic devices.
Real-time payments have the potential to enhance all-digital payment methods and increase the adoption rates of alternative payment products and services as a whole. Along with mobile payment platforms and similar technologies, faster payments rails could eliminate the need for many consumers to carry cash.
Banks must address growing demands to embrace new technology if they want to remain competitive. Real-time payments are a preliminary step towards real-time banking, and consumers stand to benefit the most as financial institutions strive to adapt to changing market realities. As competition stiffens, banks will show greater dedication to providing convenience, a better customer experience, and value-added services. The development and proliferation of real-time payments will enable banks to eventually provide immediacy in other financial services as well.