In a world where time is money, businesses can no longer afford to rely on outdated payment methods that hinder growth and competitiveness. The current payment landscape in the US, dominated by checks, ACH, and credit cards, presents significant challenges for businesses, particularly small and medium-sized enterprises (SMEs). As the global economy rapidly adopts instant payment systems, the US lags, creating significant obstacles for SMEs to compete effectively.
This article delves into the urgent need for US businesses to embrace instant payment solutions, drawing insights from a recent webinar, Understanding FedNow’s Impact on Your Clients, featuring Nick Chandi, CEO and co-founder of Forwardly. Chandi argued in the webinar, “As the global economy rapidly shifts towards real-time payments, US businesses, particularly SMEs, risk falling behind their international counterparts unless they embrace instant payment solutions that offer improved cash flow, reduced costs, and enhanced security.”
The Global Shift Towards Instant Payments
Instant payment systems have been gaining traction worldwide, with many countries already implementing or working on real-time payment solutions. Chandi says, “Currently, more than 70 countries have a real-time payment solution available: instant payments. Either they already have it, are working on it, or will have it this year or next year, including Canada.”
The rapid global adoption of instant payments puts pressure on the US to catch up and remain competitive in the international business landscape. This global shift underscores the urgent need for the US to modernize its payment infrastructure to support the growth and competitiveness of its businesses.
The Challenges of the Current US Payment Landscape
The current payment landscape in the US presents significant challenges for businesses, particularly SMEs. Slow payment methods lead to cash flow issues, hindering business growth and stability. Chandi highlights the severity of this issue, stating, “82% of businesses fail due to cash flow problems. Many of these businesses might have been profitable, but they didn’t have the money in the bank account when they needed to do payroll or pay their rent.”
In addition to cash flow problems, the high costs associated with traditional payment methods, such as credit card fees, eat into profit margins. Fraud risks expose businesses to financial losses and security concerns, particularly with checks. These challenges highlight the urgent need for instant payment solutions to improve cash flow, reduce costs, and enhance security.
The Benefits of Instant Payment Solutions
Instant payment solutions offer a range of benefits that address the challenges businesses face in the current payment landscape. These include:
- Improved cash flow: With funds available in real-time, businesses can better manage their finances and invest in growth opportunities.
- Reduced costs: Instant payments eliminate the high fees associated with credit card transactions and the processing costs of checks and ACH.
- Enhanced security: Real-time payment systems, like Fednow, incorporate robust security measures to mitigate fraud risks.
Chandi adds, “I believe eventually it will end up similar to how we handle ACH. There will be some responsibilities on the bank side to ensure both parties are real and there’s no fraud happening.”
The benefits of instant payment solutions directly address the urgent need for US businesses to modernize their payment processes and remain competitive in the global economy.
The Path Forward
Adopting instant payments in the US is crucial for leveling the playing field for SMEs in the global economy. Accounting professionals and financial decision-makers are vital in advocating for and implementing instant payment systems in their organizations. By embracing instant payments, US businesses can contribute to a more resilient, efficient, and secure financial ecosystem.
To understand the urgent need for instant payments in the US, we encourage readers to watch the full webinar recording featuring Nick Chandi. As an accounting professional or financial decision-maker, now is the time to explore instant payment solutions for your organization and take proactive steps toward implementation. Doing so can help your business clients succeed in an increasingly competitive global market.