Most People Will Choose FedNow Based on Convenience

As the Federal Reserve prepares to launch FedNow, the real-time payments system for consumers, Craig Ramsey, head of real-time payments at ACI Worldwide, said that most people will choose to use it based on convenience.

Facade of the Marriner S Eccles building of the United States Federal Reserve, in Washington, DC. ... [+] (Photo by Smith Collection/Gado/Getty Images)Getty Images
The Marriner S. Eccles building is the headquarters of the United States Federal Reserve in Washington, D.C. The building is named after Marriner S. Eccles, who was the Chairman of the Federal Reserve from 1934 to 1948. The building was completed in 1937 and is located on Constitution Avenue.

as the Federal Reserve prepares to launch its FedNow real-time payments, Craig Ramsey, head of real-time payments at ACI Worldwide, says that for consumers, the choice of payment will mostly be about convenience. Covid-19 powered a big shift away from checks and cash to contactless cards, account-to-account and online payments.

Craig Ramsey, head of real-time payments at ACI Worldwide.Courtesy ACI Worldwide
As the head of real-time payments at ACI Worldwide, Craig Ramsey is spearheading the company's efforts to revolutionize the way that payments are processed.

As more and more consumers move toward a cashless society, it's important to remember that not everyone is on board with this trend – and that's okay. There are still plenty of people who prefer to use cash or other methods of payment that don't involve credit cards, and we should respect their choices. Yes, credit card fees can be a burden for merchants, but at the end of the day, convenience is what matters most to consumers. If a payment method is convenient and easy to use, people will gravitate toward it – regardless of the fees involved.

It's clear that real-time payments will give consumers more choices when it comes to how they pay for goods and services. However, even before real-time payments are widely available, Congress may take action to reduce the costs associated with card payments.

The proposed amendment would allow merchants to route credit-card payments over networks other than Visa and Mastercard, giving them more choice and flexibility in how they process payments. This is a positive development that would benefit both businesses and consumers.

Steven D. Smith of the Electronic Payments Coalition depicted this rather standard legislative ploy as an attack on veterans. While this may be a standard legislative tactic, it is nonetheless an attack on those who have served our country. Veterans should not be used as pawns in this political game, and we urge our elected officials to do what is right for those who have sacrificed so much for our country.

It is disappointing to see our nation's veterans being used as pawns in a political battle. Senators Durbin and Marshall should put aside their differences and work together to find a solution that benefits all Americans, not just a select few. Big-box retailers should not be given a government handout at the expense of our veterans and other citizens.

If interchange fees were to change, the market for credit cards would look very different. Consumers would not be rewarded for staying with cards with points that merchants pay for. This would lead to more competition among credit card companies, and ultimately benefit consumers by driving down prices.

The fees that banks charge businesses for accepting credit and debit card payments are often passed on to consumers in the form of higher prices. These interchange fees support the reward programs like free airline fights and hotel stays, or cash back, that some consumers value. For merchants, they add up. The National Association of Convenience Stores says its members paid a price for the move away from cash during the pandemic. “Because credit card fees are a percentage of the total transaction cost, they multiply with every cent of inflation.

There is no competition in the credit card market, which is why Visa and Mastercard control around 80% of the credit card volume in the United States, according to the NACS. This lack of competition means that credit card companies can charge higher fees and interest rates, which can be a burden for consumers.

The convenience store industry is forecast to continue to grow in the coming years, with overall card fees paid estimated to reach $13.5 billion by 2021. This represents a significant increase from the current level of card fees paid, which is estimated at $25.6%.

The airline industry is also interested in seeing real-time payments, as it paid $8 billion in interchange fees last year. Wider adoption of real-time payment networks could help expand the use of alternative payment methods.

The launch of FedNow will be a welcome development for smaller banks, who have long been at a disadvantage when it comes to real-time payments (RTP). FedNow will level the playing field, giving smaller banks the same access to RTP as the big banks. This will be a major boost for competition and innovation in the banking sector.

The Fed's commitment to providing a level playing field for all banks is commendable. Ramsey said he has not seen pricing information from any banks, but in the rest of the world, banks are not charging consumers to use real-time payment rails. This is a positive development that will benefit consumers and promote competition among banks.

I see corporations and merchants paying to use FedNow just as they are willing to pay for other payment systems like ACH and Fedwire. The Fed will charge banks to use FedNow in order to make it affordable and convenient for everyone involved.

In the future, e-commerce websites will offer more payment options such as paying by bank, QR code, or mobile phone. This will make it more convenient for customers to make purchases and send money to recipients.

Ramsey is hopeful that FedNow, the real-time payments service from the Federal Reserve, will help to educate consumers about their rights. He believes that branding around the service can help to raise awareness and encourage adoption. Ultimately, he wants to see a better understanding of consumer rights in the United States.

As the payments landscape continues to evolve, the Federal Reserve needs to adapt in order to stay relevant. One way they could do this is by rebranding to a more consumer-friendly name. This would help them connect with users on a more personal level and better compete with other payment providers.

The financial technology sector is abuzz with excitement over the forthcoming launch of the FedNow service from the US Federal Reserve. Providers such as ACI Worldwide and FIS have been testing the service for some time, and are now preparing to launch on-premise and cloud solutions for real-time payments. This is a major development that will help to further streamline and modernize the US payments landscape.

It's clear that banks are exploring their options when it comes to payments systems. FIS's system appears to be one option, but it's not the only one. This flexibility is good for banks and their customers, as it gives banks the freedom to choose the best possible option for their needs.

There is no doubt that the Federal Reserve's FedNow initiative will bring about significant changes in the way payments are processed in the United States. While this may initially cause some disruption for banks and other financial institutions, ultimately it will help to streamline the payment system and make it more efficient. In the long run, this will benefit both businesses and consumers alike.