# A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2020-09-23 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Accelerating US Payments Transformation: The Impact of Meta Description: Explore how real-time payments, changing demographics, and evolving corporate requirements are driving the digital transformation in the US payments industry. URL: https://financedigest.com/a-sleeping-digital-giant-wakes-4-key-trends-accelerating-payments-transformation-in-the-ushtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/untitled-design-1736838833144-compressed.jpg) _By **Lauren Jones,** International Payments Ambassador, Icon Solutions_ The US payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks. Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, [drive business](https://www.financedigest.com/the-collective-power-of-partnerships-integrating-payment-solutions-to-drive-business-success.html "The collective power of partnerships: integrating payment solutions to drive business success") value, and stay competitive. But [beyond the immediate impact of COVID](https://www.financedigest.com/unlocking-fresh-business-investment-opportunities-beyond-covid.html "Unlocking fresh business investment opportunities beyond COVID"), what underlying trends are accelerating digitization in the US? 1. **Real-time payments – the stimulus for change** Real-time [payments have been met with a degree of caution by US financial institutions](https://www.financedigest.com/how-payment-institutions-can-leverage-data-to-support-merchant-customers.html "How payment institutions can leverage data to support merchant customers"). [Risking traditional profit](https://www.financedigest.com/early-detection-of-mismatched-trades-is-key-to-managing-risk-and-maximizing-profits-on-the-pl-desk.html "EARLY DETECTION OF MISMATCHED TRADES IS KEY TO MANAGING RISK AND MAXIMIZING PROFITS ON THE P&L DESK") generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate [payments are coming to the US whether banks](https://www.financedigest.com/can-banks-acquire-customers-with-biometric-payment-cards.html "Can banks acquire customers with biometric payment cards?") like it or not. Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate [payment adoption in recent years](https://www.financedigest.com/the-year-ahead-top-payments-trends-to-watch-out-for-in-2022.html "The year ahead: Top payments trends to watch out for in 2022"). But the Fed, frustrated with a [slow rate](https://www.financedigest.com/ecb-could-slow-rate-hikes-but-bond-run-off-should-start-soon-knot-says.html "ECB could slow rate hikes, but bond run-off should start soon, Knot says") of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business. This means holdouts risk their own ‘Kodak’ moment if they miss the [huge opportunities](https://www.financedigest.com/quad-flat-no-lead-packaging-market-huge-growth-opportunity-between-2017-2027.html "Quad-Flat-No-Lead Packaging Market Huge Growth Opportunity between 2017-2027") in front of them by fixating on traditional revenue streams. Banks are in a position to support [innovation across](https://www.financedigest.com/open-finance-can-help-unlock-innovation-across-the-financial-ecosystem.html "Open Finance can help unlock innovation across the financial ecosystem") entire industries such as healthcare, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions. Another opportunity that can be unlocked via [instant payments](https://www.financedigest.com/the-latest-trends-in-instant-payments-and-how-they-impact-banks.html "The latest trends in instant payments and how they impact banks") is ISO 20022 (used in the TCH RTP system). It [is the future of payments messaging standards](https://iconsolutions.com/blog/iso20022-bedrock-payments-transformation/?utm_source=iseepr&utm_medium=blog&utm_campaign=usdigitalisation) and can greatly enhance various payments processes through increased data-carrying capabilities. More importantly given the current climate, citizens reliant on federal or state support can benefit from RTPs combined with additional data to immediately access [emergency funds](https://www.financedigest.com/where-can-you-start-building-your-emergency-funds.html "Where Can You Start Building Your Emergency Funds?"). 2. **The kids are growing up** The US is getting older. Consumers who were 10 when the iPhone first launched are now 23. This means we are seeing a ramp-up of digitally native Gen Z consumers (roughly those born between 1995 and 2010) accessing [banking services](https://www.financedigest.com/major-myths-and-questions-holding-banking-and-financial-services-back-from-full-digital-id-adoption.html "Major myths and questions holding banking and financial services back from full digital ID adoption"). Demographics are an inexact science and not perfect predictors (there are technophobe [college students](https://www.financedigest.com/networking-is-key-to-forming-business-ideas-as-a-college-student.html "Networking Is Key To Forming Business Ideas As A College Student") and 100-year-old Instagram influencers), but we can detect noticeable trends. Younger customers don’t usually choose a bank because there is an ATM in their neighbourhood, a slightly better [interest rate](https://www.financedigest.com/boes-pill-sees-need-for-further-interest-rate-rises.html "BoE’s Pill sees need for further interest rate rises") or an advert in the newspaper. Rather, a strong digital presence, personalised tools, rewards and experiences, and the trusted recommendations of friends and family, will have a more significant impact on [customer acquisition](https://www.financedigest.com/rationalfx-drives-customer-acquisition-with-regtech-platform-from-trunarrative.html "RationalFX drives customer acquisition with RegTech platform from TruNarrative"). Banks must look at the [effect this will have on their longer-term digitalization strategy and be able to segment what this emerging customer](https://www.financedigest.com/5-simple-steps-to-an-effective-customer-complaint-response-strategy.html "5 Simple Steps to an Effective Customer Complaint Response Strategy") base might want and how they will interact in years to come. 3. **Checkmate? Evolving corporate requirements** ![Lauren Jones](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/image001-1736838832995-compressed.png) Lauren Jones Corporate treasurers are [people and their experience](https://www.financedigest.com/people-need-people-humanising-the-digital-banking-experience.html "People need People – Humanising the digital banking experience") of seamless, immediate payments in their personal lives shapes expectations in the workplace. Although check usage for business-to-business (B2B) transactions is still the norm in the US and barriers remain, [corporates are increasingly demanding](https://www.financedigest.com/textron-launches-two-cessna-jets-on-corporate-demand-rebound.html "Textron launches two Cessna jets on corporate demand rebound") the ability to transact in a real-time, omnichannel environment, 24×7. The [benefits are clear](https://www.financedigest.com/clearing-out-your-garage-benefiting-from-corporate-simplification-2.html "Clearing Out Your Garage – Benefiting from Corporate Simplification "). Corporate treasurers stand to enjoy enhanced liquidity management and transparency, greater control over [payments and enhanced data](https://www.financedigest.com/understanding-the-realities-of-payment-data-monetisation.html "Understanding the realities of payment data monetisation") for reconciliation purposes. And for consumers, alternative digital [payment options such as buy now pay later](https://www.financedigest.com/the-future-of-b2b-payments-buy-now-pay-later.html "The Future of B2B Payments: Buy Now, Pay Later") promote choice and flexibility. 4. **Increasing competition** A significant consequence of [emerging consumer and business demand](https://www.financedigest.com/electric-vehicle-transmission-market-emerging-growth-analysis-future-demand-and-business-opportunities-2027.html "Electric Vehicle Transmission Market Emerging Growth Analysis, Future Demand and Business Opportunities 2027") for digital offerings is the increase in competition from fintechs, technology giants and other third-parties. Traditionally, incumbent banks have enjoyed the advantage of [consumer trust](https://www.financedigest.com/more-than-twice-as-many-consumers-trust-customer-reviews-over-companies-themselves-according-to-research-from-smart-money-people.html "More than twice as many consumers trust customer reviews over companies themselves according to research from Smart Money People") to offset more limited innovation. But as [consumers become more comfortable entrusting their financial transactions to non-banks](https://www.mckinsey.com/~/media/mckinsey/industries/financial%20services/banking%20blog/are%20convenience%20and%20rewards%20leading%20to%20a%20digital%20flashpoint/mckinsey-2019-digital-payments-survey.ashx), banks must differentiate and digitize to remain competitive. [Data is where the technology](https://www.financedigest.com/how-the-global-insurance-market-will-keep-pace-with-evolving-risks-through-data-analytics-and-technology.html "How the global insurance market will keep pace with evolving risks, through data, analytics and technology") giants excel, and their ability to personalise experiences and emotionally connect with their users is unprecedented. [Banks need](https://www.financedigest.com/could-the-npa-be-the-catalyst-banks-need-to-transform-their-payment-networks.html "Could the NPA be the catalyst banks need to transform their payment networks?") to learn from the positive aspects of this model to better understand their users and deliver meaningful, useful products and services. For data to become the cornerstone of a banks’ customer relationship and take [services to the next level](https://www.financedigest.com/is-ai-taking-quality-and-cost-optimization-of-enterprise-services-to-the-next-level.html "Is AI taking quality and cost optimization of enterprise services to the next level?"), breaking the channel silos and extracting value from a comprehensive dataset will be decisive. But with [only 18% of banks](https://iconsolutions.com/blog/why-arent-banks-extracting-value-from-payments-data/?utm_source=iseepr&utm_medium=blog&utm_campaign=usdigitalisation) reporting that they are in the process of shifting from a transactional revenue model to a data-driven revenue model, this work has some way to go. **Taking** [customer propositions to the next level](https://www.financedigest.com/solving-the-customer-experience-conundrum-how-fs-organisations-can-use-data-to-level-up.html "Solving the customer experience conundrum: How FS organisations can use data to level up") Customers now [expect services](https://www.financedigest.com/keeping-up-with-heightened-consumer-expectations-in-financial-services.html "Keeping up with heightened consumer expectations in financial services") that work for them, not their banks. All banks, no matter the footprint, need to move quickly to offer a broad [digital service platform](https://www.financedigest.com/choosing-the-best-digital-experience-platform-dxp-in-financial-services.html "Choosing the best Digital Experience Platform (DXP) in financial services") that adds value to both the customer and the bank. By defining a robust [payments transformation](https://www.financedigest.com/three-ways-blockchain-is-transforming-payments.html "Three ways blockchain is transforming payments") strategy, banks of all sizes can remain fiercely competitive by rapidly lowering costs, unlocking revenues and promoting innovation. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---