Introduction

“The generation of NOW and ALWAYS” is where everyone expects everything to be done instantly and available 24x7x365’’.

There were days when banks and many retail businesses were only open on weekdays excluding holidays that fell out during the week and we were content and patient with that for the most part as we understood that this was the norm at the time.

That started to change as many banks and retail businesses started to be open 6 or 7 days a week. On holidays such as “black friday” after Thanksgiving, business opened for shopping in the middle of the night.

This expanded to staying open during Thanksgiving all night to the next day and in some cases straight through the weekend and even some that went straight through the end of the end of year holiday season. Then the “black friday” and hours started earlier in the fall and the after Christmas deals found their way into January and started to blend with the President’s Day sales and extended hours. It used to be rare to see any retail businesses open 24x7, and fewer 24x7x365, but there are many examples now which we can find open all the time such as some gas stations, convenience stores, pharmacies, groceries, fast food restaurants, and others.

Today we can also find many banks open on Saturdays. With the introduction of ATMs, limited banking services became available 24x7x365.

The always available internet enabled e-Commerce at any time where we could place an order in minutes and pay for it instantly by card accounts which were debited instantly as well, but the banks settled these between them behind and then credited the merchants up to 3 business days later.

Through advancements by companies like Amazon, UPS, Fedex, and others, the shipment of e-Commerce and delivery of packages in general started to shrink expectations from days or weeks down to as soon as same day receipt. The current generation that did not know of anything prior to these always open and instant everything has established a new norm, that we also now expect for payments. For those who have in their payments life, only known of digital card and non-bank payment services (e.g. PayPal and Venmo) likely do not even know what checks are or don’t understand why anyone would use them where it could take several days for checks to clear and be fully available.

When the checks are sent via the mail, it takes that much longer before they even get deposited. Some businesses may say that checks give them time before the funds come out of their account, but the uncertainty of how long this might take and the effort it takes to reconcile checks and calculate cash flow taking uncleared checks into account may be fooling themselves.

During the pandemic, when offices closed and many were forced to work at home, and many feared the spread of Covid by handling the paper, the printing and deposit processing of checks by businesses accelerated the switch to electronic payment methods.

The switch over from cash to electronic payments also accelerated during the pandemic. It can be viewed that cash is a form of instant transfer of value especially when it can be immediately re-used. However, if the cash has to be deposited into bank accounts before it can be used, then cash falls short of the benefits of instant payments where the payee can use the funds immediately.

Possession of cash also comes with other issues that do not exist with electronic payments such as losing it, having it stolen, not able to accrue interest, only able to use for in person transactions, and not always accepted everywhere. Some uses of checks and cash switched to instant payments during Covid, but the instant payments implementations had not matured enough and alternatives such as ACH and card payments were more of the beneficiaries of forced switches from checks to electronic payments during this period.

Even with this acceleration, B2B payments still have a long way to go to wean off of checks and as the saying goes “cash if king” it will likely still linger on a continued decline, but not for some of the reasons that instant payment adoption of instant payments will accelerate. Instant payment network implementations can’t come fast enough for many financial institutions as they begin to compete for the payment landscape with non-bank financial services (e.g. PayPal, Venmo, and Crypto payment platforms) that on the surface appear to be instant and always operating to move funds between payers and payees as they provide “closed-loop” platforms and ecosystems where banks have only been able to do the equivalent with payers and payees that are their customers on both ends.

These “on-us” and “closed-loop” transactions settle immediately between payer and payee and do not require settling funds with other financial institutions or networks other than when the non-bank “closed-loop” users load funds into the loop or unload them back out. Loading and unloading funds is called on-ramps and off-ramps and interestingly enough these have become one of the top use cases for instant payments where users of these non-bank closed-loop platforms could instantly and automatically transfer funds with their bank accounts and these non-bank platforms.

The demand is there and if your financial institution and payment service customers are not asking for instant payments, it could be because they are already using something else or these services have not asked them the right questions or offered them instant payment use cases that they would better understand the value of, such as instant payroll, instant merchant settlement, and many other use cases described in this book.

The time to act is now and always be re-evaluating and improving to first catch up and then expand in the world of the NOW and ALWAYS of instant payments. There are a number of instant payment specific terms and stakeholders that the book mentions and which you should be familiar with. Let’s start out by first defining faster payment and then further distinguish instant payments.

Note: The US Faster Payments Council (FPC) published a Glossary of Terms for the industry. Many of these terms were collaborated together with a team of subject matter experts from the NACHA Faster Payment Professional Certification work group. Applicable references to the glossary work group as well as other sources are accordingly footnote referenced.

• Faster Payments: Electronic payment services that provide funds to the Payee within seconds or up to a few hours. Faster payments include instant/immediate/real-time, push-to-card, and same day ACH.

• Instant Payments: An electronic payment solution available 24/7/365, resulting in the immediate interbank clearing of the transaction and crediting of the Payee’s account with confirmation to the Payer within seconds of payment initiation.

We hope you’re ready to learn and then act on implementing or expanding existing implementations of instant payments in the US. By reading this book; you should come away with the following:

• Knowledge about various aspects of what instant payment are, how they originated, who and how they benefit financial institutions, Fintechs, payment service providers, and the consumer and business end users

• Social and philosophical implications of instant payments

• Economic effects and considerations of implementing and/or adopting instant payments

• Use case benefits and corresponding implementation considerations

• Implementation considerations including strategies, use cases, risks, fraud, compliance