The U.S. stands at a pivotal moment in its financial evolution. The adoption of Open Banking, FedNow, and RTP represents a significant step forward, but the journey is far from over. By looking to emerging markets for inspiration, the U.S. can build a payment system that is faster, more resilient through USSD redundancy, and more inclusive.
It is a technological challenge and a cultural one. As the country navigates this transition, it must confront the disparities that have long plagued its financial system and embrace the lessons of low-trust societies. The tipping point for instant payments is on the horizon, and the time to act is now.
What The U.S. Can Learn From Emerging Markets: The Road to Instant Payments and Financial Inclusion
When people talk about culture, what often comes to mind are the visible markers: food, clothing, norms, and values. Yet, having lived and worked in over thirteen countries, spanning both developed and emerging markets, I’ve come to realise that payment preferences, behaviours, and attitudes are an equally critical, yet often overlooked pillar of culture. Just as tipping a waiter 20% at a restaurant is a norm in the U.S. but would be strange in the Arab world, payment practices reflect the values, trust levels, and economic realities of society. These practices are not just transactional; they are cultural.
Take, for instance, the affinity for credit cards in the West. In countries like the U.S., credit cards are not just a payment method; they are a lifestyle. They represent trust in deferred payments, the convenience of rewards, and the security of chargebacks. Contrast this with countries like Nigeria or Kenya, where the payment culture revolves around instant payments.
When I dine out at a restaurant in Lagos and pay using local payment methods like mobile wallets, bank transfers, or USSD, the restaurant owner expects to receive the funds immediately, before I leave the premises. To an American experiencing this for the first time, such a demand might seem rude or distrustful. But it is not. It is simply the payment culture—a reflection of a low-trust environment where delayed settlements are seen as risky and unacceptable. And I will use the above perspective as a segue to my main discussion:
Fintech Trends: Connecting the Dots
The global financial technology (fintech) landscape is undergoing a seismic shift, driven by the rise of instant payments and the increasing interconnectedness of financial systems. While the developed West has long been seen as the leader in economic innovation, it is now looking to emerging markets for lessons on how to build faster, more inclusive payment infrastructures.
With the adoption of Open Banking, FedNow, and the Real-Time Payments (RTP) network, the country is poised to transition from sluggish T+2 (or even T+3 or T+4) settlement cycles to instant payments.
However, this shift is about culture, trust, and yes, financial inclusion. As the U.S. embarks on this journey, it can draw valuable insights from emerging markets, where instant payments have been a necessity rather than a luxury.
The next phase of fintech evolution will be defined by the ability to connect payment systems globally. Emerging markets, particularly in Africa and Southeast Asia, have already demonstrated the transformative power of instant payments.
In countries like Kenya, mobile money platforms such as M-Pesa have significantly improved financial inclusion, enabling millions of unbanked individuals to participate in the formal economy. Similarly, India’s Unified Payments Interface (UPI) has become a global benchmark for real-time payments, processing over 10 billion transactions per month as of 2023.
In contrast, the U.S. has lagged. The Federal Reserve’s FedNow and The Clearing House’s RTP network are significant steps forward, but they are still in their infancy. These systems aim to reduce settlement times from days to seconds, but their success will depend on widespread adoption and a cultural shift in how Americans think about payments.
Interestingly, this shift mirrors the experiences of emerging markets, where instant payments were born out of necessity in low-trust societies. In these regions, the lack of trust and high levels of financial exclusion forced innovators to build systems that prioritised speed, transparency, and accessibility.
Low-Trust Societies: A Catalyst for Innovation
When we refer to “low-trust societies” in the context of payments, we are talking about ecosystems where trust between entities, whether between individuals transacting, banks and their customers, or customers and regulators, is limited. In such environments, traditional financial systems often fail to meet the needs of the population, creating a demand for alternative solutions.
This lack of trust has been a driving force behind the rapid adoption of instant payment systems in emerging markets.
For example, in many African countries, the distrust of traditional banking systems has led to the widespread use of mobile money platforms like M-Pesa. These platforms provide a transparent and immediate way to transfer funds, reducing the risk of fraud and ensuring that transactions are completed quickly.
In contrast, the U.S. has a high-trust financial system, which has ironically slowed the adoption of instant payments. Americans are accustomed to the convenience of credit cards and the relative security of ACH transfers, even if they come with longer settlement times. However, this trust is not evenly distributed, and underserved communities often face significant barriers to accessing traditional financial services.
Mobile Money and Redundancy: Lessons from USSD and CrowdStrike
One of the most underappreciated aspects of emerging markets’ payment systems is their reliance on simple, resilient technologies like Unstructured Supplementary Service Data (USSD). USSD, often referred to as “text message banking,” allows users to conduct financial transactions without needing a smartphone or internet connection. This technology has been a game-changer in regions with limited digital infrastructure, providing a reliable alternative to traditional banking.
USSD works by sending a series of text messages between the user’s mobile phone and the bank’s server. The user initiates a transaction by dialling a specific code, which triggers a menu-based interface on their phone. They can then select options to check their balance, transfer funds, or pay bills. Because USSD does not require an internet connection, it is accessible to anyone with a basic mobile phone, making it an ideal solution for low-income and rural populations.
The U.S. could benefit from adopting this approach, particularly in terms of redundancy and resilience. The recent CrowdStrike outage, which disrupted payment systems nationwide, highlighted the vulnerabilities of relying on a single, centralised infrastructure. USSD-like systems could serve as a backup, ensuring that payments can still be processed even during technical failures. This is a technical consideration and a matter of economic stability. As the U.S. moves toward instant payments, building redundancy into the system will be critical to maintaining trust and reliability.
Integrating USSD into the U.S. Payment Ecosystem
For USSD to play a meaningful role in the U.S. payment ecosystem, it would need to be integrated into the existing infrastructure. Payment system players, such as banks, fintech companies, and payment processors, could adopt USSD as an additional channel for conducting transactions. This would involve developing USSD-based applications that can interact with the current payment networks, such as FedNow and RTP.
One way to achieve this is through partnerships between financial institutions and telecommunications companies. Telcos already have the infrastructure in place to support USSD transactions, and they could work with banks to offer USSD-based payment services. For example, a bank could partner with a telco to allow customers to check their account balances, transfer funds, or pay bills using USSD codes. This would provide an additional layer of redundancy, ensuring that payments can still be processed even if other systems go down.
Regulators also have a role to play in supporting the adoption of USSD. They could encourage the development of USSD-based payment solutions by providing guidelines and standards for their implementation.
Additionally, regulators could incentivise financial institutions to adopt USSD by disbursing some federal relief money through this new channel. Going back to history, the current widespread adoption of the Automated Clearing House (ACH) system in the United States was significantly influenced by the federal government’s initiative in the mid-1970s.
In 1975, the U.S. Social Security Administration began a trial to directly deposit Supplemental Security Income payments into recipients’ bank accounts via the ACH network. This move demonstrated the system’s efficiency and reliability, encouraging many banks to join the network to offer this service to their customers. This initiative by the federal government served as a tipping point, accelerating the adoption of ACH across financial institutions.
The Cultural Divide: Trust and Instant Payments
The adoption of instant payments in the U.S. is a technological challenge and a cultural one. Countries with low-trust societies, such as Kenya and India, have been quicker to adopt instant payments because they address a fundamental need for transparency and speed. In these regions, the lack of trust in traditional banking systems has driven innovation, resulting in payment infrastructures that are faster, more accessible, and more inclusive.
In the U.S., the high level of trust in traditional banking systems has ironically slowed the adoption of instant payments. Many Americans are accustomed to the convenience of credit cards and the relative security of ACH transfers, even if they come with longer settlement times. However, this trust is not evenly distributed. In underserved communities, particularly Black, Latino, and Asian neighbourhoods, the lack of access to traditional banking services has created a demand for faster, more inclusive payment options.
Data from the Federal Reserve’s 2022 Survey of Household Economics and Decision Making (SHED) reveals stark disparities in financial inclusion. While 81% of white households have access to a bank account, only 63% of Black households and 68% of Latino households can say the same. These disparities are even more pronounced in rural areas and low-income zip codes. Instant payments have the potential to bridge this gap, providing a lifeline to communities that have been left behind by the traditional financial system.
The Tipping Point for Instant Payments in the U.S.
Malcolm Gladwell’s concept of the “tipping point” is particularly relevant to the adoption of instant payments in the U.S. In The Tipping Point, Gladwell argues that social epidemics, whether they are trends, ideas, or behaviours, spread like viruses, reaching a critical mass that triggers widespread adoption. For instant payments, the tipping point will come when the benefits of speed, transparency, and inclusivity outweigh the inertia of the status quo.
Several factors could accelerate this tipping point. First, the growing demand for faster payments from businesses and consumers will create pressure on financial institutions to adopt FedNow and RTP. Second, the increasing visibility of successful instant payment systems in emerging markets will demonstrate the feasibility and benefits of real-time transactions. Finally, regulatory support and public-private partnerships will be essential to driving adoption, particularly in underserved communities.
As the U.S. moves toward instant payments, it must confront the cultural and structural barriers that have slowed progress. Drawing on the experiences of emerging markets, the country can build a payment infrastructure that is faster and more inclusive. This will require a concerted effort to address disparities in financial access, invest in resilient technologies, and foster a cultural shift toward real-time transactions.
About the author
Oluwaseun Yusuff is a Fintech and Payments expert, holding an MBA from the University of North Carolina’s Kenan-Flagler Business School in Chapel Hill. He writes from New York City.
