Consumers, businesses gravitate to faster, mobile payments
- The use of mobile and faster payment services by consumers and businesses in the U.S. is rising as those services become more widely available, according to two Federal Reserve reports issued this week that were based on surveys.
- In the consumer research, 67% of U.S. household decision-makers surveyed last year said they mainly use online and mobile services for their banking needs and rarely or occasionally visit a bank branch, up from 63% in 2021 and 61% in 2020. Faster payment use rose to 75% last year, up from 68% in 2021 and 62% in 2020.
- For its business research, which included surveying 2,000 companies of all sizes, the Fed said 83% already use some form of faster payments and 90% expect to be using them within three years. The businesses mainly use those speedier payments because they’re lower cost and provide flexibility, they said last year.
The research results gave the Fed an opportunity to plug the arrival of its new FedNow faster payments system, which is expected to launch services publicly in July. That real-time payments system from the central bank has been in development for years with pilot projects, including bank and technology company participants, underway in recent months.
“Given the move to a 24/7 economy and strong, growing use of faster payments, it is timely that the Federal Reserve’s FedNow Service will be available in July for financial institutions of all sizes to use to provide instant payment services to their customers,” Connie Theien, head of industry relations for Federal Reserve Financial Services, said in a press release Wednesday regarding the research.
For businesses already tapping faster payments, including same-day ACH services, mobile payment apps or digital wallets, the principal use cases are for payroll, paying recurring bills and invoices, shooting off an urgent payment and internal money transfers.
“The combination of supply chain complexity, tight labor markets and rising costs has prompted businesses to focus on greater flexibility, more options, and increased speed and control when sending and receiving payments,” the Fed’s business research study said.
Almost all of the businesses (94%) said they still resort to manual intervention for processing their payments, which the Fed said in that study highlighted the need for more automation.
With respect to consumers, 70% expect faster payments from their financial institutions and more than half (53%) are using some form of non-bank mobile service to make faster payments, the research showed.
Meanwhile, some older cohorts are playing catch-up when it comes to digital devices. Consumers between the ages of 35 and 54 now use mobile services for checking balances and making payments more often than those between the ages of 21 and 34, the Fed data showed.
The biggest consumer use cases among those surveyed was generally for using online and mobile payments was for checking balances, recent transactions and shifting money from one account to another.
Despite the Fed’s focus on mobile and electronic payments, the most likely consumer methods of payment used in the past year were still cash (75%), credit card (68%) and debit card (63%).
Both studies showed that consumers and businesses still have concerns about fraud when it comes to faster electronic payments. As a result, they’re seeking anti-fraud and confirmation notice features with their services.