Banks Struggle to Keep Up with 24/7 Payments

The way people make payments has changed dramatically in recent years, thanks to technological advancements and regulatory changes. Gone are the days when banks had a fixed schedule for processing transactions.

Now, payments can be made at any time of day or night, 365 days a year. The European Central Bank's TIPS platform settles instant payments in central bank money around the clock, while the Federal Reserve's FedNow Service is designed to process transactions continuously.

In fact, many countries are extending their settlement hours or moving towards a 24/7 system. In India, for example, the RTGS system has been available 24/7 since December 2020, and in the US, the Federal Reserve plans to extend its Sunday-through-Friday operation by 2028.

This shift towards continuous settlement is bringing new challenges for banks. They need to have enough liquidity on hand to meet customer demands at any time of day or night. This can be a problem for smaller institutions that may not have the same level of resources as larger banks.