By Roy Urrico
The U.S. Faster Payments Council’s (FPC) 2024 U.S. Instant Payments Adoption Quantitative Study, published October 2024, outlined a disconnect in instant payments for financial institutions (FIs) that prevents them from delivering value to customers. By 2028, while an estimated 70-80% of U.S.-based FIs will be enabled to receive instant payments, only 30-40% will be able to send them, according to the study, which surveyed credit unions, banks, core processors, and fintech providers.
This obstacle in the digital payment evolution prevents credit unions, banks and other financial service organizations from delivering benefits to their members and customers including increased efficiency in cross-border payments, lower payment processing costs and greater access to liquidity. That is the belief of Deepak Gupta, EVP, product, engineering and services at Jersey City, N.J.-based Volante Technologies, a provider of cloud payments and financial messaging solutions.
Gupta provided insight to Finopotamus on the instant payments sending/receiving disconnect, how FIs can counter this trend by building a business case for payments modernization and digital transformation, and predictions for how the ongoing payments modernization 3.0 movement will shape payments and banking in 2025 and beyond.
Payments 3.0 is a technology that aims to improve the payment experience by using artificial intelligence to personalize payment options, speed up transactions and improve the user experience.
Why a Disconnect in Instant Payments for FIs
Gupta explained the FPC study clarifies the path forward for instant payments technology based on the industry’s current benefits and challenges. It sheds light on how various factors, including use cases, benefits, and industry challenges, are shaping the future of instant payments. “Being risk-averse, FIs have created this disconnect due to concerns around maintaining compliance and preventing fraud.”
However, for smaller institutions, he said, technological and financial limitations make it extra challenging to adopt innovative instant payments systems. “This slows the implementation process and creates a fragmented approach to modernization, with many institutions still relying on legacy systems that cannot easily adapt to new technologies or standards, ultimately widening the divide between sending and receiving capabilities.”
The FPC’s other key findings, said Gupta, focused on early adoption drivers including earned wage access, wallet funding, peer-to-peer (P2P), marketplace/gaming and brokerage payouts. The study also anticipates use cases like business-to-business (B2B) payments and online banking bill pay to spur broader adoption.
What Are the Concerns Around Compliance and Fraud?
“The global average cost of a data breach in 2024 was $4.88 million, a 10% increase over the last year and the highest total ever,” Gupta revealed. “Despite ongoing efforts from the Cybersecurity and Infrastructure Protection Agency (CISA), threat actors are employing increasingly complex methods for identifying target vulnerabilities, automating their phishing attacks, and identifying new ways to infiltrate malware.”
Gupta added it is important for FIs to take the necessary precautions to protect their users’ assets against the evolving threats. “Maintaining compliance for advancing technology is a continuous burden for in-house teams that would rather not open the door to risk. However, for credit unions and smaller institutions where data breaches hit the hardest and there is a heavy reliance on community reputation and member relationships, creating solutions that meet consumer demands is of the upmost importance.”
Volante believes the answer to uncertainty in payments security lies in the cloud and platform-as-a-service (PaaS) solutions. PaaS providers and their cloud partners are continuously investing in security, privacy, and compliance so that financial institutions can spend less time and effort in those areas, noted Gupta. “We have expended considerable effort on achieving and maintaining the highest standards of security certification, rigorously verified by leading authoritative bodies, to ensure we’re continuously exceeding the minimum requirements for FIs and other enterprises operating within the payments sector.”
Gupta continued, “These certifications offer peace of mind, reassuring institutions and partners that the integrity of the data processed by Volante will remain intact, and that best practices are being followed accordingly for detecting, preventing, and remediating data breaches.”
How FIs Can Maintain a Competitive Advantage
To meet consumer demands for better, more innovative technology and lower processing costs, FIs must invest in payments modernization solutions, like PaaS, that are built as tools for digital transformation, Gupta recommended. “PaaS enables FIs to maintain regulatory compliance and keep up with technological advancements without continuously overhauling their systems.”
Said Gupta, “PaaS providers minimize the load on in-house teams by handling the headaches of compliance updates, such as ISO 20022 [an international standard for exchanging electronic financial data between FIs] migration and real-time payment integration. This allows financial institutions to stay competitive by quickly adapting to changes and delivering innovative solutions to their customers and members.”
Financial institutions must implement the Federal Reserve’s ISO 20022 payment standard for Fedwire on March 10, 2025. “In the past year, we’ve worked towards furthering the adoption of instant payments technology and helping FIs comply with ISO 20022 messaging standards, enabling our partners to innovate themselves,” said Gupta.
How Can External Expertise Help Credit Unions and Other Financial Institutions
Volante’s PaaS platform offers scalability, flexibility, and cost efficiency for institutions of all sizes, enabling them to modernize their payment infrastructures without significant capital expenditures on hardware or proprietary systems, Gupta noted. Instead, they can use cloud-based infrastructure to provide faster and more secure payment services.
“This ‘pay-as-you-grow’ model is especially beneficial for smaller FIs and credit unions that want to scale their payment capabilities in response to market demand without the overhead of managing complex systems in-house,” said Gupta. “Staying in tune with our mission, Volante specializes in serving as the trusted payments partner to our customers, helping them become innovators themselves.”