Consumers have made it clear—they want quick, simple, and convenient experiences. Whether it’s shopping, watching movies, communicating with friends, planning vacations, or even managing financial needs, there’s a clear trend—digital solutions that power fast, frictionless experiences wherever the user is, from whichever device is in the user’s hand, make it out on top. To keep up with those trends, businesses are accelerating investments into solutions that keep their brand, products, and services relevant to modern-day consumer demands.
If you’re looking for a clear sign that the financial services industry is accelerating towards this, FedNow® is the latest example. As of June 20, 2023, the U.S. Federal Reserve officially announced the pilot launch of FedNow, the new Federal Reserve-backed service developed to modernize payment processing for U.S. banks and credit unions.
Here are a few ways FedNow is different from other peer-to-peer payment services and the opportunity this innovation, and the data-driven insights that accompany it, can provide your financial institution and consumers.
Instant Access to Funds
“The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” said Federal Reserve Chair Jerome H. Powell. The key difference between FedNow and the former system is that FedNow will be online 24/7, processing transactions in real time.
FedNow is open to more than 10,000 financial institutions that operate within the Fed’s network and provides FIs the ability to support immediate end-to-end payments. The pilot has kicked off with 35 early adopting banks and credit unions, and the results are anticipated to help consumers and FIs better manage cash flows and empower banks and credit unions to work alongside private sector payment systems like PayPal™, Venmo™, and Zelle®. And while all of these platforms allow accountholders to conduct online peer-to-peer (P2P) payments, FedNow offers some key differences and benefits to both FIs and their consumers.
Unlike private money-transferring services, FedNow will be available directly through a bank or credit union, not via third-party applications. The benefit? Although well-known, those third parties simply function as an intermediary between consumer funds and the FI, but money moved with FedNow will settle directly within a consumer’s account, allowing for increased flexibility, more access to liquidity, and improved transparency between financial institutions and their accountholders.
Democratic Senator Chris Van Hollen applauded the pilot explaining, “the launch of FedNow will help connect Americans with their money—when they need it, immediately, in real-time.”
Actionable Data, Dollars, & Opportunities
A fifth of consumers have abandoned a financial transaction because the speed of money movement would take too long.
But with the launch of FedNow, banks and credit unions can better control that experience. FedNow is a service that FIs can adopt directly into their internal operations, assisting them in building products to help consumers send and receive money instantly, facilitating clearing and settlement, and instantly crediting a payee’s account. Further, FIs can integrate their P2P payment product into their digital banking platforms for consumers to easily access and use the payment solution.
This is where transaction transparency not only provides your consumer peace of mind but also means greater visibility into individual behavioral trends and spending habits. When a transaction is facilitated through Venmo, Zelle, or PayPal, you can only see that those third parties were used. But, as the facilitator of the end-to-end payment, your FI will have a clearer picture of how your accountholders are spending their money and where you can add value to their financial lives—all while seizing opportunities that can help you to drive deeper consumer relationships.
Using Data To Power Better, Faster, More Personalized Experiences
Collecting payment data in-house, and having that information at your fingertips, opens a realm of opportunities that could increase your share of wallet with consumers, since more data means more ways to build cross-sell opportunities. The challenge is that many financial institutions don’t have the in-house resources, expertise, or time to sort through this data and devise a plan of action. FIs need a partner that can provide the tools to help.
With evolutions in the financial services industry that allow for better visibility into how consumers are using their money and who they’re paying, we’re here to help you elevate the experience by leveraging digital solutions, data intelligence, and marketing automation.
Are the funds being transferred to an auto loan or mortgage provider? Maybe they’re paying off credit card debt or have accounts with another FI? These actions identify opportunities for your financial institution to extend timely, relevant, and personalized offers that can help meet consumers’ unique financial needs, creating a symbiotic relationship leading to:
- Increased share of wallet
- Pipeline optimization and increased loan growth
- Increased deposit growth and liquidity
- Improved account opening and loan origination ratios and processing times
- Enhanced engagement and increased revenue from new and existing relationships
MeridianLink® intentionally designed our growing platform of data-driven solutions to help our customers connect with their consumers at every step of the financial journey—whether it’s deposit account opening, consumer and mortgage loan origination, credit reporting, business intelligence, data analytics, consulting, or collections.
Chris Dumas—Director, Data Product Management, MeridianLink, shares how MeridianLink can help improve your access to, and use of, data.
Digital innovation equips FIs with tools to better understand what consumers need and create efficient, accessible, convenient experiences tailored to each financial situation.
Elevate Your Consumer Experience With Data Intelligence and Marketing Automation Webinar on August 31st
Join us Thursday August 31st for a free, live webinar where you will learn how the fully integrated, digital data solutions provided through MeridianLink® Data Connect, MeridianLink® Insight and MeridianLink® Engage, FIs can quickly automate the collection of origination data, use business intelligence to identify opportunities, and personalize campaigns to build greater consumer connections—all while removing data silos and dependencies on IT for data extraction, sorting, and manual reporting.
