Exploring the rise to real-time at Icon’s U.S payments conference

On Wednesday 5th February, Icon is hosting its annual payments conference in New York to explore the growth of instant payment adoption in North America.

We will hear from U.S banks on how they are embracing next-generation technologies like the Icon Payments Framework (IPF) to accelerate payments modernisation, while remaining in control of development, delivery timelines, and costs. The event will also showcase the growth opportunities that can be realised amid evolving customer demands for 24/7, instant payments.

How are real-time payments taking shape in the U.S?

Compared to other markets, the journey to real-time payments in the U.S is still in the relatively early stages. When The Clearing House (TCH) launched the Real-Time Payments (RTP) system in 2017, it was the first to provide faster payment capabilities to banks, businesses, and consumers.

Yet despite being just eight years along, real-time in the U.S is already showing significant potential. Following the launch of FedNow in 2023, real-time transaction volumes have achieved substantial growth. A study by U.S Bank found that 51% of companies currently use instant payments through the RTP network and FedNow service, a rise of 42% in 2023.

Leveraging the benefits of ISO 20022

The launch of RTP and FedNow have also given a strong push to the adoption of ISO 20022 in the U.S as the new payments message standard. This same message standard is also used in the new version of the Fedwire service, which goes live in March this year.

In comparison with legacy payment message standards, ISO 20022 offers more detailed and structured payment information, creating opportunities for banks to increase automation across areas like reconciliation, while reducing errors and improving compliance checks (like sanction screening). Together with real-time payments, both RTP and FedNow have also launched a request-for-payment (RFP) service that uses the ISO 20022 standard. Looking ahead, we expect more banks will move to leverage RFP for the development of new, value added real-time payment services.

Use cases and benefits driving adoption

The opportunity to improve efficiencies, reduce costs, and increase speed and convenience are well recognised as key benefits driving demand from bank’s corporate customers, for example:

• Optimise cash-flow management – real-time payments enable businesses to manage liquidity and working capital more effectively.
• Improve operations and strengthen global competitiveness – logistics firms can issue immediate payments to their contractors to ensure timely deliveries.
• Enhance the customer experience – retailers can provide instant refunds to enhance customer trust and loyalty. Insurance companies can also expedite claim payouts.
• Support an on-demand economy – instant payouts for workers, freelancers, or contractors, and / or same-day bill payments, avoids disruption to services.

The impact on payments processing

However, alongside these benefits, real-time payments also present a major impact to bank’s payment processing infrastructure.

Real-time payments have higher deployment requirements and have major impact on the way banks process payments. It means finding the resources to develop or acquire new technologies capable of processing large volumes of payments in a matter of seconds, around the clock and 365 days a year.

Aside from cost and time, there is then also the issue of risk. Payments are mission-critical and so technology updates and upgrades must happen with no or limited downtime for system updates or fail-over recovery. Ensuring compliance with regulations like the Dodd-Frank Act, which aim to reduce risk in the banking system must be top of mind.

Implementing real-time also cannot come at the expense of customer protection. As we have seen in other regions, when transactions happen in real-time the risk and impact of fraud can become much greater. Considering the positive effect of Confirmation of Payee (CoP) / Verification of Payee (VoP) services on fighting real-time payments fraud in other parts of the world, it is possible that the U.S could introduce a similar service.

How can banks capitalise on real-time payment opportunities?

As real-time payments continue to gain momentum, there are key opportunities to use next-generation technologies to deliver new value to corporate clients. This will be a focal point of the discussion at our annual payments conference in New York,  where we look forward to hearing from our U.S customers on how they are already use the Icon Payments Framework (IPF) to capitalise on the potential of real-time payments, request-for-payment and ISO 20022.

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If you would like to arrange a meeting with us in New York, get in touch here.