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Why mid-sized banks can’t afford to ignore real-time payments
Thought Leadership· 3min February 27, 2025
For years, mid-sized banks have struck a balance between personalized service and strong operational capabilities, competing with both large national banks and emerging fintechs. However, as the payments landscape rapidly evolves, that balance is shifting. The rise of real-time payments (RTP) is redefining customer expectations, and financial institutions that do not move quickly to offer instant payments risk losing market share to competitors that do.
The U.S. market has been slower to adopt real-time payments compared to international peers, but that is changing fast. Since The Clearing House launched the RTP® network in 2017, it has grown to cover nearly 90% of U.S. demand deposit accounts, with more than 900 banks already connected. With the introduction of FedNow® in 2023, the urgency for mid-sized banks to modernize their payments infrastructure has never been greater.
This is not just a matter of innovation; it is a matter of competitive necessity. Customers—both consumers and businesses—increasingly expect immediate access to funds, and banks that cannot meet this expectation risk losing deposits, transaction volume, and high-value relationships.
The Competitive Pressure is Real
Mid-sized banks occupy a unique space in the industry. Unlike smaller community banks, they have the resources to scale new payment capabilities, but unlike the largest national banks, they cannot afford to lag behind in innovation without serious consequences.
The competitive landscape is clear:
01
Large banks are aggressively pushing RTP to maintain deposit share. Top-tier institutions are leveraging instant payments to attract corporate clients, provide real-time payroll solutions, and increase customer engagement.
02
Fintechs are bypassing traditional banking rails. Companies like Venmo, CashApp, and Stripe offer real-time transactions that compete directly with bank-led payment products. Mid-sized banks must offer similar capabilities to keep customers engaged within their ecosystem.
03
Business banking customers now expect faster payments. Mid-sized commercial clients need real-time disbursements for payroll, vendor payments, and treasury management. Banks that lack RTP risk losing these relationships to more agile providers.
Customer attrition is a very real risk. When businesses and consumers discover that faster, more predictable payments are available elsewhere, they move their accounts accordingly.
RTP Adoption is a Strategic Imperative — And More Attainable Than You Think
Many mid-sized banks hesitate to adopt RTP due to concerns about cost, complexity, and integration challenges. But the reality is that financial institutions of all sizes are already making the shift, leveraging scalable, cloud-native solutionsthat do not require a full infrastructure overhaul.
The most effective approach for these institutions is a phased adoption strategy, ensuring they can introduce real-time payments without disrupting existing operations. Instead of a high-cost, full-scale transformation, many banks are following a “crawl-walk-run” approach, which allows them to integrate RTP in stages:
01
Start with receive-only capabilities. By first enabling the ability to accept real-time payments, banks can immediately improve funds availability for customers while minimizing backend changes.
02
Optimize cash management and customer experiences. Once RTP is integrated, banks can enhance treasury services, support faster loan disbursements, and enable instant settlement for commercial clients.
03
Expand to full RTP send capabilities. Over time, banks can fully participate in the real-time payments ecosystem, enabling outbound RTP transactions across multiple use cases.
By following this structured approach, mid-sized banks can strategically integrate RTP without overhauling their core systems, making adoption manageable, cost-effective, and scalable.
A Low-Risk, High-Reward Investment in the Future
Some financial institutions still hesitate, assuming that RTP requires significant upfront investment and operational restructuring. In reality, banks today can connect to real-time payment networks via API-driven, cloud-native platforms, drastically simplifying the process.
Mid-sized banks that take a wait-and-see approach risk losing ground as larger players accelerate their RTP adoption. This is not just about adding another payment option—it is about future-proofing operations, securing deposits, and ensuring long-term relevance in a rapidly evolving market.
Banks that fail to offer RTP will increasingly struggle to compete for business deposits, consumer engagement, and corporate relationships. On the other hand, those that move now to implement real-time payments will be positioned as leaders, able to meet modern expectations while driving new revenue streams and efficiencies.
