Annual mid-tier bank payments modernization report also reveals real-time and instant payment modernization is driving increased adoption of payments as a service (PaaS)
Volante Technologies, the global leader in payments as a service, issued the results from its third annual mid-tier bank payments modernization report. The report shows high interest and enthusiasm for faster payment networks, with 78% of U.S. financial businesses saying it is a “must-have” for their organization.
Volante customers share this sentiment. Several banks already use the Volante PaaS platform for The Clearing House RTP® (TCH RTP) or FedNow Instant Payments Service or are about to certify on these networks.
Erika Bauman, Director, Commercial Banking & Payments Practice, Datos Insights, said, “The interest in real-time payments and the impressive adoption rate of real-time payment usage across the networks underline a transformative shift in the payments ecosystem. Once seen as a nice-to-have, 24×7 real-time payments experiences are increasingly a core requirement for consumers and businesses.”
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With the FedNow Service launch in July 2023, most institutions have firm FedNow plans, with a 50% year-over-year uptick in respondents who said they plan to connect within the year or sooner. More than a quarter of those planning to connect to TCH RTP Network expect to do so within the following year. Connecting to either network or both is the top modernization priority across all asset tiers.
Replacing legacy wire payment processing systems ranked second in modernization priority, likely due to the Federal Reserve’s rapid approaching deadline for institutions to adopt the global ISO 20022 messaging standard by March 2025. In the ACH realm, respondents were less focused on system replacement, but one-third of institutions identified rising ACH volumes as their biggest challenge, with reporting and fraud as associated problem areas.
The report also highlights the growth of cloud and PaaS. Today, PaaS is on track to displace bank data centers as the preferred method for payment processing. Half of all mid-tier institutions are either already using or implementing it, a significant increase from only 11% in 2021. This is not a surprise since ubiquity and cost remain top challenges. In fact, 92% see payment system interoperability as a top issue, consistent over the four annual surveys.
“With a renewed focus on deposit protection and customer retention, financial businesses now realize that providing superior payments services, specifically instant and real-time payments, provides an ideal way to meet their customers’ shifting needs,” said Deepak Gupta, EVP Product, Engineering, and Services, Volante Technologies.
“Furthermore, the industry is converging on PaaS as the fastest, lowest-risk way to achieve payments modernization. As a result, it is an efficient and effective way for our customers to extract meaningful value from technology,” he continued.
The annual mid-tier bank payments modernization survey report is based on data collected throughout 2023. It offers invaluable insights into the evolving payments landscape among U.S. mid-tier banks and credit unions with assets between $1B to $50B. The data encompasses responses from diverse payment professionals, from business and technology executives to front-line systems operators.
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