Use of digital, faster and instant payment services is on the rise among businesses and consumers according to new surveys from Federal Reserve Financial Services. A robust 86% of businesses and 74% of consumers said they used faster or instant payments in the past 12 months, and most (74% of businesses and 79% of consumers) reported looking to their financial institution to provide these services.
Businesses say they are using faster and instant payments because it helps them reduce cost (48%) and provides flexibility to pay and be paid as customers prefer (39%). They also appreciate the 24/7 nature of instant payment services (35%).
Consumers are looking to faster and instant payments to help them better manage their money with 1 in 4 (25%) saying they are challenged by the slow speed of payments and prefer to have better options for instant money movement.,
“The growing demand for these types of payments suggests instant payment services will continue to play a crucial role in helping financial institutions meet their customers’ needs.”
Mark Gould, chief payments executive
Federal Reserve Financial Services
Digital wallet use increasing
Among faster and instant payment types, digital wallets saw strong growth with business use growing from 47% to 62% over the prior year, and consumer use increasing from 25% to 33%.
Much of the growth in digital wallets is spurred by younger consumers’ adoption. More than half of Generation Z and millennials now use digital wallets, and 80% of these younger consumers say it is important to be able to make payments by mobile device.
Businesses rapidly adopting faster and instant payment services
Many U.S. businesses are implementing faster and instant payment services because the benefits they offer align with the qualities sought by today’s digital-first consumers. Businesses say key use cases that benefit from instant payments include business-to-business (92%), business-to-person (71%) and account-to-account (40%) transactions. Many also believe instant payments will be useful for digital wallet funding/defunding (50%) and earned wage access (25%).
Other key findings from the survey include:
- Managing cash flow continues to be a top strategic priority for success, indicated by 55% of businesses, just behind driving operational efficiency (59%).
- Businesses reported liking immediacy of account posting (81%), ability to access funds instantly (80%) and receiving notifications when funds are available (80%).
- Most businesses (74%) would prefer that faster payment services be provided by their primary financial institution.
Read the full report of the business survey (PDF).
Consumers want speed and flexibility in payments
U.S. consumers — especially those in their 20s and 30s — are increasingly opting for the speed, flexibility and 24x7x365 convenience of digital and faster payment options to pay for goods and services in person (32% of Gen Z and 45% of millennials).
Other key findings from the survey include:
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- Six in 10 (61%) consumers stated that convenience and ease of use are the most-desirable qualities in payments.
- Paying friends and family (55%), transferring money between accounts (30%) and paying bills (27%) continue to be the main use cases for instant payments.
- Eight in 10 consumers (79%) prefer to use a traditional bank for payments, but there is an increasing openness to using non-bank payment solutions to meet their payment needs, especially among Gen Z and millennials (56% and 73%, respectively).
Read the full report of the consumer survey (PDF).
Learn more
To get the details on the key benefits driving faster and instant payment adoption, read the full reports: business survey (PDF) and consumer survey (PDF).
The survey was conducted by Federal Reserve Financial Services, a collaboration of the 12 Federal Reserve Banks. FRFS provides an instant payment service to financial institutions known as the FedNow® Service, and thus the survey, and the statements and findings contained in this summary, are not independent academic research.
For more information about instant payments and the FedNow Service, visit FedNow Explorer (Off-site).