A study by the Federal Reserve has revealed trends in the adoption of digital, faster, and instant payment services among firms and consumers in the US.
According to the findings, there has been a remarkable surge in the use of digital wallets, with a 31% increase among efficiency-focused businesses and a 32% rise among convenience-minded consumers compared to the previous year.
The research highlights a shifting landscape where consumers increasingly rely on digital wallets and online banking, leading to a rise in instant and faster payment use cases such as bill payments, mobile wallet funding and defunding, account-to-account transfers, and immediate payroll for employees.
Mark Gould, Chief Payments Executive for Federal Reserve Financial Services, emphasised the importance of tools like the FedNow® Service in meeting the evolving needs of financial institutions’ customers. The FedNow Service, which has grown to over 700 participants since its launch last summer, underscores the proactive response of financial institutions to these changing customer expectations.
The study indicates that 86% of businesses and 74% of consumers utilised faster or instant payments in 2023, with a significant majority looking to their financial institutions to provide these services. Shonda Clay, Executive Vice President for Federal Reserve Financial Services, highlighted the benefits of same-day pay for workers, emphasising how it helps avoid late fees and improves overall employee satisfaction and retention.
Key findings from the surveys include insights into generational preferences, with younger consumers leading the shift towards digital payments. Over half of Generation Z and millennials now use digital wallets, with 80% of these younger consumers deeming mobile payment capability important.
Additionally, the research sheds light on the challenges faced by consumers due to the slow speed of payments, with 25% expressing a preference for better options for instant money movement to manage personal finances effectively.
Businesses are embracing faster and instant payments as well, citing benefits such as cost reduction, flexibility in payment methods, and the round-the-clock availability of instant payment services. Key use cases identified by businesses include business-to-business transactions, business-to-person payments, and account-to-account transfers, with expectations of further utility in digital wallet funding/defunding and earned wage access.
In conclusion, the study underscores the increasing importance of faster and instant payment solutions in meeting the evolving needs of businesses and consumers alike, with implications for financial institutions and their technology partners to innovate new services and infrastructure to cater to these demands.
“The growing demand for faster and instant payment services suggests that tools like the FedNow Service will continue to play a crucial role in helping financial institutions meet their customers’ needs,” said Mark Gould, chief payments executive for Federal Reserve Financial Services.”
“Workers can now get paid immediately, helping them avoid late fees and better meet a variety of obligations,” added Shonda Clay, executive vice president for Federal Reserve Financial Services.”
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