For much of 2020 and continuing through this year, businesses have responded to uncertainty with agility and innovative solutions, and payments improvement has been a primary area of focus. In a survey of more than 2,000 businesses sponsored by the Federal Reserve (PDF) during the COVID-19 pandemic, three of every four businesses now consider it important to offer faster payments. In fact, nine in 10 businesses expect to be able to make and receive faster payments within three years – including instant payments (Off-site), a type of faster payment that credits the payee’s deposit account within seconds of payment initiation.
Conducted in the second half of 2020, the survey offers a look into readiness and interest in faster payments as businesses navigated the COVID-19 environment. The businesses spanned a variety of industries and had annual revenues ranging from less than $1 million to more than $250 million. In completing the survey, financial operations decision makers provided information on their organization’s payments priorities, their familiarity with and usage of different types of faster payments, and their perspective on how they believe the use of instant payments will impact their business.
The survey found that not only were a majority of businesses already using some form of faster payments, but that most expect to be using instant payment options by 2023 or sooner, which coincides with the Federal Reserve’s timeline for the new FedNowSM Service rollout.
“The FedNow Service is developing capabilities to address business needs for safe, instant, data-rich payments and collaborating with financial institutions and business solution providers to implement them in 2023.”
Senior vice president and FedNow Service business executive
Within the findings, the Federal Reserve saw that the business value for instant and faster payments has heightened as consumers increase their acceptance of digital payment methodologies, and it has taken off exponentially in the wake of the COVID-19 pandemic. Nearly half of respondents indicated that the pandemic is causing them to accelerate their plans for adoption.
“Businesses’ appetite for faster payments has clearly accelerated due to growing acceptance of digital commerce during the pandemic,” said Shonda Clay, the Federal Reserve’s chief of customer and industry engagement. “Businesses are calling for consumer-to-business and business-to-business payments that facilitate quicker access to funds, the ability to post payments immediately and automatically, and timely notification of payments. Our survey of businesses was designed to uncover insights to help us as an industry deliver instant payment services that meet end user needs.”
Other key findings of the Federal Reserve survey include:
- A majority of surveyed businesses have already sent and received some type of faster payments in the past 12 months, primarily via digital wallets, same day ACH and “push to card” services that use debit card networks.
- Nearly two-thirds of those surveyed (and more than three of four large/very large businesses surveyed) indicate that access to faster payments would factor into any decision to switch banks in the future.
- Nearly 75% of micro businesses and 60% or more of all the other businesses surveyed cite managing cash flow and working capital among their top concerns in the current business climate. Coming out of the pandemic, many are focused on offering additional digital/online payment options, ensuring payment timeliness and growing sales and revenue.
- The faster payments capabilities most demanded by businesses support use cases that will help them improve cash flow management, payment operations efficiency, ease of access and security. And certain high-demand use cases, including electronic invoicing and bill pay with remittance details, are best supported by instant payments.
For more information on the FedNow Service features and functionality, visit FedNow.org (Off-site). Stay up-to-date on our instant payments initiatives by joining the FedNow Community (Off-site) or by signing up to receive FedNow Service emails (Off-site).