The rapid growth of instant payments in the U.S. has captured significant attention across the payments and banking industry. As digital transactions become increasingly integrated into daily life, the estimated value of the instant payments market is set to soar, reflecting both consumer demand for speed and efficiency and the ongoing innovation within financial technology.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Movements in Global Commercial Payments and Banking: 2024 Edition

Estimated Value of U.S. Instant Payments 2024-2028

• 2024 – $4 T
• 2025 – $8 T
• 2026 – $16 T
• 2027 – $27 T
• 2028 – $37 T

Estimated value in Trillions of U.S. Dollars

Source: Deloitte Insights and Association of Financial Professionals, 2023

About Report

Global commercial banking and payments are undergoing rapid transformation, spurred by advances in technology, shifting corporate practices, and emerging market trends. Businesses are under pressure to adapt quickly, staying competitive, mitigating risks, and seizing new opportunities. One of the most significant trends is the increasing adoption of instant payments worldwide. As businesses begin to mirror the success of instant payments in the consumer sector, this trend is expected to gain even more momentum.

This report by Javelin Strategy & Research examines these ongoing changes in areas such as cross-border transactions, emerging corporate payment methods, regulatory compliance, anti-fraud efforts, and the prospects for non-systemically important banks. Now is a crucial moment for businesses and their banking partners to adopt modern messaging standards, embrace automation, prioritize sustainability, and more, ensuring they stay ahead in this fast-evolving landscape.

The post What is the Estimated Value of U.S. Instant Payments, 2024 – 2028? appeared first on PaymentsJournal.

Over the past five years, the available balance on credit cards in the U.S. has shown significant fluctuations, reflecting the changing economic landscape and consumer behavior. As consumers navigated through periods of economic growth, recession, and the aftermath of the pandemic, credit card balances became a critical indicator of financial health and spending habits.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: High-Yield Savings Accounts: An Efficient Way to Fund Credit Card Loans

Credit Card Line Utilization Rates 2020 – 2023

• 2019 – 24%
• 2020 – 21%
• 2021 – 21%
• 2022 – 22%
• 2023 – 24%

Source: New York Federal Reserve Bank, Household Debt and Credit Report (2024)

About Report

Banks involved in credit card lending face unique challenges as they navigate the current financial landscape, with the prime rate at its highest point in decades. As they anticipate possible rate decreases in late 2024 and 2025, banks may need to optimize their loan funding strategies. One effective approach is offering high-yield savings accounts to attract deposits specifically for their credit card programs. This strategy enhances liquidity, reduces dependency on external funding sources, and contributes to a more streamlined business model.

This report from Javelin Strategy & Research highlights the complexities of implementing high-yield savings offerings, noting that these initiatives require careful planning across multiple areas within a bank. The structure of the organization may influence whether the strategy impacts various departments or is managed within the retail banking division. Key decisions include market entry, deposit attraction methods, and whether to manage deposits within the existing core system or through a separate platform.

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Prepaid and gift cards have become increasingly popular as convenient financial tools and versatile gifting options. However, their widespread use comes with a distinct set of challenges and potential risks that consumers must consider. From vulnerabilities like theft and unauthorized usage to the complications of expiration dates and hidden fees, what are the issues consumers have to consider?

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Mitigating Risk in Prepaid Card Programs

Top 3 Security Issues and Lost-Value Risks When Using Prepaid/Gift Cards

• 44% – Loss of funds due to expiration of card
• 43% – The card becoming lost or stolen
• 34% – Inability to access the prepaid balance at the time of use due to technical issues

About Report

Risk in any business is inevitable. Prepaid card programs start with risk as soon as the financial liability of a card appears on the balance sheet. From the time of issuance, all parties in the value chain must be aware of the many risks associated with that liability and understand how best to mitigate them, knowing that eliminating risk is an impossibility. 

The risks start with the seemingly simple task of understanding customer sentiments and managing their expectations. However, that is much more difficult than it appears. Other risks include store policies, theft scams, and fraud, the successful management of which compounds into ensuring customers feel secure in their purchases. Strong back-end technology and policies create an overlying, invisible shield that helps further reduce risk to acceptable levels.

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In the ever-evolving landscape of retail, understanding consumer preferences for payment methods at physical locations has become crucial for businesses aiming to enhance the shopping experience and increase customer satisfaction. As digital wallets, contactless cards, and mobile payment solutions continue to gain traction, traditional cash and card payments remain significant.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: A New Era of Chargeback Management

Preferred Payment Methods at Physical Locations

• 39% – Major credit card
• 31% – Major debit card
• 15% – Cash
• 3% – Contactless at the POS
• 2% – Store-specific card

About Report

The chargeback—a forced refund to a cardholder’s account that is initiated by the issuing bank—turns 50 years old later this year. The maneuver, legislated into existence to foster trust in card payments at a time when few consumers were using them, has aged into a management headache for merchants. In an age of proliferating card usage and ongoing growth of e-commerce channels, chargebacks are easy to initiate and easy for consumers to win. Merchants, meanwhile, need help with the complex process of challenging chargebacks, heading them off in the first place, and avoiding the escalating consequences of a high chargeback rate. It’s an endurance test most merchants are not equipped to navigate alone. 

This Javelin Strategy & Research report looks at where chargebacks started out and how they have evolved into a present-day challenge for all kinds of merchants. It lays out the stakes for harboring an unchecked high chargeback rate, denotes strategies for communicating with consumers to reduce instances of so-called “friendly” fraud, and examines the value of dedicated service providers versed in representment and building strategies to stem the chargeback tide.

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In an era defined by rapid technological advancements and shifting cultural norms, Generation Z, born between the mid-1990s and early 2010s, is redefining consumer behavior. As this tech-savvy and socially conscious cohort enters the workforce and gains purchasing power, Gen Z’s spending habits are attracting attention.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Get Out Your Wallet: Gen Z Debit Payment Preferences

Gen Z’s Self-Reported Percentage of Spending (Monthly)

• 52% – Household bills and expenses
• 44% – Clothes and accessories
• 39% – Travel
• 37% – Going out/entertainment
• 37% – Food delivery/eating out

About Report

Generation Z—those born from 1997 to 2012—is coming of age and moving steadily toward greater financial maturity. Members of this generation differ from their elders in significant ways, including a strong preference for debit and digital payments, a greater propensity for saving, and an approach to shopping that is heavily influenced by social media and a desire to shop with merchants that align with their values. 

This Javelin Strategy & Research report delves into the characteristics of this generation and what drives the payment behaviors of its members. Generation Zers live digitally and expect to be able to shop according to that lifestyle, with digital payments that are at the ready when the moment to buy arrives. As Gen Zers age, some of their habits will no doubt change, but the digital-first approach is hard-wired into them. 

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Fleet cards have become an essential tool for managing the fuel and maintenance expenses of commercial fleets, regardless of size. These specialized payment solutions offer fleet managers a streamlined and efficient way to control costs, track expenditures, and enhance operational efficiency.

The prevalence of these cards has grown significantly, driven by advancements in technology and the increasing complexity of fleet management. Whether overseeing a small business with a handful of vehicles or a large enterprise with hundreds, these cards provide critical insights and control mechanisms.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Fleet Cards 2024: Small Fleets Are an Opportunity

Global Fleet Card Usage (2023)

• 74% – Large fleets (more than 100 vehicles)
• 49% – Midsize fleets (25 to 99 vehicles)
• 23% – Small fleets (2 to 24 vehicles)

Source: Visa, July 2023

About Report

Nothing stays the same for fuel card providers, or for the fleet operators that rely on them. Declining fuel costs in 2023 cut into fuel card companies’ revenues, sending them off in search of other growth opportunities. Some of those opportunities exist in catering to smaller fleets by drawing them in with a card product and cross-selling other services. 

This Javelin Strategy & Research report looks at the fleet market and where things are headed. Vendor strategies would do well to focus on mixed fleet needs and electric vehicles, use fleet cards as entries into bigger relationships with fleet managers, and learn from newer market entrants that use sleek, modern apps to drive business.

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The U.S. open-loop commercial prepaid market is experiencing significant growth, driven by increasing corporate demand for versatile and efficient financial solutions. This dynamic sector encompasses a wide range of commercial prepaid products, such as payroll cards, expense management cards, and incentive cards, offering businesses flexible payment options and streamlined financial operations. As technological advancements continue to enhance transaction efficiency and security features, the commercial prepaid market is poised to expand further, reflecting broader trends in corporate financial management and digital payments.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2024 State of the Industry: Commercial Prepaid Cards

2023 U.S. Open-Loop Commercial Prepaid Loads by Segment (In Billions of U.S. Dollars)

• $96 – other commercial open-loop
• $94 – government open-loop
• $19 – consumer incentives
• $6 – employee incentives

Source: Javelin Strategy & Research

About Report

The commercial prepaid market should see moderate growth in coming years, with an increased opportunity for non-governmental products such as employee and health incentives in open-loop and closed-loop networks. 

With this report, Javelin Strategy & Research continues its annual series on prepaid market trends. Overall, prepaid continues to represent a small but significant share of the overall commercial payments market. The consistency of that share provides stability for vendors offering commercial prepaid programs, and a continuation of high interest rates could create the potential for growth beyond Javelin’s current expectations.

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Debit cards have become an integral part of modern financial transactions, offering consumers a convenient and secure way to access their funds directly from their bank accounts. Unlike credit cards, which allow for borrowing money up to a certain limit, debit cards enable users to spend only what they have, promoting better budgeting and financial discipline. With the added benefits of wide acceptance, minimal fees, and advanced security features, debit cards have emerged as a preferred payment method for everyday purchases.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Retailer Debit Cards: Why Doesn’t Everyone Do It?

Top 5 Retailer Types Where Debit Cards Are The Preferred Payment Method

• 40% – Supermarkets/grocery stores
• 36% – Pharmacies/drugstores
• 34% – Mass merchandisers/big-box retailers
• 33% – Gas Stations
• 33% – Warehouse/club stores

About Report

Consumers are on a quest for value and convenient ways to pay. Retailers and merchants want to boost sales and cut costs. These interests can get together through retailer debit cards that leverage consumer bank accounts via store-branded apps and payment cards. These payment vehicles are especially attractive for buyers and sellers of everyday goods like groceries and gas, and combined with loyalty and rewards programs they can be drivers of customer retention and adoption of payment methods that are beneficial to merchants. 

This Javelin Strategy & Research report looks at how consumers’ payment habits are shifting, innovative ways retailers are guiding their customers to these branded debit products, and what should be considered when such programs are implemented.

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In an era where financial flexibility is paramount, rising credit limits have become a significant trend within the banking and payments industry. As consumers increasingly rely on credit to manage their expenses and build their financial profiles, banks are responding by raising credit limits to accommodate this demand. This move highlights the evolving dynamics of consumer credit behavior.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Credit Card Data Book Part 2: Internal Dynamics

Credit Limit in Past 5 Years (in Trillions of Dollars)

• $3.80 – Q3 2019
• $3.85 – Q3 2020
• $3.96 – Q3 2021
• $4.30 – Q3 2022
• $4.71 – Q3 2023

Source: New York Fed Consumer Credit Panel/Equifax (2024)

About Report

Part 2 of the annual Javelin Strategy & Research examination of the U.S. credit cards looks at how internal dynamics, such as issuer portfolios and ongoing risk assessment, affect the market. The upshot: As economic stressors rise and loan loss provisions are reserved, the return on assets is declining across the large card issuers, and underwriting standards are tightening as issuers steer their portfolios away from trouble. 

Although indications are that a recession, if it occurs, is likely to be mild rather than severe, there are concerning indicators. Credit card balances are going up steadily, and the rate doesn’t appear to be slowing. Banks are also encountering higher delinquencies and charge-offs, with small to midsize institutions taking the biggest hits. These factors demand caution by issuers until the path forward clears.

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In the past twelve months, the landscape of consumer spending has witnessed a notable shift towards prepaid cards, reflecting broader economic trends and evolving consumer preferences. This surge in popularity has not only reshaped the way people manage their finances but also highlighted the diverse uses of these financial tools. From budgeting and gift-giving to online transactions and travel, prepaid cards have carved a niche as a versatile and accessible option for a wide array of users.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report:2024 Prepaid Card Data Book

Top 5 Prepaid Cards Purchased, Reloaded or Received in Past 12 Months

• 72% – Retailer-specific gift card
• 42% – General-purpose non-reloadable prepaid card
• 29% – General-purpose reloadable prepaid card
• 17% – Gas prepaid card
• 11% – Phone prepaid card

Source: Javelin Strategy & Research

About Report

Open-loop and closed-loop prepaid segments have stabilized after periods of economic uncertainty, and many have had gains even as counter products to inflationary pressure. Into 2024, we expect stable short- and long-term growth potential. The immediate impact in most segments will track closely to our projected compounded growth rates, with most segments tracking between 5% and 7% growth in 2024 and a total industry CAGR of 7% through 2027. 

Business and consumer segments are emerging into a new and more stable overall environment. The past year highlighted that economic, political, and market forces have different impacts on various segments while allowing for an overall steady state in the broad prepaid market. This gives the industry the ability to plan accordingly to ensure continued growth and immediately maximize the specific segments that have the most short-term potential. 

Specific areas that will have a particular short-term lift include business and corporate prepaid, such as incentives, with estimated year-over-year growth of 12%, retail gift cards at 7%, and open-loop general-purpose cards at 7%. Products tied to cost-of-living adjustments will likely see less immediate growth, with a specific impact on government prepaid programs such as Social Security, nutritional assistance, and Temporary Assistance for Needy Families, all with an estimated 2024 growth of 3%, which comes in slightly lower than the 2027 CAGR of 4%.

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