Digital transformation initiatives are in full swing in multiple industries across the United States these days, with businesses seeking to leverage technology tools to speed and simplify a variety of functions. There is one distinct exception, however: payment systems. In retail stores across the country, the only payment options are cash and credit card, and even many online checkout systems still require customers to enter credit card information.
In recent years, some pundits have predicted an impending rapid rise in the adoption of instant payment options, but their use is still fairly limited—at least in the U.S. So what’s holding businesses and consumers back from leveraging the ease of instant payment technology? Below, seven members of Forbes Technology Council discuss some of the reasons the U.S. may be lagging behind other countries in adopting instant payment systems and what business, technology and government entities can do to encourage their use.
1. Businesses Aren’t Taking The Lead
Consumer inertia, perceived high switching costs and major retail chains’ entrenched payment processes all play a role in hindering instant payment adoption in the U.S. Chains with multiple brands deeply rely on credit card infrastructures and the “regulatory cover” they provide. Consumers may fear abandoning familiar methods, but they will follow if businesses take the lead. – Mahesh Vinayagam, qBotica Inc.
2. Legacy Systems At Financial Institutions Are Costly To Update
Consumers have access to a variety of instant payment systems, such as Zelle, PayPal, Apple Wallet and several others. A key challenge hindering widespread adoption of instant payments between institutions in the United States are the traditional systems deployed at a number of financial institutions, which can be cumbersome and costly to change, especially given enterprise regulatory issues. – Rahul Mewawalla, Mawson Infrastructure Group
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3. The Regulatory Environment Is Fragmented
A big challenge is the fragmented regulatory environment across states. To overcome this, I think tech leaders should advocate for a unified federal framework. This could foster collaboration between regulators and industry to streamline compliance, enhance security and build consumer trust in instant payment systems. – Marc Rutzen, HelloData.ai
4. Consumers Don’t Yet Understand Or Trust Them Fully
A lack of trust in instant payment systems among consumers, as well as a lack of available educational information about such systems, is hindering their adoption in the U.S. Consumers are accustomed to the protections offered by traditional payment methods such as credit cards—credit card companies often handle any errors and disputes, making the experience hassle-free. Instant payments are mostly irrevocable, and they require new ways of building trust as well as awareness programs to educate consumers. – Jabin Geevarghese George, Tata Consultancy Services
5. Federal Rules Aren’t Clear, Consistent And Comprehensive
One major challenge is unclear regulations. The Federal Reserve is encouraging instant payments via FedNow, but it hasn’t finalized how banks must verify users (Know Your Customer) and prevent money laundering (Anti-Money Laundering) in these faster transactions. Therefore, many financial institutions are not investing heavily in instant payments yet. To overcome this, regulators and financial institutions must work together on clear and consistent rules. – Sarath Babu Yalavarthi, AT&T
6. Underserved Areas May Lack The Needed Infrastructure
In some regions, mainly rural and less-developed areas, the need for adequate digital infrastructure—such as reliable internet access and mobile network coverage—can limit the adoption of instant payment systems. Overcoming this obstacle may require targeted investment in digital infrastructure expansion and incentivizing telecom companies to improve coverage in underserved areas. – Cristian Randieri, Intellisystem Technologies
7. There Hasn’t Been Enough Focus On Their Benefits
A major challenge is the lack of consumer trust and awareness regarding the security and benefits of instant payment systems. Comprehensive educational campaigns could inform the public about the safety and advantages of these systems, building confidence. Collaborating with trusted financial influencers and institutions to disseminate this information can further enhance user adoption. – Jagadish Gokavarapu, Wissen Infotech
