RTP and FedNow limit increases surge in instant payments

RedCompass Lab's expertise includes ISO 20022-based payments, instant and cross-border transactions, payment interoperability, and fighting financial crime. The company uses advanced AI, microservices technology, and extensive payment knowledge for successful payment transformation projects.

The research from RedCompass Labs shows that 84% of US banks believe the new USD 10 million RTP limit and raising FedNow’s USD 500,000 cap will increase instant payment attractiveness. This has led to a significant rise in corporate demand, with 47% of banks reporting overwhelming interest, up from 16% in 2024. Banks anticipate a 23% increase in instant payment volumes over the next three years, with 12% expecting growth over 50%. Additionally, 88% believe instant payments will positively impact their profits, and 45% foresee a major boost.

However, concerns about fraud are rising, with 85% of banks expecting an increase in fraudulent activities. To combat this, 96% support implementing a 'confirmation of payee' scheme, while measures like AI (40%), real-time fraud detection (39%), and multi-factor authentication (35%) are also being adopted.

Key findings include:

• US Banks and instant payments: 81% of US banks believe they lead in instant payments, with 42% claiming a significant lead; only 4% feel behind but can catch up;

• AI in payments: 62% of banks view AI as important for payment strategies, with 43% planning to use it for modernisation and 40% focusing on fraud prevention and automation;

• Fintech competition: 93% of banks say fintech pressures influence their instant payment adoption, with 60% feeling greatly impacted;

• Barriers to adoption: barriers include fintech competition (36%), 24/7 availability (34%), and system updates (28%). Concerns about revenue cannibalization dropped, while fraud concerns rose;

• Interoperability interest: 92% of banks are considering interoperability, but only 2% have taken action;

• Value-added services: top services likely to be adopted include bill payments (52%), digital ID solutions (42%), and confirmation of payee (38%). Earned wage access ranked ninth (29%).

Officials from RedCompass Labs stated that its research indicates a robust demand for instant payments and an increasing pressure on banks to meet this need. As RTP and FedNow gain appeal, many banks are starting to see instant payments as a way to increase their profitability.