Slow on the Uptake for Faster Payments

The subject of faster payments has been in the news almost continually for months now, but apparently awareness of the subject, and in some cases adoption, remains lower than expected among the financial institutions that will be depended on to implement speedier settlement. That’s if survey results released in April are any indication.

Some 34% of financial institutions belonging to the Western Payments Alliance, or WesPay, indicated in the February online survey they had no awareness of the Federal Reserve Faster Payments Task Force, while 46% said they had “high-level” knowledge only and just 13% indicated they were “familiar with the functionality and advantages or disadvantages of the service.”

The results for other forms of faster payments were no better. Seventy-two percent professed no awareness of clearXchange, the bank-controlled, real-time peer-to-peer payments service now known as Zelle, while 61% were unaware of Visa Direct, another fast-settling P2P network offered by Visa Inc.

A regional automated clearing house association based in San Francisco, WesPay sent the survey to 1,000 members, of which 430 responded. WesPay’s membership covers 12 Western states, and respondents were nearly evenly divided between credit unions and banks. Forty-two percent of respondents had a deposit base exceeding $1 billion.

The lack of awareness was higher than the association expected, according to Bill Schoch, WesPay’s president and chief executive. “We’re a little surprised by that,” he says, because WesPay had conducted educational sessions with members throughout 2016 to explain faster payments.

“We have been talking to our members for more than a year about faster payments. We thought we had made fairly substantial inroads” in planting awareness, Schoch says. WesPay conducted the survey in an effort to help plan activities for 2017.

A number of real-time payments initiatives have been under way in the United States, following similar moves overseas. Much of this effort has been shepherded by the Fed, whose task force on faster payments consists of 320 members, including an 18-member steering committee.

The task force, which has evaluated a wide range of faster-payments schemes, is expected to unveil at mid-year a list of some 19 proposals that made the group’s cut.

Awareness aside, WesPay’s survey also found low adoption of well-recognized faster-payments systems, including same-day ACH transaction processing, which was implemented in September. Some 57% of respondents said faster ACH “has had no measurable impact on our customers/members’ transactions” so far. Only 15.5% said same-day ACH is “a welcome addition and meets our customers/members needs.”

The ACH network allows same-day processing of credits for now and will add same-day debits this September. With ordinary processing, ACH transactions typically settle the next day at the earliest.

The low awareness levels for faster payments may have much to do with the fact that actual systems aren’t yet in place. “They’re not seeing it yet,” says Schoch. He also points to the fact that these systems are likely to require substantial bank investment.

“It will represent a fairly heavy lift in [capital expenditure],” he notes, which could discourage executives from paying close attention to the matter for now. Shoch predicts momentum will build as launch dates near. Even smaller institutions, he says, will “wait for a solution that is fairly well packaged with their core provider, or [they] will see which one is getting traction.”

While WesPay’s survey represents the sentiments only of institutions in the Western part of the country, Schoch says there is reason to believe the results may be representative of national opinion. He says he presented the results at a recent meeting convened by the Atlanta Fed, where “folks found the numbers to be fairly alarming, but I can’t say folks were completely surprised by the numbers.”