2023 swooped in and rocked a decades-long payments infrastructure with the perfect storm of fresh solutions, external pressures and market competition, but it also laid the groundwork for a year ahead filled with opportunity. The novel payments concepts and ideas that percolated are now primed for the next steps, positioning community banks for action in 2024.

To ease the regulatory and economic forces pressuring margins and embrace new payments opportunities, community banks should focus on six key trends this year to drive their payments plans and activities:

1. Evolution of payments at the Point of Sale (POS): As open banking matures, Pay by Bank functionality accelerates — courtesy of megabank support — and instant payments uses expand, this trifecta of developments will drive the POS evolution. Expect to see these changes start to shift both the physical and e-commerce POS this year, with more dramatic transformation in the next decade. Community banks should begin evaluating their strategies as they relate to POS transactions.
   
   
2. Deepened business relationships: As a follow-up to their outsized roles as Paycheck Protection Program lenders, community banks can once again showcase the strength of their relationship-based business model. Solutions like instant payments offer attractive cash-flow benefits for small-business customers while simultaneously helping community banks grow their deposits. By diversifying products, community banks can increase the number of solutions their business customers utilize and, in turn, strengthen their ties to the bank.
   
   
3. Increased revenue pressures: With interchange under fire from merchant incentives to fee cap proposals, payments revenue could be facing a hit. In addition, as instant payments catch on, the potential for the payments mix to shift grows. Community banks should focus on diversifying their payment product offerings to help bolster their noninterest income in new ways.
   
   
4. Expanded teen/family banking products: Demand for teen banking apps that support checking accounts, savings accounts, debit cards, P2P payments (primarily with parents) and financial education has seen explosive growth. In fact, more than 6 million families already use the Greenlight solution, one of the market leaders in this space. While Gen Z doesn’t currently represent a core customer base, establishing and nurturing these relationships could pay off in the long term. In 2024, community banks should place more emphasis on teen and family banking products with the long game in mind.
   
   
5. Growth in instant payments: The Fed closed out 2023 with more than 300 financial institution participants from 45 states utilizing FedNow — up from just 35 in July. Instant payments are on a growth trajectory and should become more of a priority for community banks in 2024 to ensure they embrace the future potential for more diverse product offerings.
   
   
6. Heightened attention to the customer experience: Some research indicates that customers want services from their primary bank, reporting that over half of consumers rate their primary bank as the most desirable provider for mobile/digital wallet app services. But the experience must meet market expectations. That push-pull effect will incentivize community banks to place more emphasis on customer experiences and digital interfaces in 2024.

While the wheels were set in motion last year, we’re going to see an acceleration of payments prioritization among community banks as they continue to ramp up. And as they do, ICBA Payments will be there to provide strategic support, products and services to help community banks act on these opportunities and excel in 2024 and beyond.