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The use of real-time payments in the United States has seen a growth in recent months. The Real-Time Payments (RTP) network, a banking solutions platform that allows all federally insured U.S. depository institutions to participate in payments innovation, has been leading this growth.
In 2017, The Clearing House (TCH) launched its real-time payments banking solution to boost efficiency in the financial system. Many U.S. banks are on the network, including Citibank, Bank of America, and PNC. These companies were forced to embrace digital transformation and change their digital payments infrastructure earlier than anticipated because of a malware attack last year that infiltrated thousands of financial institutions and disabled their core payment systems.
Despite this banking solution’s novelty, many financial institutions face the challenge of implementing real-time payments and transactions into their outdated legacy systems. But those banks that recognize the benefits of improving their back end systems and digital-first payment infrastructures have a chance to see long-term gains from a financial and reputation point of view, represented by these three factors:
Financial institutions are adapting their business models to address the needs and demands of their customers and industry. They aim to deliver a better value proposition, one that puts the client at the center of everything they do: in the flow of money, in the flow of information, in their relationships with each other. What are the benefits and challenges of this approach?
For one thing, electronic banking solutions help customers manage payments in real-time. This feature can help you improve customer experience and build stronger relationships with clients.
For example, customers can use it to considerably speed up disbursements and refunds. This is a common pain point for customers and businesses. In addition, it can help improve cash flow by giving better control of accounting and liquidity. As a result, this banking solution improves operations and business administration.
Commercial bank clients can use the Remote Transaction Platform to manage money better and keep a closer eye on their balances and financial situations. Overdraft fees, check cashing fees, and other costly processes will likely become a thing of the past as real-time payments become more accepted in place of traditional payments.
Financial institutions will have to adopt advanced digital technologies and upgrade their operating models, processes, and systems to remain competitive in the digital era. They will also need to build relationships with customers and offer personalized services that exceed their expectations.
Consumers want transparency, lower fees, and faster payment options domestically or internationally. If financial institutions cannot provide modern banking solutions for their consumers, they will lose customers to competitors with user-friendlier platforms and payment mechanisms. The time to act is now.
Over the long run, real‑time payments RTPs should help banks optimize the services they offer corporations, such as payments automation and data services. Banks will also be able to tap into new revenue streams. According to a report by Deloitte, 50 percent of businesses would be willing to pay a fee to receive payments immediately. Though it costs just a bit more, companies clearly emphasize financial growth.
When banks modernize technologies to conduct real-time transactions, they can serve new customers and businesses that they might not have seen before. Today, many U.S. businesses and retail customers use non-traditional financial services because they often offer fast money transfer services that many incumbents can’t provide. If banks extend these sought-after services and offerings to this demographic, they can increase revenues by acquiring these clients.
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Although there is undoubtedly a lot of hard work ahead to achieve the vision, significant technology upgrades and the progressive digital transformation banks are undergoing will nudge them towards the future. Moreover, the surge in online and mobile payment transactions and increasing customer demand for better services will shape the end of all payments. With that in mind, banks will fundamentally change as a system as a whole.
Consult Informatics today for modern banking solutions such as RTPs. With a primary focus on custom software development, we specialize in infrastructure solutions and services through years of experience and knowledge in the industry. Explore the possibilities on our website today!
Written by Hiran Wickramasinghe