Banks chisel, not smash: real-time payments demand smarter, faster, fraud-proof upgrades

By early 2026, real-time payments have evolved beyond simply accelerating fund transfers to fundamentally enhancing customer experience, cash flow management, and transactional certainty. This shift underscores how speed is no longer a standalone feature but a strategic enabler of trust, as customers increasingly expect seamless and reliable interactions. However, as Karen Postma of Velera highlights, trust frameworks must also advance beyond fragmented, reactive fraud controls to dynamic, multilayered defenses that unify data across all touchpoints, addressing the sophistication of modern fraud threats.

The interplay of speed and trust is now central to customer loyalty, especially in fraud management where slow or opaque responses can irreparably damage relationships at moments of vulnerability. Credit unions and financial institutions recognize that timely, transparent communication during fraud incidents is critical to maintaining member confidence, reinforcing that operational agility and clear dialogue are as vital as the underlying security measures.

The integration of AI into the payments layer is accelerating this imperative, transforming payments into the critical juncture where consumer intent—once merely advised upon by AI assistants—is directly converted into action. This evolution magnifies the importance of both speed and trust, as automated commerce demands instantaneous, secure transaction processing to fulfill consumer expectations shaped by AI-driven experiences.

Legacy payment systems continue to serve as the indispensable backbone of trust, resilience, and scalability within financial services, a reality underscored by experts like Mladen Vladic who emphasize that these infrastructures are far from obsolete. However, their design—rooted in pre-digital eras—creates fragmented and siloed data environments that impede the effective deployment of AI and real-time payment capabilities, as these systems were never built to support such modern demands.

Recognizing the impracticality and risk of wholesale replacement, financial institutions are embracing a nuanced orchestration strategy that integrates legacy systems with new technologies. This 'chisel versus sledgehammer' approach, advocated by industry voices including Velera’s Cody Banks, aims to preserve the reliability consumers depend on while incrementally enhancing functionality, thereby avoiding further data fragmentation and operational disruption.

The vast troves of transactional and behavioral data held by banks represent a treasure trove for AI-driven innovation, yet the challenge lies in transforming these raw assets into unified, high-quality data environments. Without this transformation, AI models remain starved of the coherent inputs they require, limiting advancements in fraud detection, personalization, and analytics despite the abundance of underlying information.

To balance the need for speed and innovation with operational safeguards and trust, incumbent financial institutions are increasingly partnering with agile FinTech firms. These collaborations allow banks to leverage FinTech’s rapid experimentation and innovation capabilities while maintaining compliance and customer confidence, a delicate equilibrium essential for modernizing payments without compromising the foundational reliability of legacy systems.

By mid-2026, Paymentus positioned AI as a transformative force multiplier that bridges the gap between modern payment demands and entrenched legacy infrastructures. Garrett Baird highlighted that rather than discarding reliable mainframes—which still process roughly 75% of transactions due to their unmatched security and dependability—AI acts as the 'connective tissue' that intelligently orchestrates across these fragmented systems. This approach allows incumbents to modernize payments without the costly and risky overhaul of legacy platforms, preserving their critical operational backbone while unlocking new capabilities.

AI’s unique ability to extract relational context from disparate data sources is revolutionizing payments modernization by enabling smarter fraud detection, personalized customer experiences, and enhanced operational efficiencies. According to Baird, AI excels at uncovering patterns within the historical interactions between customers and organizations, suggesting that future competitive advantage hinges on leveraging this accumulated relational intelligence across ecosystems. This shift transforms AI from a mere automation tool into a strategic enabler that amplifies the value embedded within existing data silos, driving both security and customer-centric innovation.

By early 2026, financial institutions, particularly credit unions, have embraced a nuanced approach to modernization that prioritizes adapting legacy payment systems rather than wholesale replacement. As Cody Banks explains, the challenge lies in distinguishing stable infrastructure components that must remain intact from those requiring evolution to support real-time payments and AI-driven capabilities. This incremental, 'chisel versus sledgehammer' strategy enables institutions to enhance functionality and member experience while preserving the operational continuity and trust that consumers rely on.

Partnerships with FinTech firms have become essential in this landscape, providing the agility to innovate rapidly without sacrificing the operational safeguards and regulatory compliance that banks must uphold. Cody Banks highlights the tension between FinTech’s 'fail fast' ethos and financial institutions’ imperative to maintain trust, underscoring the delicate balance banks must strike as they integrate modular architectures and APIs into their payment ecosystems.

While client-facing digital channels have advanced significantly, underlying payment platforms often remain entrenched in legacy systems, compelling banks like Bank of America and U.S. Bank to juggle modernization with the imperative to 'keep the lights on.' Barry Rodrigues emphasizes that payments are deterministic and must function flawlessly at all times, making resilience, security, regulatory compliance, and 24/7 availability baseline expectations rather than competitive advantages. This operational reality shapes how banks approach infrastructure upgrades amid evolving client demands.

Corporate clients are accelerating the push for modernization by demanding faster settlement and seamless integration of payments within their digital workflows. AJ McCray notes that these clients are 'done waiting,' pressuring banks to move beyond deferred upgrades and embed payments directly into broader business functions. This client-centric shift compels banks to rethink their role—not just as payment processors but as integral partners within their clients’ digital operations.

By mid-2026, it became clear that payment delays and errors are a major source of customer dissatisfaction across sectors like investment platforms, healthcare, and insurance, with 'Where’s my payment?' inquiries topping the list of payout issues—reported by 73% of investment firms and over half of healthcare and insurance companies. This friction stems largely from incorrect recipient data, delivery glitches, and the need to reissue payments, which not only frustrate customers but also impose real financial hardships such as fees, postponed purchases, and reliance on credit, underscoring the urgent need for faster, more reliable payouts.

Fragmented payment rails exacerbate the disconnect between quick transaction approvals and slow fund delivery, reducing visibility and inflaming customer complaints. For example, healthcare insurers still rely heavily on legacy methods like paper checks and ACH transfers for core claims payouts, despite faster options being available for non-claims disbursements. This lag not only fuels consumer frustration but also raises compliance risks and operational burdens, particularly for larger insurers, highlighting the critical role of payment processors and the limited control many insurers have over payout methods.

The push toward real-time or same-day payments is driven by consumer demand—36% of recipients want government payments available within hours—but the limited delivery options currently available intensify payment friction and complaints. Investment firms report that adopting real-time payouts can cut payment inquiries by half, improving operational efficiency and customer certainty. However, this acceleration compresses the window for accounts receivable teams to detect and correct errors, with only 30% of firms catching problems pre-settlement and nearly 60% discovering them post-settlement, leading to costly reversals and disrupted cash flows.

To mitigate risks inherent in faster payments, companies increasingly rely on instant bank account and ownership verification technologies, which double the likelihood of early problem detection and significantly reduce fraud and payment integrity issues without adding friction. Firms with well-integrated payment verification and fraud detection systems report lower fraud and nonclearance costs—around 30 to 35 basis points of annual revenue—compared to nearly 40 basis points for those with poor integration, emphasizing the necessity of embedding these tools within accounts receivable workflows to balance speed with security.

By mid-2026, the journey from mere connectivity to full activation in instant payments reveals significant operational and fraud-related hurdles, particularly on the send side, which remains the critical bottleneck for banks. While many institutions have linked to instant payment rails like RTP® and FedNow®, a majority hesitate to send payments in real time due to concerns over fraud, unclear routing, and liquidity management challenges. This cautious stance is especially pronounced among smaller financial institutions, where 78% initially adopt receive-only capabilities to mitigate risks of accelerated deposit outflows, underscoring a widespread prioritization of risk containment over immediate outbound payment activation.

Transitioning to a fully activated instant payment ecosystem demands that banks evolve beyond receive-only deployments toward intelligent orchestration across multiple coexisting payment rails such as RTP®, FedNow®, ACH, and wires. This orchestration must embed sophisticated fraud controls, real-time validation, and richer data integration within payment workflows to foster confident usage and scalability. As the competitive landscape intensifies, institutions recognize that the true value of instant payments lies not just in connectivity but in operational readiness and scalable modernization that align with evolving business demands, enabling seamless send-side confidence and activation.