- Real-time payments allow banks to achieve the transaction speed consumers demand while providing significant financial return for the institution.
- Study shows a $1.1 billion revenue opportunity for U.S. banks that use real-time payments to support the outbound foreign money transfer segment.
- The majority of consumers view their primary financial institution as the first choice for real-time payment services, and many consumers are willing to pay for these services.
Offering real-time payments can help consumers better manage their financial lives, offer a differentiated banking experience and provide additional revenue streams for financial institutions, according to the second phase of a comprehensive research study released today by FIS™ (NYSE:FIS), the world’s largest provider of banking and payments technology. Among other findings, the study reveals that the most positive responses to real-time payments are among people that are most sensitive to payment timing, such as outbound foreign money transfer users.
The study, conducted by global market research provider Ipsos Vantis, on behalf of FIS, gauged consumer sentiments and potential economic value for banks that instantly authorize and settle transactions in four key market groups: outbound foreign money transfer users, account-to-account (A2A) transfer users, person-to-person (P2P) payment users and online bill payers. The study sought to better understand the challenges consumers face with payments and how institutions can derive bottom-line benefits by providing real-time payments capabilities to their consumer and corporate customers. It also found that consumers seeking real-time payments services can afford and are willing to pay for fees associated with the services.
Overall, the study underscored that real-time payments resonate with consumers and that the immediate availability of funds is very important, both from a sender and a receiver perspective. To that end, 80 percent of overseas money transfer users believe it’s important for their recipients to be able to use the money they send to them immediately. Also, 58 percent of A2A users and 41 percent of P2P recipients want to have immediate access to their funds.
Other key findings include:
- The opportunity is now: Given that financial institutions are the preferred place for customers to initiate real-time payments, even more so than alternative payments or credit card providers, there is a sense of urgency to seize the real-time opportunity now. In fact, the greatest opportunity in real-time payments – especially for large and mid-tier banks – is among the outbound foreign money transfer segment. While the segment offers significant “white space” opportunity and potential for generating more than $1.1 billion in new fee-based revenues for large financial institutions (LFIs).
- Strong adoption potential: Consumers reported they would use real-time payments – if available through online banking or their mobile banking app – for a significant percentage of their transactions. Online bill payers who currently use expedited payments estimate, on average, they would use real-time bill payment through their online banking or mobile banking app to make real-time payments for 71 percent of their expedited bill payments going forward. On average, users of overseas money transfers say they would use real time for 47 percent of those transactions, while A2A users project making 36 percent of their money transfers in real time and P2P users expect to use real time for 25 percent of their P2P transactions. Overall, a compelling opportunity exists for FIs to migrate these transactions to real time.
- Real time as a relationship builder: Real time provides another vehicle for financial institutions to solidify relationships with profitable consumers. For example, the research found that consumers who actively use outbound foreign money services are more than twice as likely to own a money market account and have an automobile loan with their primary checking account provider. Real-time payments can strengthen customer loyalty, making the foreign money transfer process much more convenient, while generating fee income.
- Reaching the mobile consumer: Four out of 10 survey respondents who use outbound foreign money transfer and P2P services want to be able to access real-time applications through their mobile phones. For P2P payments, nearly as many Gen Y respondents – those 18 to 33 – prefer to use mobile phones to make real-time payments as those who prefer computers and laptops.
“The findings of our research and survey are clear – real-time money movement is resonating with the majority of consumers, and financial institutions have a tremendous opportunity to capitalize on the white space that real-time payments can provide,” said Anthony Jabbour, executive vice president, North American Financial Institutions, FIS. “The research confirms that consumers are willing to pay for these real-time services and that mobile technologies will be a catalyst for adoption in this space. Helping financial institutions seize this opportunity is a key element of FIS’ broader payment vision.”
The second of a three-part series, the study’s findings are being unveiled on May 14 at FIS Client Conference 2013, FIS’ annual conference for large and mid-tier financial institutions. The first phase of the study, highlighting findings that create opportunities for community institutions, was unveiled last month at InfoShare 2013, FIS’ annual gathering of community banking clients. The final phase will be released in the summer and will disclose more detailed findings about consumer behaviors and payment preferences in the retail payments channel.
The study’s research method was comprised of qualitative research with focus group respondents, including overseas money transfer users, followed by a national quantitative survey with 1,508 adult financial decision makers who conduct their banking online or through mobile apps and interviews with 30 executives in the banking industry.
Real-time payments are a key pillar of FIS’ broader global payments vision. FIS is in the process of piloting PayNet®, the company’s real-time authorization and settlement solution powered by the NYCE® network. PayNet is currently being integrated into FIS’ broad payments portfolio, including bill pay, EFT, retail solutions, electronic commerce, P2P and mobile payments solutions.