The Race to Faster Payments & How Credit Unions Can Win

Over the last decade, the financial services industry has changed considerably as community banks and credit unions evolve their product offerings to keep up with consumer expectations. The faster payments movement is the latest example of this.

In the current economic climate, having access to funds in real-time is now more important than ever, both for consumers and small and medium-sized enterprises. According to a recent survey of 2,010 U.S. businesses by the Federal Reserve, 90% expect to use faster payments in their operations by 2023, and many are ready for that upgrade now. Meanwhile, 30% of consumers say access to real-time payments is a key factor when selecting a financial institution and nearly 25%  would be willing to switch to an institution that offers them, according to new research from PYMNTS.com.

While implementing new payments technologies and revamping established processes can seem like a time- and resource-intensive investment – especially for smaller financial institutions and credit unions – the right strategy can help maximize both short-term ROI and long-term success.

Remember Faster Payments Aren’t Just About Speed

First and foremost, consider how faster payments technology can ensure your credit union remains agile to emerging trends and future needs. Today, debit and credit cards are the two most popular payment methods overall, but consumers tend to pay for their rent, tuition and personal services — contractors, nannies or housekeepers — with paper checks. They also rely on peer-to-peer (P2P) payment apps, such as PayPal and Venmo, when paying friends or family members.

Consumers show significant interest in real-time payments, especially for certain use cases, and are even willing to pay fees to ensure that recipients can access funds quickly. Research from PYMNTS.com revealed this is the case for nearly 40% of consumers making tuition payments, 35% of those paying their contractors and 25% of those making P2P payments.

For credit unions considering new payments technology, reflect on who your members are, what they need and ultimately what they are trying to achieve with faster payments. By deeply understanding the expectations of your members, your credit union can more effectively choose a solution that serves them, both now and long-term.

No matter how your credit union approaches faster payments, the technology your team chooses must be flexible enough to serve your diverse members’ needs – whether they have a merchant or personal account, or both. A truly flexible platform will also support the use of different payment routes, such as FedNow, real-time payments and same-day ACH. This means payments can be routed according to speed, cost and network, which ensures payments arrive when a member needs them, at the lowest cost possible. Looking for these key functionalities in a payments platform reduces the risk of implementing technology that addresses an existing gap, but is unable to address needs that arise down the road.

Find Opportunities for Operational Efficiencies

Beyond benefitting members, the right approach to faster payments promises benefits for credit union employees. There are institutions that still require employees to memorize hundreds, if not thousands of codes and manually perform job tasks that can easily be automated.

Reconciliation is just one example of this. Instead of spending hours reconciling payments through multiple channels, balancing accounts and compiling reports, technology can automate and simplify this process. With the right payments technology, credit union employees can utilize a single interface to easily streamline these tasks, which saves time and minimizes the risk of human error.

Fintech Moves Fast, Plan Accordingly

Ultimately, innovation in fintech and payments is unlikely to slow down anytime soon. As a result, how credit unions plan their “long-term” strategies may need to change. Instead of developing five-year strategic plans, credit union leaders should focus on creating a strategic plan for the next two or three years, as technological innovations are constant and will no doubt influence your institution’s roadmap.

If there’s one thing we can count on, it’s that technology will continue evolving consumer expectations and community financial institutions must be ready to adapt quickly. The most successful credit unions will anticipate these changes and proactively adapt for the future, and there’s no better place to start than with faster payments.

Abhishek Veeraghanta is the Head of Pidgin, a real-time payments platform from the Atlanta-based VSoft Corporation.