Real-Time Payments for Banks and Credit Unions: Open Banking Ahead

The payments ecosystem is undergoing a seismic shift.

As new players flood the market and payment types multiply, financial institutions are facing unprecedented fragmentation and risk losing relevance. But this isn’t just a challenge … it’s an opportunity.

Let’s break down what’s happening and how you can turn these trends into opportunities.

Payments Are the New Battleground for Primary Financial Relationships

Consumers now expect payments to be seamless, secure, and invisible.

But behind the scenes, the infrastructure is anything but simple. With third-party apps like PayPal, Venmo, and Square capturing a growing share of transactions, traditional financial institutions are losing visibility – and deposits. In fact, only $1 of every $8 collected through these platforms ever returns to the primary financial institution – signaling payments are no longer just a utility – they’re a strategic asset.

To stay competitive, 92% of banks plan to increase their payments investment in the next 12 to 24 months. Additionally, they’re not just spending – they’re expecting returns, with three out of four financial institutions anticipating revenue growth of over 5%, and one-third anticipating double-digit growth.

To become your accountholders’ go-to financial partner, payments must be at the heart of your strategy.

Your Competitive Edge: Gen Z and Debit Cards

The definition of a primary financial institution is changing.

For Gen Z, it’s no longer about where their paycheck lands, but rather where they actively manage their money day-to-day. The real markers of loyalty are now tied to debit cards, P2P payments, and digital wallets.

Since debit cards are typically linked to checking accounts, you have a built-in advantage over fintechs and neobanks – if you can meet their expectations for speed, convenience, and seamless digital-first experiences, that is. By offering intuitive, mobile-first payment solutions and layering in personalized insights, you can capture the attention of this influential generation and build lasting relationships.

Payment Fragmentation is Fueling Deposit Displacement

As consumers and businesses adopt more payment options, funds are flowing out of traditional banking channels.

This shift is accelerating, with neobanks, wallets, and wealth platforms capturing a growing share of liquidity.

But there’s a way to fight back – and it starts with data.

Open banking offers the visibility you need to understand where money is moving and why. By integrating payment data across platforms, you can deliver smarter services, anticipate accountholder needs, and reclaim your role as the financial command center for your accountholders. 

At the same time, embedded finance and Payments-as-a-Service (PaaS) are gaining traction, helping financial institutions reduce complexity, lower costs, and launch new services faster. The banks and credit unions that embrace these innovations won’t just survive – they’ll lead.

Don’t Overlook the SMB Opportunity

SMBs are often hiding in plain sight. In fact, between 13% and 35% of your retail accountholders may actually be micro or small business owners.

These accountholders have unique needs – and they’re looking for financial partners who truly understand them.

One area of growing interest is pay-by-bank. This payment method enables direct transfers from bank accounts via ACH or real-time rails, bypassing card networks and offering lower costs for merchants, enhanced security, and a smoother user experience.

And consumers are on board, with 70% saying they’d choose pay-by-bank if it came with just a 1% discount.

While some financial institutions worry about cannibalizing card revenue, the greater risk is losing SMBs to competitors offering more flexible, cost-effective payment options. Meeting these evolving needs and expectations aren’t just smart – they’re essential for long-term growth.

2025 Strategy Benchmark Study Results: Planned Payment Services Additions

Most financial institutions plan to add payment services within the next two years, with real-time payments via FedNow^® Service being the top priority for both banks and credit unions, followed by digital card issuance and same-day ACH.

Four Ways You Can Win in Payments

1. Better serve SMBs. SMBs cite speed of settlement and real-time visibility as their top payment challenges. By helping SMBs automate payment acceptance, optimize timing, and access real-time cash flow insights, you can become an indispensable partner. Leverage your core data to offer just-in-time payables, maximize interest on deposits, and deliver the tools SMBs need to grow and thrive.
2. Offer real-time payments both ways. Real-time payments are a must. But offering only real-time receive capabilities isn’t enough. To unlock the full potential of real-time payments, you need to support both sending and receiving. This opens the door to high-impact use cases like instant payroll and emergency disbursements – positioning you as a forward-thinking provider.
3. Turn bill pay into a loyalty engine and relationship builder. While traditional bill pay is losing ground to biller-direct models, it still holds untapped potential. Bill pay data offers a window into accountholder behavior, helping you deliver personalized financial advice, support financial wellness goals, and deepen loyalty. With the right strategy in place, bill pay can evolve from a utility to a revenue-generating loyalty driver.
4. Embrace open banking as a strategic advantage. Open banking is the foundation for future-ready payments. It enables secure, direct transfers, enhances fraud detection, and streamlines ID verification. More importantly, it gives you the data you need to innovate. By adopting an open banking mindset, you can gain user permissions, claim first app status, and build a platform that supports embedded payments and beyond.

Ready to Lead the Future of Payments?

Financial institutions that embrace open, embedded, and real-time payments won’t just keep up – they’ll set the pace.

Are you ready to be one of them?

Download the 2025 Strategy Benchmark to explore the full landscape and discover how to turn payments into your competitive edge.