A new report from Temenos, the banking platform, has revealed the move to digital is firmly upon us. Cash is on the decline with 24 per cent of US adults admitting to never or rarely using it. A further 58 per cent believe all payments to be digital in the future. In light of the increased adoption of digital payments, Temenos is expanding its offering to include central bank digital currency (CBDC) wallet capabilities.
FedNow’s launch will drive a significant increase in the adoption of instant payments in the US. Competition and collaboration between banks and fintechs to offer a range of innovative payment solutions is also expected to grow as a result. According to Temenos in its survey Cashing in on the rise of digital – key trends in US payments over half (53 per cent) of the respondents used a payment app monthly.
This includes apps like PayPal and Venmo. Forty-one per cent of users utilised mobile wallets like Google Pay and Apple Pay.
A step into the crypto world
In addition to over a quarter (26 per cent) using QR codes for payments, 16 per cent of respondents use some form of cryptocurrency. With digital assets growing as a payment method, Temenos has decided to jump ahead of the competition and implement a new CBDC function into its platform.
The banking platform can integrate CBDC platforms such as Hyperledger Besu and R3 Corda into banks. It has added an additional set of use cases across secure non-custodial wallet opening from a mobile app built with Temenos Visualiser, transaction signing to fund wallets from deposit accounts integrated to the platform, management of offline payments, and synchronisation of transactions with the core ledger via the Temenos fulfilment service layer.
Tememos demonstrated several key use cases. It can securely create a new wallet, generating a private key within the Temenos Visualiser app runtime and use the phone’s secure enclave to generate a cryptographic key with which to encrypt it.
The enclave will shield and make the key inaccessible outside, ensuring it safeguards against external threats. Non-sensitive data, like the public key and account identification details, can leave the mobile device and be sent to the fulfilment service.
Modern payment solutions
The introduction of new instant payment initiatives such as FedNow gives banks an opportunity to elevate the customer experience and grow their payment business. More than a third of Americans surveyed say bank transfers today are too slow and expensive, yet half (51 per cent) would only trust their bank or credit union when sending payments. In fact, when thinking about digital payments, security and protection from fraud (50 per cent), privacy (40 per cent) and a trusted brand (39 per cent) are the most important factors for consumers.
Younger cohorts are driving the adoption of new payment methods. The survey finds Gen Z (18 to 25-year-olds) and Millennials (26 to 41-year-olds) are the most dissatisfied with the speed and cost of bank transfers. Further, more than half expect to use online banking, contactless and payments apps more in the next few years, compared to only around one-third for older generations.
Philip Barnett, president – Americas, Temenos commented: “It’s clear from this survey and our conversations with US banks that American consumers are looking for faster, cheaper and more convenient methods of payment. Temenos is working with US financial institutions of all sizes to modernise their payments capability to adapt and take advantage of these market changes. And we continue to invest in our single code base across core accounts and payments processing, making our offering the most compelling in the market.”