The Rise of Instant Payments: Why the Shift is Happening Now

The Rise of Instant Payments: Why the Shift is Happening Now

By: Sasank Chary & Andy Greos

For decades, the infrastructure moving money through the economy evolved slowly. ACH batches ran overnight. Wires operated during banking hours. Cards were swiped, and funds typically settled one to three days later. Modernization generally meant incremental user interface improvements or new routing filters built on top of legacy systems.

Over the last decade, payments technology has evolved meaningfully. Online payments, digital wallets, and peer-to-peer networks reshaped expectations for speed, availability, and transparency. Much of this innovation was driven by fintechs building abstraction layers on top of existing settlement rails. Now, real-time payments represent the next phase of this evolution, shifting innovation into the rails themselves and fundamentally changing how money moves and how institutions operate, while redefining the payments experience for platforms and customers.

The Arrival of Real-Time

RTP (operated by The Clearing House) and FedNow (Federal Reserve) are the first U.S. payment rails designed natively for real-time, 24/7/365 settlement. Unlike ACH or wires, these networks enable funds to move and settle in seconds, with immediate confirmation and finality.

The distinction goes well beyond speed. Real-time payments are processed individually rather than batched and queued for later settlement, and they operate continuously without dependence on banking hours. They also enable a payment message to include richer, structured data that provides much more context to improve reconciliation and can be used for downstream automation. Transactions are final and irrevocable, which meaningfully changes the customer experience, but also liquidity management and risk.

In addition, push-to-debit rails such as Visa Direct and Mastercard Send enable near-instant funds delivery by leveraging existing card network infrastructure. These rails offer broad reach due to card ubiquity but are subject to card network limits and fee structures and may rely on prefunding or card-based settlement mechanics.

___

Below, we highlight several themes we are particularly excited about as real-time payments move from concept to scaled reality.

Payments as the Battlefield for Banking Primacy

Amid the payment innovations of the last decade, banks and credit unions largely sat on the sideline. The shift to new instant payments rails brings the banks to the forefront – as critical enablers providing connectivity and liquidity to make instant payments viable at scale.

Why play along now? For one, banks see their customers demanding change. According to Cornerstone Advisors[i], 80% of bank executives now view fintechs as a key threat in the coming decade. Most of these fintech platforms started by winning on payments experience, and customer relationships have migrated toward software-led platforms. Banks are highly focused on maintaining and growing deposits, and payments is the battleground. Datos research shows that nearly 40% of corporate treasurers would switch primary banking relationships for better payment automation and visibility[ii]. Corporates increasingly expect real-time cash positioning, immediate confirmation, and consolidated reporting across payment types. On the consumer side, immediacy has become table stakes, as customers expect payments to post instantly to support cash flow visibility and reduce friction. Fast, integrated, and reliable payments are a critical enabler to cementing the banking relationship.

What’s in the way of our shared instant future? Roughly 80% of financial institutions cite outdated systems as the biggest barrier to implementing new payment capabilities[iii]. But the demand for modernized payment experiences combined with regulatory standards introduced by ISO 20022 creates a forcing function for banks to modernize from their legacy infrastructure (a challenge we have written on before). We are excited about the opportunity for technology providers that can support this push for modernization.

Supercharging the Embedded Payments Momentum

Real-time payments unlock exciting opportunities for the expansion of embedded payments in software platforms. Over the past decade, the idea of embedding payment experiences within software platforms has become fairly ubiquitous. Platform providers across verticals have created substantial value by embedding card acceptance directly into industry- or user-specific workflows. Companies like Toast are prime examples of how tightly embedding payments into a defined workflow and surrounding software ecosystem can fundamentally reshape platform economics, turning payments from a feature into a core revenue driver – while improving user experience and retention.

We see instant payments serving as a catalyst to vastly expand the opportunity for embedding payment flows across software deployments. With real-time rails, software platforms can support use cases that were impractical or uneconomic in a delayed-settlement world. These become viable once money can move instantly and predictably. To name a few: instant wage access, real-time loan funding, insurance and claims payouts, receivables financing, and just-in-time supplier payments are all use cases seeing traction in a real-time paradigm. These use cases open up new monetization models and materially expand addressable market size for vertical or workflow-specific platforms.

Stablecoins as an Emerging Rail

While crypto and blockchain technologies have advanced steadily even amid volatility in asset prices, critics have focused on the lack of traditional use cases driving widespread adoption. Stablecoins have emerged as potentially that winning use case and are quickly becoming a key consideration in the payments landscape. While still nascent within regulated banking workflows, stablecoins are generating growing interest as a mechanism for programmability, settlement efficiency, and cross-border money movement. Where RTP and FedNow operate within existing bank-led frameworks and domestic networks, stablecoins could offer a global, always-on settlement model. As a result, potential use cases include cross-border settlement (where traditional correspondent banking introduces cost and delay), treasury and liquidity management, programmable payouts tied to specific business logic, and intra-day settlement between financial institutions.

As regulatory frameworks mature and enterprise use cases develop, financial institutions and corporates are likely to explore where stablecoins can be complementary to or replace traditional and newer real-time rails. As the ecosystem for stables evolves, the historical proliferation of payment types suggests it’s unlikely there is a killer winner-take-all rail, reinforcing the importance of flexible infrastructure that can support multiple settlement models.

Rethinking Fraud and Risk in a Real-Time World

Real-time settlement is a distinctly different paradigm for fraud and risk management, introducing new challenges to an ever-evolving fraud landscape. In a batch-based payment model, institutions relied on time delays to review transactions, apply scoring models, and intervene to stop fraudulent payments. That buffer disappears when payments are executed instantly and irrevocably. Datos surveys indicate 90% of fraud executives expect fraud losses to increase in the next three years.

As a result, fraud prevention must shift upstream toward pre-authorization decisioning, leveraging behavioral signals, real-time data, and automated controls. Many incumbent fraud tools were designed for post-transaction, batch-based monitoring. Amid the paradigm shift to real-time, the market is actively seeking solutions better suited to instant execution. 78% of surveyed executives expect to invest further in real-time payment fraud prevention in the next three years. 66% even expect increased regulatory mandates for FIs to curb expected fraud risks, particularly around stricter KYC and AML rules[i]. Altogether, this shift could create a new generation of market leaders.

Looking Ahead

Adoption of real-time payments will be uneven and iterative, but the direction is clear. Instant settlement is reshaping expectations across consumers, businesses, and software platforms, and pulling core payment infrastructure into the center of innovation.

From an investor perspective, this transition creates a compelling opportunity for fintech vendors that enable real-time money movement, support new rails and risk models, and capture the second-order effects of this shift through expanded use cases, higher transaction volumes, and durable, infrastructure-driven revenue streams.

Sources:

[i] Datos Insights. Real-Time Payments: Three-Year Outlook and Sentiments From Fraud Executives. October 2025.

[i] Cornerstone Advisors, What’s Going On in Banking 2026, January 2026

[ii] Datos Insights, Payment Hub Overview, September 2025

[iii] Datos Insights, Payment Hub Overview, September 2025