The U.S. payments business generates hundreds of billions of dollars in revenues to banks, payment networks and service providers.
Instant payments represent the first fundamentally new payment capability in the U.S. in over 40 years. It is the result of modern technology being applied to payments to deliver the “always on, instant gratification” experience consumers and businesses have come to appreciate.
It is also an opportunity for these enormous payment revenues to be re-allocated to those who find innovative ways to deliver payments instantly to consumers and businesses. True instant payment schemes move money from one bank account to another in real-time, irrevocably.
Consumer P2P services such as PayPal, Venmo and Cash App appear to move money instantly. In reality, payments on these platforms simply involve a ledger entry making one account go down and the other go up. Another transaction is required to move money from these services to a consumer’s bank account and often takes days to settle. Zelle improved on this experience by making money immediately available in a consumer’s bank account, but it leverages ACH, debit or wire and settles transactions in batch at the end of the day. The recently announced “Zelle over RTP” creates an instant experience end-to-end, but is only used in a small percent of Zelle transactions.