With the launch of FedNow, instant payments have become ubiquitous, and their adoption will only grow. But there are complexities to consider, particularly for banks and payment service providers (PSPs) that are figuring out how to best integrate this new service without incurring significant operational costs.

In a recent PaymentsJournal podcast, Nicholas Botha, Global Payments Sales Manager at AutoRek, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discuss how banks and PSPs can overcome these obstacles and how automation can help.

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Providing FedNow Payments at Competitive Rates

Instant payments, by their nature, result in a significantly higher volume of payments at a faster speed. As such, it is essential that companies are equipped with some form of automation to ensure operational efficiencies. Many are still working with legacy systems that, unfortunately, are not capable of handling instant payments.

Implementing operational efficiencies downstream will not only drive down operational costs but also ensure wider profit margins. These lower costs can eventually be passed down to customers or can bolster the financial health of the companies.

“With this new payment rail, you can expect more competition to enter the market,” Botha said. “Typically, when we see more competition, you should expect there to be pressure on those costs, which essentially means that there’s more requirement for creating those operational efficiencies to try and expand those margins as wide as possible.”

Reducing the manual components of the operation is also important. Tavilla noted that automation helps create greater efficiencies and can reduce the errors that result from paperwork or other non-digital methods.

“This is a great opportunity with FedNow for businesses and operations to improve automation,” Tavilla said. “It’s the first time in 40 years we have this new rail and this new technology, especially in the payments industry.”

Mitigating the Challenges of 24/7 Settlements  

Automation can be considered the golden ticket to ensuring that FedNow payments are leveraged to their highest potential. The use of automation ensures that payments are processed instantly, securely, and cost-efficiently—something that’s difficult to get from t...