The Federal Reserve in July rolled out FedNow, a real-time payments system that allows businesses and consumers to move money instantly. The launch aims to expand access to faster payments to more financial institutions and their customers. A similar payments system from the Clearing House, a payment network owned by large financial institutions, launched in 2017. Both services offer instant settling and clearing at all times of day. Other payment methods can take longer or aren’t available around the clock.

For CFOs, a key selling point of real-time payments is the ability to closely manage working capital. Companies can use the systems to pay their bills on the last possible day, meaning they can hold on to their cash longer. Real-time payments can also provide finance chiefs with the certainty of knowing exactly when their payments will settle and clear.

But despite the selling points, demand in the back office hasn’t taken off yet, bankers and payments executives said. Availability is one factor. While larger banks are mostly hooked up to at least one real-time payments system, many smaller financial institutions don’t yet have access. To complete transactions, both senders and receivers must have a deposit account that’s connected to the system.

Costs are another sticking point. Real-time payments are more expensive than some other types of payments. Companies may want to make adjustments to their back-end systems to transact in real time. And it is simply difficult to get companies to change long-established processes for how they pay their bills.

“It’s reconfiguring a lot of business processes that have been in place for a long time. Quite frankly, there needs to be a strong business case to make that effort worthwhile,” said Tom Hunt, director of treasury services and payments at the Association for Financial Professionals, a professional organization.

Tom Spataro, chief treasury and banking officer at claims administrator and restructuring adviser Kurtzman Carson Consultants, is planning to use real-time payments at his company, though he is assessing where it makes the most sense, such as payroll, vendor payments or replacing checks. “We’ll look at it,” said Spataro, who said he started his job on Wednesday. He cited benefits including efficiency and irrevocability of the payments.

In his previous role as U.S. treasurer at Computershare, an Australia-based shareholder services company, Spataro worked on a project during the pandemic to add real-time payments to the company’s treasury-management platform, alongside checks and other electronic payments. But the project ran into hurdles, in part because adding a real-time payments option required investments in time and resources from the company, as well as its banks and software providers, he said.

Three percent of treasurers use the FedNow payment system, while an additional 39% plan to do so in the future, according to a survey published in October from the AFP. The remainder said they were unsure or had no plans to use FedNow. The survey, conducted around the time the Fed started its real-time payments service in July, included 310 treasury executives, nearly 80% of whom were from publicly traded and private U.S. companies, while the remainder were from nonprofits and government agencies.

Meanwhile, 12% of treasurers said they use the Clearing House’s real-time payments network, with an additional 20% saying they plan to do so, according to the AFP survey.

“As interest rates rise, your ability to manage your cash flow down to the second is an extremely important element of management for CFOs and treasurers,” said Jim Colassano, a senior vice president of real-time payments product development at the Clearing House.

Over 120 banks and credit unions are hooked up to the FedNow service, according to the Federal Reserve. The Clearing House’s real-time payments service, meanwhile, is available at 400 financial institutions. There are roughly 9,000 banks and credit unions in the U.S, according to data from the Federal Deposit Insurance Corp. and the National Credit Union Administration.

“We’ve heard a good deal of excitement from businesses around the opportunities that instant payments offer,” said Nick Stanescu, senior vice president at the Fed and business executive for the FedNow service. Many companies still rely on checks and manual invoices, and see instant payments as a way to speed up cash flow, simplify invoicing and reduce errors, he said.

The Fed has not yet disclosed total payment volumes on its FedNow service. During the third quarter, the Clearing House processed $34.3 billion in transactions on its real-time payments system, up from about $19.7 billion during the year-earlier period. Most of those transactions are business-to-consumer payments, Colassano said. By comparison, the decades-old Automated Clearing House, or ACH, payments system handles trillions of dollars in transactions each year.

Treasurers typically use the ACH system for electronic payments that can be batched, such as employee payroll. They use wire transfers for large or critically important payments, such as interest payments on a bond. Neither system is available at all hours.

A key source of demand for real-time payments so far has come from companies that want to quickly get cash into the hands of consumers or employees, executives said.

Car dealership chain Lithia Motors last year began offering real-time payments to customers who sold their car to Driveway, the company’s online dealership platform. Once a sale is complete, customers can receive funds immediately into their bank account. By contrast, it can take several days for customers to receive a check, or up to two days to receive an ACH payment.

“We wanted to provide a differentiated experience on Driveway for customers,” said Tina Miller, CFO at the Medford, Ore.-based company. Lithia offers real-time payment options through a partnership with U.S. Bancorp.

The Clearing House last year raised the maximum dollar value for transactions to $1 million from $100,000, which is expected to make real-time payments more appealing to businesses, Colassano said. The maximum transaction on the FedNow service is currently $500,000.

One reason why there hasn’t been a high rate of adoption in the back office is because many suppliers aren’t demanding to be paid instantly, said Mike Jorgensen, head of emerging solutions at U.S. Bancorp. Additionally, finance chiefs may have less leeway with a supplier to charge a fee for a real-time payment than they would with a consumer, he said.

While demand for real-time payments in the back office is likely to increase, growth will likely be slow in the near future, Jorgensen said. “There’s a high interest to use it, but there are only niche applications for it right now,” he said.

Write to Kristin Broughton at [email protected]