The news: Walmart and Kroger are reportedly interested in using FedNow to give customers an alternative to card payments, according to Payments Dive, which cited comments from the retailers’ representatives during a panel at the Faster Payments Council spring meeting.
The Federal Reserve’s instant payment service will launch in July.
Why this matters: Real-time payments (RTP) and account-to-account (A2A) transfers have not yet taken off for consumer-to-business (C2B) transactions. The retail space is instead dominated by card payments.
But FedNow’s instant payments can bring retailers three key benefits:
- Fee savings. The average A2A payment could cost merchants just one-fifth of a debit card transaction because it avoids interchange and other transaction-based fees. And because FedNow will be operated by the government—which means it can’t turn a profit—FedNow could offer even more competitive pricing than other products on the market.
- Time savings. Card payments can take anywhere from one to three business days to process. But RTP payments give merchants immediate access to funds, improving their cash flows.
- Data insights. RTP provides enhanced communication between the buyer and seller by including transaction-specific data. This helps lead to more transparency in the payment process and more efficient accounting and reconciliation.
And consumers are ready to take advantage of RTP payments as well: Nearly 80% of consumers are interested in using faster payments to pay businesses, and 9 out of 10 businesses expect to use faster payments in the next three years, per Fed research.
Our take: As part of our 2023 Payment Trends to Watch, we predicted at least one top 50 retailer would begin accepting account-to-account (A2A) payments, and we called out Walmart as a likely frontrunner. If Walmart does tie up with FedNow, we would expect other major retailers to follow in its footsteps.
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