The challenges of implementing instant payments (and how to overcome them)
While instant payments offer advantages in terms of speed and convenience, widespread usage is not without challenges. Businesses and financial institutions face several hurdles when considering adding instant payments, including:
Fraud risk management
The heightened risk of fraud is a major challenge for instant payments. Unlike credit card or PayPal payments, which can be canceled or reversed, instant payments cannot be reversed. To mitigate these risks, companies should leverage advanced authentication methods, real-time monitoring, and risk assessment.
Plaid Transfer helps limit instant payment risk by offering an all-in-one payment solution for ACH, FedNow, and RTP. The platform reduces risk by verifying accounts and providing deeper insights that reduce NSF returns.
Technical and compliance barriers
The adoption of instant payment systems requires significant technical upgrades and investments in infrastructure to perform the actual transfers and manage compliance.
Navigating complex payment rules can require substantial resources. This challenge is most noticeable in the slow adoption of RfP, which is hindering growth for instant payins. For instant payouts, most institutions can use the current infrastructure through RTP or FedNow.
The slow adoption of request for payment (RfP)
One major challenge to the widespread use of instant payments is the slow adoption of instant payins (RfP). Most instant payments today are used for payouts, like instant payroll and loan disbursem*nts because there's not enough infrastructure for the necessary risk assessments for payins. Building this infrastructure will take time.
Currently, Plaid offers a solution for this using Plaid’s ACH risk reduction product, Signal, which analyzes more than 1,000+ risk factors to determine which payments are low risk and processes those payments instantly. As much as 90% of transactions—especially from trusted regular customers—will end up in the ‘low-risk’ bucket. This can improve new user adoption and customer satisfaction.
