Accelerated Funds Availability… The New Normal?
Accelerated funds availability allows depositors to instantly access the money they deposit via check. That way, there’s no waiting period for the check to clear and no penalty if the check writer’s account has insufficient funds.
An article at BAI Banking Strategies by Victoria Dougherty, director of Payment Management Solutions, Fiserv, opens by wondering why accelerated funds availability, in an economy that reportedly grows more robust by the month, is in more and more demand.
While in the past, accelerated funds availability was most-commonly used by account holders who were experiencing a cash flow crisis of some sort -- according to the Financial Health Network (formerly the Center for Financial Services Innovation), there seems to be a new category of account holders who demand accelerated funds availability but aren’t low on funds.
Recent findings reveal a new category of account holders who demand accelerated funds availability but aren’t strapped for cash. Consider the November 2018 PYMNTS.com Financial Invisibles Report. It divides consumers into four groups for reporting purposes, with “No Worries” the most financially sound. Eighty-seven percent of the “No Worries” group said their financial situation remained the same or improved from 2017 to 2018, with an average income of nearly $80,000 per year. But their credit scores fell (while their bank account balances grew) and nearly one-third live paycheck to paycheck.
The BAI Banking Strategies article labels this "the new normal," calling out a cultural shift in the financial habits of consumers -- now more interested in enjoying today than saving for tomorrow.
Financial institutions must meet consumers in the middle. Yes, continue to educate them—and educate early. Financial literacy instilled at a young age is shown to change behavior and encourage saving. But we need a different approach for adult account holders with bills to pay today (yet grapple with “fear of missing out,” or FOMO).
Financial institutions need to respond to the market demand for liquidity. To that end, new solutions can preserve relationships with account holders and increase their share of wallet.
Quoting a Nielsen report "The Quest for Convenience," today’s consumers demand three key qualities: ease, utility, and simplicity. Account holders don’t want to think, wait, or spend any time trying to understand your products. In an effort to stay ahead of the consumer's behaviors, financial institutions need to stay mindful of shifts within the industry as well as the trends of overall consumers - this is where advantages are realized.
"Deeper transaction history can lead to better decisions for everyone involved," Dougherty points out. FI's deploying AI are ahead of the pack -- with data being the game-changer. Historical account data can be ingested by transactional analysis allowing financial institutions to perceive patterns within accounts. Using those patterns in risk modeling tools can help the consumer close their pay gaps, thus preserving the relationship. It can also help the institution in areas such as fraud detection and prevention, validation, and recognition -- three key check processing components.
(Download the entire "The Quest for Convenience" report HERE.)