Change in the payments industry has been accelerated by COVID-19. Merchants have responded by making it easier than ever for their customers to make in-person contactless payments and purchase goods online from the safety of their homes.
The Federal Reserve intends to support payments change with its first major new payment system in four decades. Merchants will be among those to reap the benefits.
Through financial institutions participating in the FedNow Service, businesses and individuals will be able to send and receive instant payments in near real time, around the clock, 365 days a year. Recipients will have full access to funds within seconds, giving them greater flexibility to manage their money and make time-sensitive payments.
This immediacy differentiates truly instant payments from traditional retail payment methods, including those that appear to occur within seconds from the sender’s perspective, but actually can take days before funds are available to the receiver and the banks settle the funds. This instant clearing and settlement enables these transactions to be final and irrevocable, which provides assurance and certainty to both the sender and receiver.
How would merchants be able to join the FedNow ecosystem and tap into its benefits? Working with their banks and service providers, merchants could potentially leverage the FedNow Service as a springboard to provide innovative instant payment services. To name just a few examples:
Instant payments, powered by QR codes and wallets, can help deliver safe and easy online buying and in-store contactless point-of-sale purchases.
Merchants can use instant payments to provide on-the-spot refunds to customers, eliminating the costs and frustrations associated with tracking and customer support.
Instant payments can offer a secure and convenient way to load funds onto gift, reward, or pre-paid debit cards without customers needing to provide sensitive financial account information.
Merchants can make payments immediately when they’re due, helping to optimize cash flow management and ensuring timely payments to suppliers for inventory, rent, goods and/or services.
Instant payments can facilitate payroll that is issued daily or on demand – a feature that is especially attractive to part-time, temporary or seasonal employees. This could enhance merchants’ ability to hire and retain staff.
Merchants should begin working with their industry partners now to ensure they are able to use the FedNow service when it becomes available…Â Â Progressive Grocer