Fiserv: Unlocking the Potential of Instant Payments with a «Killer Use Case» as FedNow Service Hits Its Stride

The FedNow® Service is making significant strides as it enters its second month of operation, and its impact is being hailed by industry leaders. Justin Jackson, Senior Vice President and Head of Enterprise Payments at Fiserv, succinctly summarized the launch with a single word: «Finally.» In an interview with Karen Webster, he expressed that while instant payments have long been prevalent in Europe, the United States is now catching up, and the arrival of FedNow is propelling real-time payments to the forefront of industry discussions, as stated by PYMNTS. 

This development coincides with The Clearing House‘s RTP® network, which has been operational for approximately six years, creating two competing rails for faster payments. Fiserv, on its part, has been laying the foundation for instant payments for nearly a decade. In 2012, it introduced Popmoney and expanded its NOW Network’s availability in 2014, speeding up peer-to-peer (P2P) payments and bill payments. According to Jackson, this effort has been steadily gaining momentum over time.

Fiserv is actively collaborating with hundreds of institutions to establish connectivity for both the FedNow platform and RTP. It’s too early to predict which service may gain an upper hand, but Jackson emphasizes that ubiquity will be a critical factor influencing how banks, FinTechs, and other providers drive innovation and encourage user adoption of instant payments.

The FedNow platform, developed by the Federal Reserve and backed by the U.S. Treasury, has received significant support from government entities, which may accelerate its adoption. In contrast to some other countries where regulatory mandates have driven instant payment schemes, the U.S. has largely relied on a market-driven approach to development.

However, there have been hurdles to overcome. Jackson acknowledges that integrating the real-time rail into products offered by processors and companies has progressed slowly. Furthermore, the absence of a «killer use case» has hindered the widespread adoption of instant payments in the U.S.

The ultimate goal of instant payments, according to Jackson, is to replicate the convenience of cash transactions where funds are immediately accessible, 24/7. Jackson assures that there won’t be any «insufficient funds situation» where money is clawed back days later. These are truly instant transactions that can occur at any time, ensuring immediate delivery.

Looking ahead, Jackson points out that there are numerous use cases with potential applicability on the real-time rails. However, the industry is still in its infancy, and there’s a need for providers to brainstorm novel ideas. A «killer use case» for both consumers and commercial transactions should not merely replace existing alternatives.

Addressing concerns about fraud, Jackson emphasizes the necessity for a protective «wrapper» around instant payments. Meanwhile, providers must also facilitate on-demand offerings. Fiserv is collaborating with companies like Walmart to enable pay-by-bank use cases and explore innovative ways to leverage real-time rails. Examples include bill presentment, requests for payments, and earned wage access, providing gig economy workers the ability to access their earned wages at the end of each shift or cash-out transactions with FinTechs.

These novel use cases for instant payments are expected to be the driving force behind the accelerated adoption that has been elusive in recent years. As Jackson notes, it’s not about replacing traditional payment methods but offering consumers newfound flexibility and breaking free from the constraints of the two-week pay cycle.