P2P payments. (Source: Shutterstock)
Getting paid and paying others in real-time is a benefit that consumers want in their lives. But they may not fully understand what real-time payments are, how they work or who actually offers them, according to a new white paper produced by Javelin Strategy & Research and commissioned by the Brookfield, Wis.-based core processor and fintech Fiserv.
That's keeping credit unions and other financial institutions from reaching their full potential in the real-time payments services space, according to the paper, as consumers' misperceptions are steering them toward nonbank payment apps such as PayPal's Venmo and Square's Cash App.
The white paper, based on a June 2021 survey of 3,711 consumers, revealed that 60% of people do not believe that "real-time payments" are truly instantaneous, mistakenly thinking that "money will not be available for hours or even days, influenced by factors such as bankers' hours, bank policies, industry limitations, and weekend and holiday delays."
In addition, 44% of respondents said they believed Venmo and Cash App provided instant access to funds in their bank account when they in fact do not. The capabilities of the Zelle real-time payments network, however, can be integrated into a financial institution's app and provide instant access to funds in the recipient's bank account, and only 50% of consumers are aware of Zelle's advantage.
Notably, among Gen Z respondents, 42% have adopted Cash App, 27% have adopted Venmo and just 13% have adopted Zelle.
The response from credit unions, according to the paper, should be to integrate real-time payment capabilities such as Zelle's and educate members – especially young members – about how they work. Credit unions have much to gain from embracing real-time payment capabilities, including increased member engagement and stronger member relationships, and a reduced risk of losing member transactions to nonbank payment apps, the report noted.
"By integrating with real-time networks like The Clearing House's RTP network or tapping into Zelle's ability to make speedy payments, financial institutions have the opportunity to bolster their appeal to consumers," the report stated. "They must take these steps to stave off threats from payments platforms like PayPal's Venmo and Square's Cash App."
Convincing consumers of the benefits of real-time payments is not necessary, according to the paper – 75% of respondents of all ages said they feel it's important to be able to receive funds and access them instantly. That importance appeared to decrease with age, with 90% and 93% of Gen Z and Gen Y respondents agreeing with that statement, respectively, followed by 82% of Gen Xers and 52% of baby boomers.
Javelin and Fiserv listed six recommendations for financial institutions to succeed in the real-time payments area:
- Accelerate investments in real-time money movement;
- Build out real-time payments in bill pay and interbank transfers;
- Improve the consumer experience of using real-time payments;
- Use the speed of real-time payments to strengthen financial fitness tools;
- Refocus marketing to counter misperceptions about real-time payments; and
- Raise awareness of real-time networks like Zelle among Gen Z.
"Offering instant payment capabilities is now table stakes for financial institutions," Javelin Director of Digital Banking Mark Schwanhausser stated in a news release about the paper. "The opportunity for banks and credit unions to win customers in this space will hinge on their ability to deliver and differentiate their offerings from nonbank apps."
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
