FedNow could score top retailers’ points-of-sale

Article by Grace Broadbent | May 3, 2023

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.