Organizations once had the luxury of reviewing suspicious transactions prior to settlement and clawing them back after the fact. But as both payments and fraud have accelerated, financial institutions are increasingly being pushed to move fraud prevention earlier in the payments lifecycle—ideally before a transaction ever occurs.

In response, U.S. Federal Reserve Financial Services (FRFS)—which operates the FedNow instant payments system—is launching an API aimed at enhancing the security of instant payments. The goal is to provide financial institutions and payments service providers with insights derived from historical FedNow data and network intelligence, helping them determine whether to proceed with a transaction.

Alongside improved fraud detection, FedNow notes that these insights could also enable additional capabilities, such as delivering tailored messaging to users who are on the verge of initiating a high-risk payment.

“This network intelligence API is a step in the right direction,” said Jennifer Pitt, Senior Fraud Analyst at Javelin Strategy & Research. “Network intelligence is key to detecting fraud in real time, and it is key to identifying organized fraud rings. As fraudsters continue to skirt fraud flagging and reporting thresholds by spreading activity across institutions, network intelligence is a critical piece in identifying that behavior.”

The Two Elements

Two factors have allowed criminals to rapidly scale their efforts: technology and organization. Artificial intelligence has played a key role in supercharging fraudulent activity, and the threat is likely to intensify as cybercriminals experiment with frontier AI—cutting-edge models that stretch technological boundaries—to reduce the time, expense, and skill required to run fraud campaigns.

Compounding this issue, these campaigns are often carried out by organized fraud rings, which can amplify their impact. One example is a crypto investment scheme that allegedly defrauded victims of more than €700 million (roughly $817 million).

The Protections at Hand

Unfortunately, these fraud challenges are expected to grow as instant payment systems such as RTP and FedNow continues to surge. Both U.S. instant payment networks have recently reported record highs in transaction volume and value, and FedNow’s model could eventually expand globally.

In many cases, real-time payments are also irrevocable, and don’t offer recourse mechanisms like credit card chargebacks—protections that many consumers have come to rely on. As consumers increasingly expect both immediacy and safeguards, financial institutions are facing mounting pressure to adapt.

Despite these challenges, many financial institutions are still hesitant to fully leverage the fraud prevention tools already available to them.

“Participation in this FRFS network intelligence project is voluntary, that raises a question around adoption,” Pitt said. “Many banks do not fully use existing information-sharing frameworks like Section 314(b) of the USA PATRIOT Act, so it is fair to question whether they will adopt this. Some institutions point to lack of manpower and the fact that 314(b) is not real time.”

“This model may help address those concerns since the information is delivered automatically at the time a payment decision is being made, rather than requiring case-by-case outreach,” she said.

Only Part of the Picture

Another longstanding barrier is financial institutions’ reluctance to share data due to privacy and competitive concerns. The International Monetary Fund has implored banks to reconsider this stance, warning that a fragmented view of fraud is undermining their ability to respond effectively.

This view is echoed by the Global Anti-Scam Alliance, which recently partnered with OpenAI to launch scam.org, a platform offering resources for scam education, reporting, prevention, and victim support. The initiative aims to provide a centralized hub where industry participants can begin building a more standardized response to escalating scams.

Despite growing calls for industry-wide collaboration, progress will require buy-in. It remains to be seen whether tools like the FedNow API will be compelling enough to bring organizations off the sidelines.

“Even though the data is abstracted and network-derived, participation still requires a level of comfort with contributing to and using shared intelligence,” Pitt said. “For some organizations, that hesitation will remain.”

“Another limitation of the FRFS network intelligence mod is that the intelligence is focused on the receiving account,” she said. “That means participating organizations still do not have the full picture of the transaction or the parties involved.  What is ultimately needed is a more complete view of both the sender and receiver, including historical and current information about the transaction, device, and account behavior. Without that, organizations are still making decisions with only part of the picture.”

The post Stopping Fraud in Real-Time Payments Before It Starts appeared first on PaymentsJournal.

The real-time payments system FedNow has rapidly gained from over 1,600 financial institutions across the United States. However, these participants have so far been restricted to using only Reserve Banks as intermediaries.

This limitation has prevented banks and credit unions from leveraging the network for cross-border payments. The U.S. Federal Reserve, which operates FedNow, is now considering lifting this restriction. This change would align FedNow more closely with the Fedwire model, which has been in place for decades.

Under the proposed plan, a U.S. institution could use FedNow to send funds to a correspondent bank, which would then facilitate the international leg of the transaction. This functionality could broaden the use cases for a system that has already experienced substantial growth in both transaction volume and value over the two years since its inception.

“A move to cross-border via FedNow is the logical next step in the evolution of real-time payments in the U.S.,” said Hugh Thomas, Lead Commercial and Enterprise Analyst at Javelin Strategy & Research. “By moving to real-time, you’re synching up with the speed of domestic funds movements in big cross-border markets like the EU and the UK. With ISO 20022 standards in the mix in all three markets, you open up a lot of possibilities for cross-border payments solutions. This isn’t to say they’ve gotten there with this move, but it’s certainly a step in that direction.”

Stopped at the Border

While using FedNow for cross-border payments could streamline the domestic payments experience, the network’s real-time settlement would not extend beyond U.S. borders. Once the funds reach an overseas correspondent bank, the transaction would follow the same processes as conventional cross-border payments.

The complex correspondent banking system is likely to continue subjecting these payments to transaction fees, currency conversions, settlement delays, and limited transparency—challenges that have long plagued cross-border payments.

These issues have persisted despite ongoing efforts by industry stakeholders and world leaders. For example, leaders from the Group of 20 countries established a roadmap to improve international transactions. Yet, a recent review highlighted that legacy payments infrastructure and cross-country coordination challenges have hindered meaningful progress.

Weighing the Challenges

Such hurdles are why many experts advocate for sweeping changes to the cross-border payments landscape, potentially involving a shift toward new rails like stablecoins or global networks operated by Visa and Mastercard.

The SWIFT messaging system has also played a key role in modernizing the correspondent banking model, and it is working on a framework specifically for retail cross-border payments.

While expanding FedNow’s cross-border capabilities would likely be welcomed by many institutions, the service would still operate within an increasingly fragmented and complex global market. These are key considerations the Federal Reserve will likely weigh as it reviews public comments and decides whether to move forward with the proposal.

The post U.S. Federal Reserve Considers Taking FedNow Global appeared first on PaymentsJournal.

India’s Unified Payments Interface (UPI) has grown into the dominant force in global instant payments, accounting for more than four out of every five real-time transactions worldwide. The system’s rapid rise has been fueled by strong government support, widespread consumer adoption, and acceptance across a rapidly expanding network of merchants.

According to MSN, India’s finance minister, Nirmala Sitharaman, said the network accounted for 81% of global real-time payments last year, cementing UPI’s position as the largest instant payments system in the world.

The total volume of retail transactions on UPI has skyrocketed, rising from ₹7,176.9 crore (around $77 million) in FY22 to ₹22,167.9 crore (roughly $2.39 billion) in FY25. Even as UPI approaches saturation in India’s immense payments market, the network has still found room to grow—transaction volume on the system increased by more than 35% last year.

The growth was fueled by several factors, including the prevalence of smartphones, broader financial inclusion, and improved transaction safeguards.

Biometric Guardrails

Among the most notable of these safeguards is biometrics authentication, which was launched on UPI last year. Previously, consumers were required to enter a PIN to authorize transactions. However, India’s regulators added biometric functionality to reduce checkout friction while strengthening transaction security.

This made biometric authentication available to users who opt in, with their data managed through Aadhaar, a digital identity program operated by India’s government. Aadhaar issues citizens a 12-digit number after they provide verifiable biometric and personal data.

Like UPI, Aadhaar is also the largest system of its kind in the world and has frequently been spotlighted as a gold standard for other digital identity systems to emulate.

Fighting Faster Fraud

Sitharaman credited Aadhaar authentication with improving UPI payments, but she also highlighted the persistent challenges of fraud. One reason biometric programs have been slow to gain traction in many parts of the world is that they require both consumer adoption and merchant investment in acceptance infrastructure.

While government backing for Aadhaar and UPI suggests that infrastructure deficiencies may not be a major obstacle in India, gaps in consumer awareness and adoption will likely remind. And since faster payments often equate to faster fraud, challenges related to fraud persist across UPI and other instant payments systems.

To combat this issue, Sitharaman noted that India’s regulators and financial institutions are also conducting frequent awareness campaigns via text messages, radio campaigns, and other platforms.

The post UPI Tightens Grip on Global Instant Payments Market appeared first on PaymentsJournal.

Real-time payments have yet to become a true retail mainstay in the U.S., but trillions of dollars moved across the FedNow and RTP networks last year. Both networks recently increased their transaction limits to $10 million, dramatically expanding enterprise use cases.

The growing adoption of real-time payments will meaningfully reshape the B2B payments landscape. But it’s only one of several forces converging in what is shaping up to be a watershed year for commercial payments.

As Hugh Thomas, Lead Commercial and Enterprise Analyst at Javelin Strategy & Research, discussed in the 2026 Commercial & Enterprise Trends report, artificial intelligence-driven automation and the rise of more targeted, value-based pricing structures will also play defining roles in the next era of enterprise payments.

An Inflection Year for AI

Optimizing commercial payments flows—whether through automation or outsourcing—has long been a priority for finance leaders. Few technologies, however, offer the promise of AI.

Over the past few years, businesses across industries have invested heavily in AI capabilities. This year represents a critical litmus test: organizations are now expecting measurable returns on those investments.

Expectations have only intensified with the emergence of agentic AI, which has the potential to further accelerate automation.

“You’re looking at something now where so much of that work can be automated, where on initiation of a purchase you could begin to be provisioning an agent to go out and find goods or services that meet the criteria—find price points, look at all the tumblers that need to fall before you say, ‘I’m now ready to pull the trigger and make the payment here,’” Thomas said.

“The data has been around for a long time, the technology is just getting to the point where I think this year will be almost an inflection year in the payables space where you’ll begin to see some big case studies happening,” he said. “I’ve been interviewing people in the receivable space and they’re all talking about how well-suited AI is to managing customer interactions on their AR portals.”

In the past, accounts receivable processes required consistent human intervention—managing credit lines, reviewing invoices, reconciling payments, and handling exceptions. Generative and agentic AI now can substantially reduce time spent on these manual workflows.

That promise is compelling. However, implementing AI securely and responsibly requires strong governance, oversight, and iterative deployment. Progress will likely be incremental rather than instantaneous.

“I don’t know whether we’re going to see paradigm changes, but I think that this is going to be the year that there’s a more ubiquitous perceived need for AI in the payments mix,” Thomas said. “It’s still going to be a learning year, but there are going to be a lot of interesting case studies that happen. This is something where it moves from the theoretical to the practical and the applied.”

A New Real-Time Ballpark

Real-time payments are far more culturally entrenched in markets like India and Brazil than in the U.S., but domestic adoption is accelerating.

For years, RTP—operated by The Clearing House—was the only instant payments network in the U.S., which helped it grow from 60 billion real-time payments in Q2 2024 to around 481 billion in Q2 2025. FedNow, launched nearly three years ago by the Federal Reserve, has not displaced RTP; instead, both systems have expanded in parallel, with FedNow facilitating roughly 246 billion payments in Q2 2025.

“You’re in a different ballpark now, where you’ve got a higher average value and they’re seeing clear use cases where instant transfer of funds is required,” Thomas said. “The one that gets talked about a lot these days is housing down payments—moving from a wire or a cashier’s check to a real-time payment, where both parties can be sitting at their terminals and observe the money move from one account to the other.”

“It’s a great way to avoid a lot of steps versus handing a cashier’s check to a lawyer and having them affirm to the counterparty’s lawyer the funds are on their way,” he said.

Speed introduces new risk considerations, most notably fraud. In traditional payment systems, settlement delays provided time for fraud screening and dispute resolution. With real-time settlement, those buffers largely disappear.

While instant payments introduce unique risk management challenges, they also deliver powerful benefits.

“These observable instant funds movements are going to be where you’re going to see quick take-up,” Thomas said. “And they’ll drive the business case for investing in managing these new risk parameters. As real-time use cases become broadly known, the functionality will be expected of the smaller banks, and you’re seeing companies building out the functionality to offer this to the smaller providers at scale.”

Targeting Price-to-Value

As real-time rails gain momentum in B2B payments, card networks remain formidable competitors.

For years, leading credit card issuers have sought to replicate their consumer-market success in commercial payments. However, translating retail-based pricing models into the B2B environment has proven more complex than expected.  

“There are a million different kinds of consumer, but not much differentiation in how they want to pay for things,” Thomas said. “People either want rewards or access to credit, or they want to be as cheap as possible—and they tend to know the best way to meet their own needs.”

“As a consumer, if you go to a grocery store today, try and pay for it with a check—it’s not The Big Lebowski days, you can either pay with card or cash,” he said. “However, if you’re a business you can pay with ACH, you can pay with real-time payments, you can pay with a check, you can do direct debit, or you can use a card. Rarely would you ever do cash, but some people do. You tend to have a lot more options than consumers, and many of them turn on whether you want to pay now or later, and what sort of discounts or later payment options are available.”

Commercial payments operate under different economics, workflows, and value expectations. As a result, issuers face well-established alternatives and deeply embedded processes within enterprise finance teams.

Still, cards offer significant advantages in B2B contexts. Organizations can authorize one amount and settle for another within defined parameters, and chargeback rights provide strong recourse protections. From both a control and risk-mitigation perspective, cards remain one of the safest payment methods available.  

To gain broader traction in commercial payments, however, issuers will likely need to move beyond retail pricing frameworks and adopt models aligned specifically to B2B value creation.

“The pricing schedule for Visa and Mastercard used to be a six- or seven-page document for the United States and Canada,” Thomas said. “Now, it’s about a 30-page document, and most of the new pages are describing different types of B2B transactions—a page for different flavors of fleet payments, two pages for different flavors of virtual card payments, new tranches of card types and interchange schemes associated with them.”

“So, the networks are getting smarter about pricing, but the problem is they’re not seeing both sides of the transaction. They don’t know the full costs and benefits the counterparties are seeing by using the network, how much rebate the buyer may be getting, and how much it’s costing the supplier to accept cards,” he said. “These new pricing schemes are an attempt to balance the economics of the transaction without actually controlling the final costs; they’re designed to encourage maximum and sustained network use. Given the priority the card networks have been putting on B2B growth, one has to assume they’ll continue to tweak their pricing further to capture specific spend types where they can price to the value their solutions deliver.”

The post From Theory to Application: The Impending Transformation of Commercial Payments appeared first on PaymentsJournal.

Secure real-time payments are foundational to the open banking model, enabling users to pay directly from their bank accounts across a wide range of use cases. This capability is largely delivered through APIs provided by third-party fintechs.

This is the model that eBay plans to implement in the UK, where the e-commerce giant will tap into the substantial pay-by-bank network of TrueLayer to introduce account-to-account payments for its customers.

However, this partnership goes further than simply adding another payment option. eBay is also making a substantial investment in TrueLayer through its venture capital arm, signaling confidence in both the fintech itself and the broader open banking model. While this is a notable development, the long-term implications remain to be seen.

“This will be interesting to watch,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “It’s a stretch to say that the fact that eBay implemented pay-by-bank is now a broad validation for open banking platforms. What will amount to validation is how many eBay shoppers choose that payment method at checkout vs traditional card payments.”

“The proof will be in the figgy pudding—as they say across the pond—when we see the payment volume materialize,” he said.

Two Key Features

Many merchants have been drawn to real-time payments as a lower-cost alternative to credit cards and their associated interchange fees. That said, credit cards do offer certain benefits that help justify their costs.

“Card payments have evolved over their 50+ year lifespan, and the two-step process enables sellers to verify and claim good funds immediately at the time of purchase, while not actually charging the cardholder until the goods are shipped,” Apgar said. “This, combined with a well-defined chargeback and dispute process, highlights two key payment features that consumers forfeit when opting for pay by bank.”

A Challenging Road

These advantages, coupled with the dominance of card payments, suggest that real-time payments still face a challenging path to wider adoption in the UK.

“The lower fees and real-time settlement are certainly advantages for sellers, and we may see eBay and others offer incentives to consumers who select pay-by-bank,” Apgar said. “While there are many great use cases, it remains to be seen if buying goods from e-commerce marketplace sellers is one of them.”

The post eBay Adds Pay-by-Bank in the UK and Boosts Open Banking Investments appeared first on PaymentsJournal.

The euro is the world’s second-largest reserve currency, though it still lags far behind the U.S. dollar. Many European Union leaders believe that a stronger global role for the euro would enhance regional stability and create more opportunities for member states.

In upcoming talks, EU leaders have laid out an ambitious agenda to elevate the euro’s international standing. This includes issuing euro-backed digital assets such as stablecoins, tokenized deposits, and a central bank digital currency (CBDC). Another priority is to expand euro-denominated lending, including joint issuance by multiple countries, and to that aid and loans provided to other regions are denominated in euros.

Leaders are also exploring the creation of a regional payments network to rival the infrastructure established by Visa and Mastercard within the EU.

Reaching a Crescendo

Calls for more euro-backed digital assets have intensified in recent years, as stablecoins from Circle and Tether now move trillions of U.S. dollars globally. Stablecoins have proliferated across  banks, retailers, and social media companies, with use cases continuing to expand.

While euro-backed stablecoins exist, they account for only a small fraction of the market. This has fueled calls for a digital euro, though the CBDC faces pushback from banks and lawmakers. Banks worry it could compete with their products, while some policymakers question its privacy and financial stability implications.

A Global Financial Force                                              

Beyond digital assets, the EU is working to strengthen its real-time payments systems. Efforts include integrating domestic mobile payments platforms under a single umbrella and connecting to real-time payment networks abroad.

To this end, the EU recently unveiled plans to connect its instant payments infrastructure with India’s UPI system, unlocking a significant global payments corridor. India and the EU also signed a landmark Free Trade Agreement, aligning the two economies in multiple areas, especially financial services.

Ultimately, these efforts aim to position the EU as a stronger global financial force—a challenging task given the established global positioning of U.S. stablecoins, card networks, and cross-border payment rails.

The post EU Leaders Consider Comprehensive Payments Plan for the Euro appeared first on PaymentsJournal.

After decades of discussions, India and the European Union have agreed to a landmark deal aimed at eliminating tariffs and taxes, integrating supply chains, and strengthening manufacturing capabilities across both regions.

Financial services is a key pillar of the Free Trade Agreement (FTA). As part of the deal, the two economies are working toward payments interoperability, including real-time, cross-border payments and remittances.

The overarching goal is to build a stable, long-term economic integration that benefits both sides. According to the Associated Press, trade between India and EU was relatively flat from 2024 to 2025, hovering around $136.5 billion. After the FTA, the two regions hope to boost trade to approximately $200 billion by 2030.

Calling for Stronger Infrastructure

Beyond the immediate opportunities for payments providers in both markets, the agreement allows each region to leverage the other’s strengths—most notably India’s leadership in real-time payments through its Unified Payments Interface (UPI).

The FTA builds on a prior agreement by the European Central Bank (ECB) to link its TARGET Instant Payment Settlement service with UPI. The newly inked deal also calls for broader collaboration on fintech initiatives, spanning compliance, artificial intelligence, and potentially even central bank digital currencies (CBDCs).

The digital euro has been debated for years, as EU member states weigh efficiency gains against potential privacy concerns. Recently, however, momentum has shifted, with the digital euro increasingly positioned as a cornerstone of EU payments autonomy.

ECB Executive Board Member Piero Cipollone has emphasized the need for a payments infrastructure built entirely on European technology. These calls have intensified amid the surging popularity of U.S. dollar-backed stablecoins and the expanding reach of Visa and Mastercard’s cross-border payments networks.

Responding to Entrenchment

Against this backdrop—alongside the continued entrenchment of U.S. technology and currency, and a more assertive U.S. trade stance in recent months—the FTA represents both a strategic response and opportunity. The agreement could have significant economic implications for nearly two billion people.

According to Indian Prime Minister Narendra Modi, trade between the two economies already accounts for roughly a quarter of the global gross domestic product and around a third of global trade.

The post Linking Payments Infrastructure Is a Key Component of India, EU Deal appeared first on PaymentsJournal.

In just over two years since its launch, the U.S. Federal Reserve’s FedNow real-time payments system has attracted participation from 1,600 financial institutions.

The service added 500 institutions over the course of last year alone, with more than 100 joining in Q4 2025. Currently, nearly all of the nation’s leading financial services companies now participate in FedNow.

This expanding footprint has driven measurable improvements across nearly every key metric for FedNow. The Federal Reserve reported that average daily transactions on the service reached almost 30,000 last year, while total transaction volume increased 460% year-over-year.

Alongside this volume growth, the total dollar value of FedNow transactions reached $853.4 billion last year, with an average payment size of $101,435—up significantly from $38.2 billion and $25,376, respectively, the prior year.

The Obligatory Comparison

As successful as FedNow has been, nearly every discussion of the network includes comparisons to the Clearing House’s RTP network. That’s because the two are the only players in the closely watched U.S. real-time payments space.

Although it was established in 2017 by a consortium of the largest U.S. banks, the RTP network has already been surpassed by FedNow in one key area: network participation. RTP currently has around 1,135 financial institutions on its network.

However, the RTP network still exceeds FedNow in payments value. The Clearing House recently reported processing more than $1.3 trillion in total payments in 2025. This may be partly due to RTP increasing its transaction cap from $1 million to $10 million last February, while FedNow did not raise its limits until September.

A Testament to Real-Time Payments

While comparisons between RTP and FedNow are inevitable, there is substantial overlap between the two services. For example, PNC Bank—a founding member of the Clearing House—was one of the last holdouts to finally join FedNow.

PNC emphasized, however, that its support for FedNow should not be interpreted as a lack of confidence in the RTP network. Rather, the growing participation in both networks by hundreds of banks and credit unions is a testament to the power of real-time payments and their potential to reshape the U.S. payments landscape.

The post With More Institutions on Board, FedNow Notches Volume and Value Gains appeared first on PaymentsJournal.

ClearBank, the enabler of real-time clearing and embedded banking, has announced a collaboration with PhotonPay, an AI-powered global digital financial infrastructure provider offering payment solutions to businesses worldwide. Through this collaboration, PhotonPay’s business customers will gain access to a wider range of financial services, including virtual accounts, GBP collections, payouts, and Confirmation of Payee (CoP) functionality. 

Powered by ClearBank’s API-based banking infrastructure and real-time clearing services, PhotonPay will issue named virtual accounts and provide real-time connectivity to Faster Payments, BACS, and CHAPS to its customers. These enhanced capabilities will allow enterprises operating in the UK to benefit from faster settlement, more flexible liquidity management, and greater operational control. 

“Partnering with ClearBank represents a critical step in expanding our global payment infrastructure,” said Lewison Chen, Founder and CEO of PhotonPay. “With indirect access to Faster Payments, BACS, and CHAPS, our business customers can now enjoy quicker settlement speeds, stronger compliance, and seamless integration into the UK’s financial system. It also lays a solid foundation for our continued expansion across Europe. Moving forward, we will keep advancing localised payment capabilities in major European markets.”

“We’re proud to partner with PhotonPay, enabling them to scale with our next-generation banking platform,” said John Salter, Chief Customer Officer at ClearBank. “Indirect access to UK payment rails means PhotonPay can deliver faster, more localised services to their customers. We’re excited to support their growth and expansion across Europe next year.”

About PhotonPay

PhotonPay, an AI-powered financial infrastructure, was launched in 2015. Supporting over 10 global offices and operations in 200+ countries/regions, PhotonPay enables efficient, secure, and integrated global payments to drive business growth with infinite ambitions.

Trusted by 200,000+ businesses worldwide to overcome banking and payment challenges, PhotonPay delivers simple, scalable, and customizable solutions – including accounts, card issuing, domestic/international payments, and embedded finance.

About ClearBank

ClearBank is a purpose-built, technology-enabled clearing bank. Through its banking licence and intelligent, robust technology solutions, ClearBank enables its partners to offer real-time payment and innovative banking services to their customers.

ClearBank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN: 754568).

ClearBank Europe N.V. is authorised by the European Central Bank (ECB) and supervised by the De Nederlandsche Bank (DNB).

Visit www.clear.bank for more information.

The post PhotonPay Expands UK Local Payment Rails via New Collaboration with ClearBank appeared first on PaymentsJournal.

Instant payments have gained rapid traction in Greece, and regulators are now moving to both increase the transaction limits and integrate the domestic IRIS payments system with other platforms across the European Union.

Under the new rules, consumers, freelancers, and sole proprietors will be able to transfer up to 1,000 euros (roughly $1,167) per day via IRIS, doubling the previous limit of 500 euros. Additionally, Greece will also introduce a monthly cap of 5,000 euros ($5,841) for peer-to-peer transfers. However, there is no monthly cap on payments made to businesses.

The objective of these enhancements is to grow IRIS’ market share and reduce dependence on card payments, which tend to settle more slowly and carry higher transaction fees. Regulators expect these changes to ease cost pressures on merchants and help stimulate the broader  economy.

A Common Theme

Demand for instant payments in Greece is already substantial. In the early weeks of December, real-time payments accounted for roughly 40% of transfers in the nation, far exceeding the average for instant payments usage in the Eurozone.

Greece has also become the first European country to achieve near-ubiquitous real-time payments acceptance at points of sale. This feat was driven in part by regulatory action, as the government recently mandated that all businesses support IRIS instant transactions.

Such mandates have been a common theme behind the emergence of many of the world’s leading real-time payments systems, including India’s UPI and Brazil’s Pix.

At Home and Abroad

Looking ahead, Greece is planning to further expand IRIS’ reach. Early this year, IRIS is expected to connect with other European instant payment systems through the EuroPA and EPI networks. The goal is to facilitate cross-border transfers, an area that has often presented challenges across the region.

The EuroPA alliance—a group of mobile payments leaders—has already partnered with banking consortium the European Payments Initiative (EPI) to explore interoperability across systems in 15 European countries. This initiative is largely centered on the Wero digital wallet, which is designed to function as a universal payments hub.

Ultimately, the goal is to allow EU consumers to pay using their preferred system—such as IRIS—both domestically and abroad.

The post Greece Ups Transaction Limits on IRIS Real-Time Payments System appeared first on PaymentsJournal.

Not long after India’s Unified Payments Interface (UPI) launched a feature enabling users to approve payments with a fingerprint or facial scan, Amazon Pay rolled out its own support for biometric authentication.

Previously, consumers were required to enter a PIN to authorize transactions. Under the new feature, UPI now allows transactions of up to ₹5,000 (approximately $56) to be approved using biometric verification. The functionality is available across a wide range of payment use cases, including peer-to-peer (P2P) payments and merchant transactions.

Amazon Pay highlighted the friction-reducing benefits of biometrics and noted strong early adoption, with over 90% of eligible users opting to use biometric authentication for P2P payments.

The company also emphasized that biometric authentication offers enhanced fraud protection, as credentials are tied to a specific device and cannot be shared. Additionally, facial or fingerprint scans can be performed with one hand, which could help speed up checkout lines  for smaller transactions.

The Rising Role

As more users have become accustomed to using biometric authentication to perform actions on their phones, expectations have grown that biometrics will play a larger role in payments.

However, broader adoption has faced several challenges—most notably, the lack of widely deployed infrastructure to accept biometric payments in many regions. Additionally, consumers must be made aware of these programs and choose to opt in. In markets like the U.S., the dominance of card payments means many users have not recognized a compelling value proposition for adopting biometrics.

All these factors explain why there have been few large-scale implementations of biometrics in payments worldwide, despite a rising number of pilot programs and proof-of-concept projects.

A Global Force

This is why the UPI launch represents a watershed for biometric authentication in payments. UPI processes roughly 20 billion transactions per month, and its owner, the National Payments Corporation of India, handles nearly half of the world’s digital transactions.

The real-time payments system has become a global payments force in just seven years and continues to expand its reach. This rapid growth is one of the reasons Amazon has invested heavily in its Amazon Pay platform in India.

While the wallet currently holds only a fraction of the market share compared with leaders PhonePE and Google Pay, Amazon Pay’s biometric launch is a milestone for real-world biometrics applications that could provide a blueprint for further adoption.

The post Amazon Pay Is One of the First Wallets to Support Biometrics on UPI appeared first on PaymentsJournal.

After highlighting the ongoing challenges in cross-border payments, the European Central Bank (ECB) is taking steps to link its instant payments system with India’s Unified Payments Interface (UPI).

This integration was first proposed months ago, and after positive results from an exploratory study last month, the ECB is now moving forward with the realization phase to interconnect the Eurosystem’s TARGET Instant Payment Settlement (TIPS) service with India’s payments giant.

The ECB is also exploring the possibility of linking TIPS with Nexus Global Payments—a network born from Project Nexus, an initiative established by central bank consortium Bank for International Settlements (BIS). Nexus Global Payments connects payments systems across South and Southeast Asia, including India, Malaysia, Thailand, Singapore, and the Philippines.

These connections, along with a potential integration with Swiss National Bank’s Swiss Interbank Clearing Instant Payments (SIC IP) system, are part of an overarching strategy to simplify cross-border payments and remittances for European consumers and businesses.

Falling Short of Goals

Earlier this year, a member of the ECB’s executive board underscored the high costs of cross-border payments in the region, even as IT and telecommunications expenses have declined.

For example, a small business owner needing to send a payment to a supplier outside the EU’s Single Euro Payments Area (SEPA) often faces costs roughly 10 to 12 times higher than payments made within SEPA.

Separately, a progress report from the Financial Stability Board (FSB) found that G20 nations have fallen short of achieving the goals they set for improving cross-border payments. The FSB cited challenges including the complexity of coordinating payments across countries and the limitations of legacy payment infrastructure.

Staying at the Forefront

As more real-time payments systems have emerged, interlinking these systems could offer a powerful solution. This approach would reduce costs, increase speed and visibility, and prevent payment service providers from having to engage with multiple payment systems or a series of correspondent banks.

Other solutions for cross-border payments have also been proposed, including networks established by SWIFT, Visa, and Mastercard. Stablecoins have been suggested as another option, though there has been some pushback in the EU because these tokens are largely backed by U.S. dollars.

Conversely, integrating TIPS with a system like UPI could help maintain the euro’s prominence in international transactions. UPI handles the largest real-time payment transaction volumes globally, and India is among the top 10 recipients of euro remittances.

The post EU Plans to Link Its Real-Time Payments System with UPI appeared first on PaymentsJournal.

FedNow has continued to expand its network of financial institutions since its launch two years ago, and now PNC Bank is joining the real-time payments system.

The platform operated by the U.S. Federal Reserve now includes roughly 1,400 participating financial institutions. However, the addition of PNC is noteworthy—not only because the bank is one of the largest financial institutions in the U.S., but also because it was one of the last remaining holdouts.

JPMorgan Chase and Wells Fargo joined FedNow earlier, while Bank of America, Citigroup, and PNC had been more reluctant to participate. With Citi now on board and Capital One announcing its intention to follow suit, the number of major U.S. banks not participating in the platform continues to shrink.

Considering the Competition

One of the main reasons many banks were slow to adopt FedNow is that they are members of the Clearing House, a consortium of the world’s leading financial institutions. The Clearing House launched the RTP network in 2017, a real-time payments platform competes with FedNow.

Although PNC is a founding member of the Clearing House, the bank’s support for the FedNow system shouldn’t be interpreted as a lack of confidence in the RTP network. In fact, the RTP network recently set a new daily transaction record, processing over 1.8 million transactions, and continues to broaden the range of use cases on its platform.

Joining the FedNow Fold

While FedNow may have roughly the same number of institutions on its platform as RTP—or even more—it has not yet reached the payments volume of the more established network.

However, FedNow has continued to make strides. The system recently raised its transaction limits, first to $1 million and then to $10 million, positioning FedNow to handle high-value transactions like the B2B payments that have gained traction on RTP.

The addition of PNC Bank to the FedNow fold is another vote of confidence in the platform and could signal the future of U.S. real-time payments. As instant payments continue to gain ground, there may be room for both RTP and FedNow to coexist and thrive.

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As U.S. real-time payments adoption accelerates, the RTP network set a new daily record on October 3, processing 1,808,967 transactions valued at $5.2 billion.

Since its launch eight years ago by the Clearing House—a consortium of leading financial institutions—the RTP network has grown to become the largest instant payments system in the U.S. The platform now averages over 1.3 million payments daily, and RTP reports that over 1,000 financial institutions are participating in the network.

As the network’s footprint has expanded, so have its applications. RTP said its banner October day was driven by a diverse range of use cases, including gig economy payouts, bank transfers, digital wallet loads, and business-to-business payments.

A Successful Strategy

Expanding the use cases for the RTP network has been a top priority for the Clearing House. Businesses have been the most prolific users of the system, though most of these payments have involved consumers as recipients. To attract more B2B transactions, the RTP network increased its transaction limit from $1 million to $10 million last year.

This strategy has been largely successful. Bank of America was among the first financial institutions to support enterprise transactions up to RTP’s new limit, and the bank recently reported that payments exceeding $1 million now account for more than half the total value of U.S. real-time payments it processes for corporate clients.

Some of the primary use cases for these high-value payments include real estate transactions, corporate treasury operations, and portfolio settlements.

Delivering on Expectations

Payouts are also a key use case for real-time payments systems like RTP. Examples include marketplace platforms paying creators or ride-share companies paying drivers. Increasingly, gig workers expect to receive their earnings—regardless of amount—immediately after completing a job.

For merchants, meeting this expectation helps boost retention and engagement among contract workers. Real-time settlement also provides far greater visibility into company liquidity, enabling better cash management and financial planning.

The Bill Pay Use Case

Another growing use case for real-time payments is bill payment. In fact, Truist recently launched a bill pay solution for the RTP network that leverages an alias-based Request-for-Payment platform. This enables the solution to utilize the roughly 150 million existing mobile and email tokens to protect user data.

While this service is available to consumers, large corporate billers are the primary target audience for Truist’s platform. For these organizations, real-time payments offer several advantages—such as immediate acknowledgment of payment receipt, which can dramatically speed up the reconciliation process. In turn, faster access to funds can improve overall liquidity and cash flow management.

Not Ready for Retail

All of these use cases have dynamically expanded the scope of the RTP network. However, there has been much speculation about when real-time payments networks will take on a larger role in the U.S. retail payments landscape—much like Pix and UPI have taken off in Brazil and India, respectively.

Today, the National Payments Corporation of India handles nearly half of the world’s digital transactions, the majority of which flow through its UPI real-time payments system. The roughly 20 billion monthly transactions on UPI not only dwarf RTP, but also surpass leading payments networks like Visa and Alipay.

Several factors have contributed to UPI’s dominance, including support from India’s government and an aggressive expansion strategy. Additionally, many of the economies where real-time payments have surged were previously cash-based, making digital payments a substantial upgrade. In contrast, some have noted that the established financial infrastructure in the U.S. has slowed the adoption of instant payments domestically.

However, an additional obstacle is affecting both RTP and its rival FedNow, limiting their implementation in retail environments. Currently, the networks allow users only to send money, without a request functionality. This limits the scope of these systems because it is often the merchant who initiates the payment request, even when it is the customer who taps their card.

Although RTP and FedNow may not yet be ready for full retail deployment, adoption of both systems is rapidly accelerating. This suggests that new use cases and functionalities are likely to emerge in the near future.

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India’s Unified Payments Interface (UPI) is launching a feature that allows users to approve payments using a fingerprint or facial scan.

Previously, shoppers were required to enter a PIN to authorize transactions. However, the Reserve Bank of India (RBI) has requested an alternative authentication method to make UPI transactions faster and more secure for users of its real-time payments system.

Biometric authentication will be available to users who choose to opt in, and their data will be stored in Aadhaar—a system operated by India’s government.

Benefits and Challenges

The biometric verification movement has gained traction as consumers have grown comfortable with the technology through frequent use on mobile devices. Biometrics can also greatly reduce friction at checkout, streamlining the payment experience.

Beyond convenience, biometric authentication offers the potential to reduce fraud—a key factor driving its launch in UPI. The RBI noted that numerous UPI scams have cropped up to exploit the existing PIN-based authentication system, underscoring the need for stronger security measures.

Despite these advantages, several challenges remain. Consumers must first be made aware of the program and choose to opt in. Additionally, merchants and payment processors need to have the proper infrastructure in place to support biometric transactions.

There are also ongoing concerns about the protection of consumer data. The National Payments Corporation of India (NPCI)—which operates UPI—emphasized that each transaction will be “independently verified by the issuing bank using robust cryptographic checks.”

The NPCI further noted that while creating a PIN for UPI previously required entering debit card details, no card will be needed when opting into the new biometric program.

Moving Beyond Pilots

At this stage, many biometric pilots and projects have been launched around the world, but few have reached widescale implementations.

This is why the UPI launch represents a significant step for biometric authentication in payments. UPI processes roughly 20 billion transactions per month, and the NPCI accounts for nearly half of the world’s payments.

One of the main reasons UPI has grown into such a global powerhouse in just seven years is its relentless drive to introduce new features and functionalities—and to expand into new regions.

The post UPI Is Set to Add Biometric Authentication for Real-Time Payments appeared first on PaymentsJournal.

The National Payments Corporation of India (NPCI) handles almost half of the world’s digital transactions, primarily through its Unified Payments Interface (UPI) platform, and its reach continues to expand.

According to India Today, there were just over 20 billion UPI transactions in August alone—far surpassing Brazil’s formidable real-time payments system, Pix, which processed roughly 6 billion monthly transactions last year. Overall, UPI now handles more daily transactions than Visa’s global network and China’s Alipay super app.

A key reason for UPI’s rapid growth—considering the platform was only launched in 2018—is the bold strategy implemented by India’s officials. The platform has secured partnerships with leading payments players such as Google and PayPal, while continuously enhancing its functionalities.

Interoperable and Global

UPI is now accepted in various forms in France, United Arab Emirates (UAE), and Singapore, among other countries. The latest expansion comes through a partnership with Qatar National Bank (QNB), enabling UPI acceptance at point-of-sale terminals operated by QNB-acquired merchants.

This partnership means travelers from India—the second-largest group of foreign tourists to Qatar—can pay with UPI at major tourist attractions and Qatar Duty Free outlets, the first merchant to go live on the platform.

While this expansion will likely ease travel-related issues like currency exchange for travelers, the move represents UPI’s ongoing strategy, with the ultimate goal of creating a truly interoperable global payment network, per Ritesh Shukla.

A Muted Reception

Although real-time payments have taken off in regions like India and Brazil, they have received a more muted reception in the United States. Both RTP and FedNow have made strides since their respective inceptions, but still process only a fraction of UPI’s volume.

One of the main hurdles to broader adoption is that the networks are still largely receive-only, meaning they aren’t fully suited for widescale merchant applications. While in India it is common for users to scan QR codes to purchase everyday items using UPI, the use cases for FedNow and RTP have largely been relegated to business-to-business transactions.

The post UPI Strengthens Global Payments Dominance appeared first on PaymentsJournal.

Stripe’s network of businesses will be able to offer their customers in Brazil the option to make Pix payments in Brazilian Reals, with settlements available in the merchant’s domestic currency.

The integration, facilitated by Latin American payments firm EBANX, will be available to both businesses directly integrated with Stripe and those using e-commerce platforms built on Stripe’s infrastructure.

A key use case for the launch is cross-border payments. One of the most effective ways to improve international transactions in Brazil is to offer local payment methods.

This approach can deliver measurable results: data from EBANX shows that merchants who support Pix increased revenue by 16% and grew their customer base by 25% over a six-month period.

Capitalizing Upon Ubiquity

Pix has quickly become the predominant payment method in Brazil since its launch in 2020. The real-time payments system processed over six billion transactions per month last year, and 93% of Brazilian adults say they use Pix.

The main reasons the network has gained traction so rapidly are that it is fee-free and transactions are real-time. These factors have driven the platform to surpass credit cards as the leading payment type in Brazil.

Pix has capitalized on its ubiquity by launching new features like contactless payments, recurring payments, and a buy now, pay later service. These features have increased the platform’s popularity to the point where merchants who want to tap into the Brazilian market must offer Pix capabilities.

Options Are Effective

Reaching more customers in Latin America is one of Stripe’s goals, as Brazil is the largest market in the region. It also represents a shift toward incorporating more real-time payments, after Stripe has been heavily focused on crypto-related ventures in recent months. The company also made significant acquisitions of both stablecoin company Bridge and crypto wallet Privy.

However, the Pix integration isn’t Stripe’s first foray into instant payments—it already  operates its own pay-by-bank platform, which was first launched in the UK before expanding into France and Germany.

While there have been questions about how much traction this platform will gain, certain options have proven effective. Stripe noted that merchants offering at least one additional relevant payment method beyond cards saw average revenue growth of 12%.

The post Stripe Adds Pix Payments Through EBANX Integration appeared first on PaymentsJournal.

Venmo entered the mainstream sphere in 2015. At the time, there was genuine doubt that consumers would adopt a digital payment platform as their primary means of transferring money and making payments. Ten years later, Venmo hosts 92 million active users, and most people keep an average balance of more than $200 in their accounts. Once the public embraced it, digital payments quickly became a standard financial tool.

The next iteration in digital payments adoption is real-time payments. Today, companies have the ability to issue immediate, instant payments to workers—a valuable tool in the gig economy and a necessary one to attract and retain talent. Although about half of U.S. companies are already using a real-time payment network to issue payments, most companies aren’t realizing their full potential. For many gig workers, instant payments remain a myth. But just like the digital payment movement, real-time payments are the future, and companies need to embrace these networks now before they are left behind and suffer a competitive disadvantage. Here are three ways that companies can deliver the promise of instant payments to workers.

Increase Corporate Buy-In

The real-time payment market is already substantial. While the concept of issuing an instant payment to a worker is still new, companies are quickly adopting the technology. ACI Worldwide and Global Data forecasts the market to grow 63% annually through 2027, reaching $511 billion in annual transactions. Despite healthy adoption, more is needed. When more companies implement instant payment technology, the entire business community can reap the benefits. Increased adoption means ubiquitous updates to payroll systems and cash flow management, as well as a more universal customer experience.

Venmo is, again, a good example of the importance of buy-in. Venmo generates revenue as a payment processor for merchants, but the platform wouldn’t be able to process payments without widespread consumer buy-in. Real-time payments will function the same way, when more companies utilize real-time payments, it enhances the experience for everyone.

Companies also benefit from increased adoption. Gig workers and affiliates want instant payments, and they will prioritize the companies that can truly deliver them. Companies that can actually deliver that experience—meaning earned wages of any amount are delivered on-demand, once the worker has completed a job—will see increased retention and worker loyalty.

Why the Right Tech Matters

Instant payments are not always instant. Many workers report delayed payments due to things like minimum earning requirements or data processing errors. When the promise of an instant payment isn’t fulfilled, it can weaken the worker relationship and actually increase payment friction. This is, of course, the opposite of what instant payments should accomplish. Instant payments solve the friction and pain points of traditional payment systems, but the system only works when businesses have opted into the right technology platform to support the payment.

A quality real-time payment network will allow the business to make an immediate payment in any amount, even as low as $0.99, and allow the funds to be automatically available to the worker through a digital card or wallet. In addition, because digital companies operate on a global scale, the platform should have the ability to make cross-border payments in the local currency. Companies should work with a third-party payments provider that can deliver this experience to ensure that workers receive payments instantly upon request. The wrong technology will hinder payment processing and delay worker payments.

Ensure Compliance

The most common roadblock to instant payment adoption is regulation. To issue a payment, companies need to comply with Know Your Business (KYB) and Know Your Customer (KYC) standards. Unfortunately, many companies don’t have the capacity or experience to manage regulatory compliance in-house. The payments processing partner, however, should ensure global compliance on every transaction by running a sanctioned check of every person using the platform as well as full check based on the location or region where the transaction is delivered. Compliance is a significant burden, and many companies delay the adoption of new payment systems because they don’t want to navigate through the regulatory challenges. It is a heavy lift. However, the payments network provider should take on that responsibility to ensure compliance as part of the payment infrastructure. 

Adopting real-time payments will certainly be a transition, like any technology revolution—but businesses need to get through the transition. Workers are demanding instant, on-demand payments, and companies must adopt the tools to provide a frictionless payment experience and deliver truly instant payments to remain competitive. It may seem like a significant change, but once you are past the learning curve, your company can reap all of the benefits of real-time payments.

The post Fulfilling the Promise: Making Real-Time Payments a Reality appeared first on PaymentsJournal.

To further foster innovation within the UK’s strong open banking ecosystem, Mastercard has developed a sandbox where financial institutions can experiment with the latest instant payments technology.

The sandbox gives banks access to Mastercard’s fifth generation account-to-account (A2A) real-time payments infrastructure. Within this environment, UK financial institutions can test payment use cases across retail, peer-to-peer (P2P), and B2B transactions.

For example, the sandbox will enable institutions to implement a “5-leg credit transfer,” allowing a consumer to make a real-time payment at a merchant with the retailer receiving instant confirmation.

Far Richer Data

According to Mastercard, the merchant and their financial institution would also receive richer data from these transactions, as the sandbox will adhere to the ISO 20022 format.

This messaging protocol was designed as an international standard for the payments ecosystem, supporting efficient and transparent cross-border payments in both consumer and commercial applications.

ISO 20022 compliance will become even more critical in the coming months, because one of the world’s leading cross-border payments systems, SWIFT, has mandated ISO 20022 adoption by November.

Big Tech Sandboxes

While there are benefits to ISO 20022 adoption, many financial institutions—especially small- to mid-tier banks—have yet to achieve compliance. Beyond the costs associated with upgrading, a key reason for hesitation is concern around risk and fraud.

This is where the sandbox model can provide value for highly regulated financial institutions looking to adopt emerging technologies. For example, artificial intelligence has become one of the most transformative technologies in recent years. Yet, many financial institutions worry it could make errors or jeopardize sensitive customer data.

In response, Nvidia launched its own sandbox, allowing UK banks to experiment with AI and uncover use cases in a controlled setting. This approach helps financial institutions stay competitive while minimizing exposure to risk.

Such environments are equally critical in the context of real-time payments, where faster transactions often come with increased fraud risk. Unlike regulated institutions, bad actors aren’t bound by compliance regulations and tend to adopt new technologies faster than financial institutions—an issue that big-tech-built sandboxes have been developed to mitigate.

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The EuroPA alliance is partnering with the European Payments Initiative (EPI) to explore opportunities for connecting European consumers and merchants across 15 countries. The initiative aims to support all payment types—from peer-to-peer (P2P) payments to enterprise-level transactions.

Under this model, users will be able to use their preferred digital payment solutions both locally and across Europe. Provisions will also be made for countries that don’t yet have established systems of their own.

An Alliance and a Consortium

The EuroPA alliance includes mobile payment players across Europe, such as Bancomat, Bizum, Blik, MB WAY (SIBS), and Vipps MobilePay. Its goal is to create an interoperable mobile platform built on the Single Euro Payments Area (SEPA) real-time payments protocol. Support for SEPA was mandated in the region at the beginning of this year.

EPI, for its part, is a consortium of 16 European financial services companies whose initial focus has been the Wero digital wallet—a product designed to serve as a unified mobile payment solution for retail transactions.

Wero launched last year in Germany before expanding to Belgium and France. One of its initial use cases was to allow users to complete P2P transactions in seconds using a QR code, email address, or phone number.

Functionality for cross-border and merchant payments is in development for Wero, and EPI plans to evolve the wallet into an all-encompassing platform—supporting everything from recurring payments to buy now, pay later.

A Eurocentric Solution

Combining EPI’s digital wallet with the mobile platforms of EuroPA’s members is a logical step, given the organizations’ agenda—to enhance Europe’s sovereignty in payments by building a better cross-border solution.

Concerns have been growing in Europe over the dominance of Visa and Mastercard, especially  as USD-backed stablecoins gain traction in the region.

This reliance on both U.S. companies and the dollar has drawn criticism in Europe, prompting calls for a more Eurocentric solution. Both the European Commission and the Eurosystem have stated that one of the fastest ways to strengthen the payments system is by interconnecting existing payment solutions.

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There was substantial buzz when Walmart announced that—with Fiserv’s help—it was launching support for real-time payments through FedNow and the RTP network last year. However, for all the speculation that real-time payments will be the way of the future, there are reasons most consumers aren’t using pay-by-bank at retailers yet—and might not start any time soon.

In the report Implementing Pay-By-Bank: A Guide for Merchants, Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the use cases for instant payments, the limiting factors delaying adoption of real-time payments, and the future of pay-by-bank in retail environments.

The Benefits and the Use Cases for Merchants

Real-time payments appeal to retailers because they don’t come with the 2% to 3% interchange fees that credit and debit card transactions bring. Merchants receive their funds in real time, which means they can reconcile transactions quickly.

Instant payments can also be a powerful tool in many merchant use cases because of their around-the-clock availability.

“If you’re a business and your supplier says, ‘I’m not going to ship you any more pizza boxes until you pay the bill,’ you can use those technologies to push that money out,” Apgar said “If it’s 3 o’clock on a Sunday afternoon, you can say, ‘Fine, supplier, you got the money in your account.’ Unlike Fedwires that require manual intervention—so it’s only business hours—and ACH—that runs in batches and is posted only during business hours—real-time payments go 24/7, 365.”

This functionality could be a boon for a payment processor that is paying a merchant for its daily credit card sales. It could also be a powerful tool for insurance companies because they could resolve claims instantly and get victims of natural disasters and other incidents on the road to recovery.

Both of these use cases are unhindered by an attribute of U.S. real-time payments that is often considered a drawback: There is currently no way to dispute an instant payment transaction. This characteristic also opens up another potential use case.

“Let’s say you’re on a website selling a car and somebody says, ‘Here’s $5,000 for this rust bucket and I’ll FedNow it into your account.’ As a seller, when that money hits—here’s the title, here’s the keys, have a nice day. It’s cash in the bank,” Apgar said. “There are use cases where that is a valuable attribute, but buying stuff from a merchant is not one of them.”

No Dispute Mechanism

This irrevocability is one of the main challenges to the broader merchant use case for real-time payments. Most consumers have become accustomed to having the capability to dispute transactions that are suspicious or erroneous.

In this way, real-time payments operate similarly to peer-to-peer (P2P) payment platforms like Zelle and Venmo. These platforms have drawn criticism because if one of their customers is manipulated into sending money to a criminal, there is no recourse to be reimbursed. This has caused many P2P users to become prime targets for cybercriminals.

ACH, the most common pay-by-bank method in the United States, comes with payment delays but has a dispute mechanism built in. If a consumer notifies their bank of a fraudulent transaction, the bank can reverse it.

“That functionality doesn’t exist on RTP and FedNow,” Apgar said. “So, when we talk about use cases, it’s the sender knows the receiver, and the sender and the receiver agree on the amount. The sender agrees that there’s no dispute, and he’s got no claim to the money once it leaves his account. It’s done, and he has zero recourse.”

Send and Request Issues

Perhaps the main reason RTP and FedNow aren’t quite ready for merchant applications is they only allow users to send money.

“There’s no function where you can request money,” Apgar said. “If you walk into my store and tap your debit card, I’m sending a request and saying, ‘Take money out of his account and put it in my account.’ But there’s no way for me to do that. You have to initiate the payment.”

Additionally, in a card-based transaction, when the customer taps their card at the terminal, the merchant receives an approval code. If there is not enough credit or enough money in the account to cover the transaction, it won’t go through. This aspect doesn’t exist with real-time payments, so the merchant won’t know whether the transaction was approved.

“The way to check that you got the money is to look in your bank account,” Apgar said. “But if you’ve got thousands of point-of-sale stations, how do you do that? You would have to have some kind of AI bot scanning your bank account to see if there was a deposit for $16.33, when it was deposited, and that it wasn’t some other $16.33 purchase made by somebody else in another store.”

The Leapfrog Effect

These issues counter the narrative that real-time payments are sweeping the globe, and the United States is next in line. The first half of this assertion is true; in countries like Brazil and India, real-time payments systems like Pix and UPI have gained significant traction in a short time.

However, these countries are far different environments because their governments mandated Pix and UPI adoption. This regulatory-first approach was successful because a firmly established payment infrastructure was not in place.

“There is that leapfrog effect, and it’s the same thing with card payment technology,” Apgar said. “The infrastructure was not as developed in a lot of these countries as early as it was in the U.S., so card payments weren’t ubiquitous. Now that everybody’s got cellular capability in all these little towns, they can validate card transactions. It’s easy for the government to jump in and say, ‘We don’t need a debit card, we can just do pay-by-bank and tie it all in.’”

However, the debit card infrastructure is so entrenched in the United States that it doesn’t make sense for the Federal Reserve to mandate real-time payments to displace debit cards.

“From the consumers’ perspective, when you use your debit card, you’re already paying by bank,” Apgar said. “The merchant may avoid debit card interchange fees. but now that most debit cards are regulated under Durbin, the price is low. Unless the government is going to subsidize it to make the price even lower—like they do in Brazil and India—you kind of scratch your head looking for the business case.”

Searching for a Catalyst

Though more use cases for real-time payments are no doubt coming, there aren’t any new solutions on the horizon that could be the catalyst for more instant payments at retailers.

“This is fairly typical of the payments industry,” Apgar said. “As soon as something comes out, it’s plastered all over the media. ‘This is the next big thing—everybody jump on this bandwagon because the train is leaving the station.’ Everybody’s desperate to have something new to talk to their merchant customers about, and it is fun to talk about.

“FedNow and RTP are fantastic tools that will do a lot for money movement in the country,” he said. “But one of the things that they’re not built for is for consumers to buy stuff from merchants.”

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A member of the European Central Bank’s executive board voiced frustrations over the persistently high costs of cross-border payments, despite declines in IT and telecommunications expenses.

Speaking at the Regional Governors’ Meeting, Piero Cipollone highlighted the issue with a specific example: a small business owner in Croatia sending a €5,000 transfer to a supplier in a Western Balkans country outside of the EU’s Single Euro Payments Area (SEPA) could face costs up to 12 times higher than when sending to a supplier within SEPA.

Since its launch in 2018, SEPA’s reach and capabilities have expanded greatly, with Montenegro, Albania, and North Macedonia set to join this year. Still, Cipollone noted that fragmentation within the EU remains a barrier to growth.

Interlinking Instant Payments

Because cross-border payments are a challenge on a much wider scale, a better system can be built by linking the existing real-time payment systems across countries.

This approach would reduce costs, increase speed and transparency, and prevent payment service providers from having to engage with multiple payment systems or a chain of correspondent banks.

Targeting Cross-Border Payments

At the heart of Cipollone’s proposal is the EU’s TARGET Instant Payment Settlement (TIPS) service, a multi-currency instant payments platform that already operates within SEPA.

Cipollone proposed implementing a currency exchange service within TIPS so real-time payments can originate in one TIPS currency and settle in another. Initially, this service would operate within the euro area, Sweden, and Denmark.

The system could then be expanded to include other networks globally. One such framework could be Project Nexus, which was established by a central bank consortium, the Bank for International Settlements (BIS). Set to take effect next year, the project is designed to connect payments systems in South and Southeast Asia, such as India, Malaysia, Thailand, Singapore, and the Philippines.

The next step in the proposed plan would be to establish a direct link between TIPS and India’s UPI, which has quickly become one of the leading instant payments systems in the world.

After these steps, the ECB can then work to further achieve its goal, which—according to Cipollone—is to “develop safer, more accessible alternatives that make global payments cheaper, faster, and more transparent, without compromising on integrity, stability and sovereignty.”

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There have been remarkable strides toward U.S. real-time payment adoption in recent years, driven by growing demand among businesses and consumers. As the long-awaited ubiquity of instant payments draws closer, the financial institutions that have yet to adopt this nascent payment method face tremendous downsides.

In a recent PaymentsJournal podcast, Justin Jackson, Head of Enterprise Payments at Fiserv, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed the concerns many institutions have about instant payments support, the benefits of real-time payment adoption, and the steps institutions can take to stay competitive.

Real-Time Concerns

There are approximately 9,000 banks and credit unions in the U.S., and roughly a quarter of them are active in instant payments. While financial institutions are often separated into adopters and non-adopters, the actuality is a bit more complex.

“We often speak as though the other 75% are one homogeneous group that all look and think and act the same, but that’s not the case,” Jackson said. “They’re all individual businesses. They have their own strategies and their own goals and concerns. Each of them has factors that influence their decision of what they’re going to do with real-time payments.”

Some institutions are concerned about potential technology challenges when implementing instant payments. They aren’t sure about the magnitude of the change, its impact on operational processes and existing systems, and whether it will require additional staff.

Cost is another major concern for many banks and credit unions, as they worry that instant payments could introduce incremental expenses beyond their control. For example, if an originator were to come online and the volume of received instant payments increased by 10X or even 100X overnight, it could lead to unforeseen ramifications.

Additionally, many banks remain uncertain about the fraud risks associated with instant payments. These concerns—spanning technology, fraud, and cost—are weighing on institutions to varying degrees. However, as more organizations adopt instant payments, many of these worries will subside.

“They’re thinking through these concerns, and they are seeing what their peers and their colleagues are doing and they’re deciding that maybe it’s time,” Jackson said. “We’re nascent in the adoption of instant payments within the U.S., with FedNow being live for about a year and a half and we’re not even at a decade with the Clearing House’s RTP network. We have about 25% of the industry live and that’s tremendously fast for a totally new payment mechanism like this.”

Table Stakes: Powering Deposits and Efficiency 

For all the concerns about adopting instant payments, the disadvantages are mounting for financial institutions that lag behind. Consumers have quickly become accustomed to real-time experiences, such as instant access to vast libraries of music and movies.

As these experiences become the norm, both consumers and businesses are increasingly perplexed as to why moving money still takes so much longer.

“Retail goods are an example that comes to mind, where you can order something on your phone and sometimes receive it the same day,” Tavilla said. “There is also the precision and the transparency with my packages, where I know exactly where the UPS guy is. But when you move your money, it takes multiple days, and you don’t have the precise information as to when and where the money is in terms of the process.”

The increased demand for real-time money movement means instant payments are becoming a table stakes offering for financial institutions. However, real-time payments are much more than an obligation—they are a transformative force that delivers substantial benefits.

“There’s one credit union that we worked with to take live on the instant payments networks,” Jackson said. “In the first couple of days after going live, incoming transactions hit the 1,000-payment milestone. After a few months, they got to the point where they were processing 10,000 transactions a month for their members, who were receiving these real-time payments from originators outside of their institution.”

The resulting deposit growth at the credit union was almost $60 million in net new deposits, simply due to taking their real-time connection live.

Other advantages of real-time payments are more efficient controls and better risk management processes. When an institution initiates a payment, it knows exactly what the balance of the account is. The financial institution secures funds instantly when its user makes a payment, and it can restrict unauthorized use of those funds. In addition, the bank doesn’t carry the risk that the funds aren’t there.

The institution is also immediately ready to process a payment at any time, and it is guaranteed credit. If a bank receives a transaction and posts it to an account, it doesn’t face the risk that comes with a return window of two to three business days, where a payment could be clawed back. This extra control is a significant benefit that isn’t available with non-instant payment methods.

There is also a less obvious benefit to the acceptance of instant payments: customer retention. For example, after many gig economy workers perform their food-delivery or ridesharing services for the day, they want to cash out their earnings immediately to pay for groceries or bills.

Many fintech companies that facilitate gig economy platforms have touted their ability to pay out instantly to attract talent. However, that real-time payment capability is only available if the worker’s financial institution supports it.

In some instances, if a contractor requests instant payment but their bank isn’t eligible, fintech companies have encouraged them to switch to a competing institution that supports real-time payments.

“That’s huge, when someone else is marketing against you and encouraging your customers to go to another institution because you don’t offer the service,” Jackson said. “That attrition risk is something that just kind of comes out of left field. It’s easy to solve for—just accept the instant payment—but it’s something that isn’t often thought about. It’s becoming more of a problem for the institutions that have decided not to get into instant just yet.”

Business Impacts

In addition to mounting consumer demand, recent research indicates that 90% of businesses consider instant payments to be important or very important.

“As a business owner, one of the things that’s most important is cash flow and access to working capital,” Jackson said. “The nice thing about instant payments is they are 24 hours a day. There is no availability window, they are seven days a week. There’s no weekends or holidays, they are 365 days a year. At any time, a business owner can receive or send a payment and know that within 15 seconds it’s available and it’s confirmed.”

These transactions could include payments to vendors and suppliers or incoming payments from customers or investors. Immediate access to money movement is tremendously valuable to business owners, as it increases efficiency. Business owners know exactly where their payments are, and once received, there are no exceptions—no two-day return window and no risk of a clawback.

Real-time payments allow organizations to use funds immediately and confirm that an obligation has been satisfied. They also give business owners more time to focus on running their company and serving customers.

“The improved customer experience that I get from my bank or my credit union as a result of the instant payment goes a long way,” Jackson said. “There is a lot of impact to the business owner by having access to instant payments and that is going to become more of a drag on the institutions that haven’t gotten into this space. Businesses are starting to think about where they bank based on the availability of instant payments functionality.”

Getting Into the Game

The demand from businesses and consumers means real-time payments adoption is going to continue to grow by leaps and bounds. As adoption accelerates, there will be increasing pressure on banks and credit unions to become real-time. Though these institutions have a myriad of concerns about implementation—and no two banks are the same—there are solutions for every situation.

Some financial institutions may want to manage all the network integrations and run software in their own data center. Others might prefer to outsource the whole operation and buy instant payments support as a service from a provider. Still others might want to integrate instant payments via API directly into an app that they or a third-party has built.

“At all ends of the spectrum, regardless of what you want to do with instant payments, there’s a solution out there,” Jackson said. “I would say for any financial institution that’s not yet in this space, talk to your provider, whether it’s Fiserv or someone else. Ask them what they have, tell them what you’re looking to do, and get into the game here.”

The post The Downside of Not Offering Real-Time Payments appeared first on PaymentsJournal.

Beyond accelerating settlement and clearing times or giving merchants a pathway to better liquidity, real-time payments hold transformative power on a global scale. According to ACI Worldwide’s Real-Time Payments: Economic Impact and Financial Inclusion report, real-time payments are bringing millions of people into the financial ecosystem, opening new markets for financial institutions, and bringing lower costs and higher efficiency to consumers, businesses, and governments.

Published in collaboration with the Centre for Economic and Business Research, the report demonstrates—for the first time—an empirical link between real-time payments and financial inclusion and the associated enhancements in financial security, entrepreneurship, digital transformation, and the expansion of banking services that financial inclusion brings.

As the report’s introduction notes, “Real-time payments are a win-win proposition for all stakeholders in the world’s payments ecosystem.”

‘At Every Level of Society’

The study focused on 40 countries, reviewing historical banking data and applying a predictive model. Among the findings and projections:

• Real-time payments in 2023 boosted the gross domestic product across all 40 countries by $164 billion (or the equivalent of the labor output of 12 million workers).
• By 2028, the GDP contributions from real-time payments will reach $285.8 billion, a 74% increase from 2023.

Real-time payments—whereby payers and payees can complete their business in seconds through digital tools rather than waiting for days with legacy methods—fuel economic growth “at every level of society,” the report notes, and create market efficiencies in the economies they touch.

The report also examines specific developments and opportunities in various regions: Africa, Asia Pacific, Europe, Latin America, Middle East, and North America.

The driving factors vary—in Africa, a youthful population is enjoying robust real-time payment ecosystems, while North America is seeing more incremental growth—but a larger story is emerging across the globe: Real-time payments are transforming economies and creating opportunities for businesses and consumers.

A Matter of Inclusion

The report takes a deep dive into financial inclusion, studying data from 28 countries to chart the link between real-time payments and the expanding reach of financial services. By 2028, more than 167 million people previously excluded from the financial system could have bank accounts. The 10 countries poised to see the most uplift into financial inclusion are a mix of nascent and mature economies. Pakistan is number one (with an estimated 63.5 million people newly banked by 2028), and Turkey is number 10 (1.5 million), with economic powerhouses like China (13.8 million) and the United States (4.9 million) at numbers five and seven, respectively.

Although the inclusionary effects of real-time payments are profound in rapidly developing economies—much attention has been granted to the rise of such payments in India, for example—the reach is more egalitarian. Those historically left behind even in advanced economies can be allowed to leverage more affordable and accessible financial services through real-time payments and subsequently avoid predatory fees and loans.

Real-time payments can eliminate the barriers caused by fees and delays in payment timing and reduce the late fees that often occur amid payment lags. This means that apps, QR codes, and mobile wallets can be the portals for previously unbanked and underbanked citizens to access products that could transform their lives.

Fees have a particular impact on unbanked or underbanked populations. For example, a recent U.S. Consumer Financial Protection Bureau report on overdraft and non-sufficient funds fees found that the median fee amount was $35. Roughly half of consumers in the CFPB study were not prepared for the overdraft fee, and those who incurred fees were more likely to come from lower-income households. In addition, lower-income households are more likely to experience income volatility or live paycheck to paycheck. This makes certainty about the timing and availability of funds even more critical.

“In some areas, the barrier to becoming banked has likely been cost,” said Elisa Tavilla, Director of Debit Advisory Services at Javelin Strategy & Research. “You usually have to maintain a minimum balance in the account or pay maintenance fees. Maybe they weren’t in proximity to physical branches, which used to be the primary way to access banking services. Now, with digital and mobile, banking is a lot more accessible no matter where you are.”

The Financial Uplift for Merchants and Banks

The dramatic effects of real-time payments go far beyond consumers. Merchants also experience reduced transaction fees—or none at all—when they accept real-time payments. Receiving funds in seconds rather than days can be crucial for businesses that rely on daily cash flow. Instant settlement also helps merchants keep better tabs on their inventory and reduce their overhead.

The ACI Worldwide report indicated that real-time payments generated $116.9 billion in savings for consumers and businesses in 2023, mainly due to lower transaction fees and reduced settlement float times. These savings are predicted to grow to $245.8 billion by 2028.

The effects of real-time payments can also be seen in the most basic marketplace meetings. Tavilla noted that she had recently been in Thailand (No. 9 on ACI Worldwide’s list of the top markets for financial inclusion uplift) and saw that “street vendors who used to accept only cash now have a QR code posted.”

“When the money gets deducted directly from a bank account, the merchant immediately knows they’re getting paid,” she said. “It’s just convenient, and everybody seems accustomed to using it.”

These remarkable efficiencies—coupled with the surge in financial inclusion—present significant opportunities for banks. The report identifies the top markets for increased profit opportunities by 2028 through accountholder growth aided by real-time rails. Again, Pakistan takes the top spot ($173 billion), followed by Argentina ($3.4 billion), with major economies like India, China ($21.2 billion), the United States ($18.9 billion), and Brazil ($8.9 billion) also in the top 10.

That influx of newly banked citizens brings opportunities to build new products and services and grow new generations of customers.

As the report notes, “Real-time payments have asserted their role as a powerful enabler for societal transformation.”

*All data contained within this article comes from the Real-Time Payments: Economic Impact and Financial Inclusion Report

Dive into the complexities of real-time payments modernization with ACI’s recent research.

The post Transforming Economies: The Global Impact of Real-Time Payments appeared first on PaymentsJournal.

Most consumers in Canada use instant payments and will continue to do so, but fraud remains a top concern.

A recent FICO report found that 91% of Canadians have sent a real-time payment, with 87% planning to maintain or increase usage over the next year. However, more than two-thirds would feel reassured if banks could better detect and block fraudulent transactions.

Roughly half of respondents said stronger fraud detection would be the most impactful step financial institution could take. Their concerns are likely amplified by the fact that most Canadians have received a communication they suspected was a scam. In addition, 44% of  respondents reported that a friend or family member had fallen victim to fraud in the past year—a 5% increase year-over-year.

Global Counterparts

Fraud attacks have become increasingly prevalent worldwide, and criminals will exploit any available mechanism to them. However, real-time payments present an added challenge because account-to-account transfers are conducted in seconds and are often irrevocable.

The concerns of Canadian consumers were echoed by their global counterparts. FICO found that a growing number of consumers worldwide reported that their family and friends had been victims of real-time payment scams last year. In North America as a whole, 47% of individuals said their family and friends were scammed, a figure on par with the EU.

In Asia Pacific and Latin America, the percentage of respondents who said a friend or family member had been affected by instant payments fraud last year rose to 56% and 69%, respectively. These numbers were likely higher due to surging instant payments adoption in areas like Brazil and India.

Full Clarity

For all the fraud concerns that come with instant payments, the benefits outweigh the drawbacks. Real-time payment settlement allows both consumers and businesses to have full clarity on where their funds are and make better financial decisions.

While the adoption of instant payments is likely to increase, consumers’ fraud concerns are real and should be top of mind for financial institutions moving forward. According to the FICO study, 12% of respondents in Canada and 13% of respondents worldwide reported they would change banks if they were unhappy with their financial institutions’ fraud detection and mitigation solutions.

The post Canadians Have Adopted Instant Payments, but Fraud Concerns Linger appeared first on PaymentsJournal.

The United States employs multiple real-time payment schemes; however, unlike those in many emerging markets, these methods are not driven by a central government or central bank. In the absence of a centralized entity to organize payment processes, other stakeholders must take the lead in enabling instant, cross-border transactions.

In a recent PaymentsJournal podcast, Alex Johnson, Chief Payments Officer at Nium and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the latest efforts aimed at integrating the U.S. into the realm of international real-time payments.

The U.S Plays Catch-Up

In many ways, the U.S. economic landscape lags behind some emerging economies in payments innovation. This is partly because emerging markets have faced more pressing challenges, driving them to harness technological advancements to help solve specific, regionally unique use cases.

“Compared to networks like UPI in India and Pix in Brazil, our level of maturity and sophistication in the United States is not quite there yet,” Bodine said. “As most people know, RTP and FedNow are not even interoperable now.”

But, it’s time for the U.S. to catch up. One of the key drivers of payments innovation in the U.S. is the global supply chain. Even small and medium-sized businesses are starting to source goods and services from regions like India. In India, real-time payments are the most widely used payment method for both citizens and businesses. Extending the supply chain to India therefore requires developing systems that can facilitate real-time payments effectively in that market.

A significant advantage of real-time payments is their efficiency. They always provide complete visibility into the payment’s status, letting buyers optimize their working capital for a longer period. However, sellers may prefer traditional payment methods, as they often receive their funds slightly earlier.

“CFOs don’t want to see money go out of their account in 20 seconds,” said Bodine. “We have to look at the strategic coexistence of all the pay types and not assume that any one is going to be applicable to all situations.”

Fraud Concerns

With the rise of real-time payments, there has been an increase in account-to-account fraud for those sending payments. But, real-time payments are not inherently riskier than traditional methods. Since the money moves instantly, there is never any question about its status at any point in time.

Account verification plays a big role in boosting confidence in the global adoption of real-time payments. For example, if someone is completing a transaction to Nigeria or Thailand, it’s now possible to verify the ownership of the receiving account.

“You can put in an account number and name, ping our API, and within seconds you get a response to say, ‘Yep, that matches’ or ‘No, it doesn’t,’” said Johnson. “In some jurisdictions, we can also pass back the actual name on the account. You can be absolutely certain that the money’s going to exactly who you think it’s going to, separate from and prior to a transaction. That’s a huge prevention of fraud, giving people more comfort in using real time payments. We’ve seen a 58% reduction in return transactions just by the use of this tool.”

A Partnering Plan

The global cross-border payments network is led by Swift, run by a consortium of international banks. What many may not realize is that a Swift transaction is not the payment itself, but rather the messaging service.

Swift acts as a tool that creates interoperability between different payment systems. Most financial institutions have already completed the integration with Swift, allowing them to use its functionality to send wires globally.

“At Nium, we can now accept transactions via Swift messages from financial institutions,” said Johnson. “They can make Nium an intermediary on those transactions, and we can route those payments into mostly real time. About 85% of the transactions we handle are delivered within 15 minutes or less.”

Because the differing global payment systems don’t speak to each other, a third-party like Nium is needed to bridge these connections. With the connections that have been made, these third parties are now beginning to create locally interoperable systems.

“Fortune 1,000 companies absolutely need to partner in these situations,” said Bodine. “They simply don’t have the resources or funding to support and maintain legacy systems while they’re branching out of these areas. Partnering with organizations like Nium is incredibly important.”

The Promise of ISO 20022

Despite the challenges of implementing it as a new messaging standard, ISO 20022 has been a boon to the world of instant payments.

“If we could get every scheme, SWIFT and otherwise, to ISO 20022, then interoperability becomes so easy,” said Johnson. “But a lot of the local schemes aren’t there yet. Once everyone is talking the same language, the translation between a SWIFT message to whatever that local scheme is becomes a lot easier.

“Interoperability will be a theme that we’ll continue to ride on in the next few years as we explore what that looks like,” she said. “There’s so much experimentation happening right now that I really look forward to seeing in the next couple years how this evolves.”

Bodine added: “We can communicate pretty much with every human being on earth. There is absolutely no reason we shouldn’t be able to transact funds between every human being and every business on Earth.”

The post The Power of Real-Time Payments on a Global Scale appeared first on PaymentsJournal.

Visa’s A2A pay-by-bank service will launch in the UK and Europe next year, offering consumers a more secure way to pay bills and make purchases directly from their bank accounts.

Currently, when consumers set up direct debits for rent, utilities, or childcare, they often are required to sign over extensive personal data. In addition, they typically need to give advance notice to change payment amounts, and handling one-off transfers might require multiple interactions. Many consumers also lose significant amounts each year due to unauthorized subscription auto-renewals.

Visa A2A is designed to mitigate these issues by giving consumers the ability to monitor transactions and reverse them if necessary. The platform uses variable recurring payments (VRP), enabling users to adjust their direct debits with each transaction. A2A also leverages biometric authentication to reduce unauthorized transactions.

“We want to bring pay-by-bank methods into the 21^st century and give consumers choice, peace of mind and a digital experience they know and love,” said Mandy Lamb, Managing Director, Visa UK and Ireland, in a statement. “Visa A2A will ensure consumer-to-business bank transfer payments have similar levels of protection that consumers are used to when they use their cards.”

Faster Payments

Visa will pilot A2A in the UK in early 2025 before expanding to Europe later in the year. The service will initially have limited scope—it can’t be used to pay for many recurring expenses like streaming services or gym memberships.

As the platform gains traction, businesses could see immediate benefits. A2A uses the UK’s Faster Payment System rails, which can deliver near real-time settlement. Merchants will be notified much faster if a consumer cancels or modifies a payment, and the system’s higher throughput for transaction data should facilitate smoother reconciliation.

Open Banking Trailblazer

Visa A2A should be well-received. The UK has been an open banking trailblazer, and account-to-account payments are one of the core principles of the model. The U.S. has lagged behind many other countries, in part due to the established credit card culture.

U.S. consumers have been hesitant to adopt pay-by-bank solutions because these methods are viewed as less secure, and account-to-account transactions are often irrevocable once authorized. Visa A2A could alleviate these concerns if the service gets a U.S. launch.

The post Visa to Launch Upgraded Pay-by-Bank Solution appeared first on PaymentsJournal.

The financial world saw real-time payment transactions set a new record last year, with 266 billion transactions occurring globally. However, this record is expected to be surpassed, as real-time payments are projected to more than double¹ over the next five years, reaching 575 billion by 2028.

This growth is driven not only by financial institutions but also by a unique collaboration between governments, regulators, banks, and fintechs. Countries with the most to gain—those with large populations, cash economies, low credit usage, and poor financial inclusion, such as Brazil and India—have been leading the way in establishing real-time payments for everyday use. The next major frontier will be developing real-time remittance and cross-border payment corridors to support international trade.

Success Factors

ACI’s fifth annual Prime Time for Real Time report examines the real-time payments landscape and identifies the factors that will fuel its growth over the next decade.

In countries with thriving real-time payment ecosystems, five common drivers have emerged:

Active collaboration
Whether by government mandate or industry consensus, real-time payment systems thrive through collaboration between financial institutions, payment service providers, government institutions, and third-party stakeholders.

Strong merchant incentives
To spur adoption of its UPI service, India’s government removed merchant discount rates and issued all merchants QR codes, making it easy to accept UPI payments.

Open and inclusive payment ecosystems
Larger banks will need to forge new partnerships with fintechs and smaller banks to remain competitive and drive transaction volume.

Constant flow of user-friendly use cases
Real-time payments thrive in countries where innovative use cases like tax bills or subscription payments have driven mass adoption.

Cross-border ambition
Efforts to extend real-time to cross-border payments are finally paying off, with Asian countries leading the way.

Real-Time Around the World

Global regions have taken very different approaches to real-time implementation. While Asia is the global leader in real-time payments, North America appears to have the most potential for growth. Here’s how the markets are currently shaking out:

South Asia

India leads global real-time payments by a significant margin, handling 129 billion transactions in 2023. This exceeds the combined total of the rest of the world’s top 10 real-time payment markets and accounts for nearly half of all global real-time transactions.

The introduction of UPI in April 2016 was a game changer, enabling real-time payments through QR codes mobile numbers, and virtual IDs. Thanks to demonetization mandates and the inclusion of non-bank players, UP is now accessible across 500 banks.

Moreover, Pakistan—whose Raast payment method went live in 2021—is forecast to experience some of the world’s fastest growth in this area over the next five years.

Asia Pacific

Asia Pacific is the largest regional market, with four of the global top five real-time payment markets by volume. Thailand, South Korea, and China are third, fourth, and fifth in the top five nations with the most real-time payments.

Overall, Asia Pacific processed 185.8 billion real-time payments in 2023, with real-time payments representing 24% of all electronic payments in the region.

Europe

In Europe, the EU Instant Payments Regulation, which passed earlier this year, is expected to drive instant payments volume across the 27 EU member states. Instant payments are forecast to account for 13% of all electronic payments in Europe by 2028, up from 8% in 2023.

Ireland is expected to experience the fastest growth in real-time payments worldwide over the next five years. Croatia is in second place, although only seven institutions have signed up for the national real-time payments scheme so far.

The Netherlands ranks fourth in the EU for instant payments transaction volume, with more than 1.3 billion instant payment transactions in 2023. Despite this, its instant payments scheme is one of the most innovative in Europe. While new payment schemes are typically driven by governments and central banks, in the Netherlands, it was the payment service providers and banking community that led the process when it launched in 2019. Thanks to early nationwide adoption of SCT Inst as the default payment method for all digitally initiated single transfers, the Netherlands achieved a smooth transition to low-cost and seamless instant payments.

Americas

Brazil’s PIX may be the world’s gold standard for real-time payments. According to ACI Worldwide, more than three-quarters of Brazilians now use the PIX real-time platform, which handles 75% of South and Central America’s real-time transaction volumes. The system continues to expand: The launch of Automatic PIX is expected to transform recurring payments, allowing Brazilians to use PIX for streaming services, bill pay, and subscription clubs. This will likely be followed by buy now, pay later plans and point-of-sale financing processes.

Mexico was an early adopter of real-time payments in Latin America, launching its Sistema de Pagos Electrónicos Interbancarios (SPEI) system in 2004. Despite its head start in the region, adoption of real-time payments has been slow due to the region’s high unbanked population and lack of awareness about electronic payments. ACI forecasts annual growth in real time payments at just 7.9% from 2023 to 2028—the lowest forecasted growth in all of Latin America.

North America is a major growth market to watch, primarily due to the launch of the FedNow® Service in 2023. Real-time payments are still in their early stages in the U.S., accounting for only 1.5% of the total payments volume in 2023, leaving significant room for expansion.

Real-time payments in the U.S. are minimal compared to paper-based payments and non-real-time electronic payments, which account for 18% and 80.5% of all transactions, respectively. However, due to its significant financial influence, the U.S. still ranks 12th worldwide in terms of transaction volume.

Middle East and Africa

Finally, in a bit of a surprise, Africa had the highest real-time share of electronic payments of any world region in 2023, at 40%. The region recorded 8.2 billion real-time transactions last year.

Nigeria led the region in real-time payments, with 27.7% of transactions using real-time methods in 2023. The COVID-19 pandemic was a key driver of this growth, encouraging consumers to shift from cash to electronic payment methods.

Egypt, which entered the world of real-time payments in 2022, accounted for just 1.4% of overall payment volume in 2023. However, it’s expected to represent more than a third of payments in the region by 2028.

The Next Big Thing

For financial institutions looking to monetize real-time, the next big opportunity will be connecting multiple real-time schemes to create new corridors. Last year saw numerous bilateral agreements in Latin America and Asia as neighboring countries began establishing real-time cross-border rails for QR code and P2P payments.

Asian countries continue to lead in this area. Payments using India’s UPI scheme can now be made in Malaysia, Indonesia, UAE and France, while users of Malaysia’s DuitNow can now make QR code real-time payments from Indonesia, Singapore, Thailand, and China.

But the rest of the world is catching up. G20 initiatives, EU Instant Payments mandates and the Nexus blueprint are expected to drive progress in 2024 and beyond. The blueprint aims to standardize and connect national payment systems, unlocking economic, competitive, and operational advantages, and both governments and financial professionals are poised to reap the benefits.

*All data contained within this article comes from the 2024 Prime Time for Real-Time Report.

Dive into the potential of real-time payments with ACI’s recent research, and explore the markets that are leading the way in instant payments adoption. 

The post Real-Time Hits the Big Time, with More Room to Run appeared first on PaymentsJournal.

The RTP Network, the instant-payments organization operated by The Clearing House, crossed a milestone by processing $1 billion in a single day for the first time on June 28. RTP, which is owned by 22 large global banks, also set quarterly records for transaction volume and value, handling 82 million transactions and totaling $55 billion. Payment volume grew 7%, while overall payment value jumped 30% in Q2.

This success followed numerous records set by the RTP Network in Q1, handling a then-record 76 million transactions valued at $42 billion.

The Clearing House didn’t announce the billion-dollar milestone until ten days after it happened because the organization wanted to determine the factors contributing to reaching this mark. Ultimately, the organization determined there was a myriad of elements involved.

“The increase in transaction value is due to broad adoption of the RTP network across a number of use cases, including account-to-account transfers, title insurance and mortgage closing payments, gig economy payouts, earned wage access, and more,” Margaret Weichert, Chief Product Officer at The Clearing House, said in a press release. “Banks and credit unions that have joined the RTP network are seeing how instant payments can grow deposits, while meeting member and customer expectations for instant payment availability, 24/7.”

Facing the Competition

The progress for RTP follows a year of competition with the Federal Reserve’s rival payments system, FedNow. A survey from earlier this year found that 61% of financial institutions have implemented RTP or are in the process of doing so.

One area of success has been the RTP Network’s efforts to onboard smaller financial institutions. Roughly 90% of the financial institutions on its system have assets of less than $10 billion. At the same time, RTP now serves 225,000 unique businesses monthly, up from 105,000 a year ago. While businesses account for 80% of RTP transactions, 95% of those payments are received by consumers, according to TCH.

The network also reports a significant increase in consumer usage, with more than five million unique consumers sending instant payments every month, a figure that has doubled over the past year. RTP credits this growth in consumer usage to the widespread adoption of mobile wallets. 

The post RTP’s First Billion Dollar Day Highlights a Bang-Up Year appeared first on PaymentsJournal.

Although the adoption of real-time payments (RTP) continues to grow, most banks and credit unions still do not see real-time payments as a future profit center.  

According to a recent report from Cornerstone Advisors, fewer than 20% of American banks anticipate that commercial real-time payments will become a revenue generator for them in the next three years, and only 10% expect retail real-time payments to generate revenue. The number is even lower among credit unions, with just 7% expecting either commercial or retail RTP to become a profit center.

Nevertheless, these institutions plan to make more use of real-time payments. Half of the banks and credit unions surveyed expect to be up and running with RTP by the end of 2024.

Roughly half of respondents said they plan to offer real-time payment services through FedNow. In contrast, nearly a quarter of banks plan to offer payments through The Clearing House’s RTP rail, while 12% of credit unions said the same.

Seeking Profits

The study points out that many banks see real-time payments as a cost, potentially cannibalizing their profits from wire transfers. But businesses have been willing to pay extra for speed in these transactions. Cornerstone said that if $2.50 is a fair price for sending $1,000, then $100 should be reasonable for sending (or receiving) $100,000 much more quickly.

Banks and credit unions recognize that business-to-business (B2B) payments are likely the biggest reason to move towards RTP. B2B payments were the most commonly cited as the most important potential use case, followed by payroll payments.

Account-to-account (A2A) transfers are also a notable use case, and for credit unions, they remain No. 1.  For banks, A2A payments are tied with last-minute consumer payments as important real-time payments use cases.

Overall, increased interest in real-time payments has manifested in new attention toward payments hubs. The survey found that more financial institutions are planning to invest in a new payment hub or replace an existing one. In both 2022 and 2023, just 4% of banks and credit unions mentioned a new or replacement payments hub.

The post Why Banks and Credit Unions Are Moving Slowly to Real-Time Payments appeared first on PaymentsJournal.

Traditional payment gateways have often hindered banks in their efforts to modernize their payment systems. Transitioning to real-time payment capabilities demands dismantling outdated procedures, a task many banks are unprepared to take on.

A recent PaymentsJournal webinar featuring Miriam Sheril, Head of US Product at Form3, Peter Gordon, Founder and Managing Partner at Atlantic Fintech Advisors, and James Wester, Co-Head of Payments at Javelin Strategy & Research, took a closer look at how a platform-based approach is helping banks commercialize their value-added services and develop a more client-centric service model when it comes to payments.

Battling the Legacy

For banks venturing into real-time payments, grappling with legacy back-office technology can be frustrating. Real-time payments hinge on delivering seamless end-user experiences, a demand that traditional technologies have long struggled to meet, especially considering customers’ 24/7 expectations. Implementing FedNow and the RTP network effectively necessitates embracing modern technologies.

“In the U.S., we’re going to see more banks needing to modernize their technology at the back end to make this happen,” Gordon said. “The legacy infrastructure that banks have—batch-oriented, mainframe-based systems—can’t handle the 24/7/365 scaling. It also means that we’re moving from silo-based systems to enterprise-based systems and platforms.”

Managing individual transactions for FedNow and RTP differs significantly from the batch-oriented processing typical of ACH transactions. The infrastructure needs to become modern and cloud-based. Regulatory concerns, such as anti-money-laundering laws, further impel banks toward modernizing their architecture. By providing more seamless solutions through better technology, fintechs like Stripe and PayPal have been pushing banks to turn toward cloud solutions and APIs that allow banks to scale and work more directly with fintechs.

“We focus on trying to insulate banks and financial institutions from having to deal with some of the nitty-gritty annoying stuff, so that they can focus on their customers, their end users, and where they want to make money,” Sheril said. “A truly seamless API will cover all the rails, instead of the bank having to worry about ISO spec version this for RTP, and version that for FedNow, and a third version for Fedwire.“

Wrestling With Complexity

Financial institutions are often stymied by the technological complexity of payments. The systems in place worked well for a long time, but banks are beginning to realize they’re being forced along the path to modernization. And it’s not going to get simpler, primarily because of the silos within their operations.

A large financial institution operates numerous disparate channels, each with its own dedicated system tailored for functions like treasury and wealth management. Yet there’s growing desire within banks for payments to present a unified front, emanating seamlessly from a singular source. This entails breaking down the silos so there’s a consistent experience across the middle and back office, as well as throughout the infrastructure and among technologists.

With this push for new technology, many banks accustomed to constructing their own infrastructure are opting against replacing outdated system internally. Instead, they’re forging partnerships with companies specializing in modern technologies.

“Instead of it being one of the 75,000 things I do, streamline the piece that matters to me,” Sheril said. “Now that we have the ability to have better architecture that’s easier to implement, that is going to be helpful in terms of where banks are going across lines of business and tearing down silos.”

Ultimately, customers simply want convenience. However, there’s growing awareness among customers regarding the various payment methods available to them. They can opt for installments plans, direct transfers, or transactions that accrue points. Financial institutions want to present customers with all of these options.

“That’s where that technology kicks in and says to the financial institution, you have more power now,” Wester said. “Financial institutions have always just looked at a payment as a payment. But now that we’re seeing consumers care, there are ways that you can use that to reinforce the relationship.”

In many instances, customers fully appreciate the advantages of real-time payments only once they’ve had the opportunity to use them. Real estate firms, for instance, are showing interest in real-time payments not because they’re concerned about where their settlements occur but because they want to close deals on Saturdays, a day when most realtors are active.

Consider another scenario where instant payments afford retailers the ability to reconcile transactions at the end of the day and receive funds instantly. For example, on a Friday night, a restaurant reconciling its accounts can simply press a button, and the funds are deposited into its account, enabling them to promptly pay the wait staff.

However, many banks have been unable to facilitate such transactions on Saturdays due to wire closures. As a result, these options emerge as new products and services for consumers and represent novel competitive avenues for financial institutions.

Adventures in the Cloud

Conducting operations in the cloud allows banks to integrate many of their services, yet there has been a reluctance to use such services.

“Ten years ago I was at a conference about the cloud, and the CIO of a relatively large bank said from the stage, ‘We will never put any mission-critical stuff in the cloud. It’s just too risky,’” Wester said. “And the bankers in the audience all nodded sagely. ‘No, that will never happen.’”

Yet more banks are discovering that using a platform-as-a-service provider can reduce costs significantly if it’s done right. They can end up paying a fraction of the cost of building and maintaining a data center.

Another advantage of the cloud is translation. It can take an ACH file and convert it to an ISO 20022 format, maybe even enrich the payment instructions with information, then pass it through a payment system. Those who understand how rich this data is will be the real winners.

Piece by Piece

Implementing new processes in today’s payments landscape means dismantling old ones. It’s important for organizations not to underestimate the challenges associated with decommissioning legacy systems and instead focus on this task with purpose.

Organizations should embark on a journey toward modernization, starting by insulating themselves from risks and addressing their least risky areas first. It’s imperative to start with smaller aspects that can coexist alongside the legacy system. This incremental approach ensures that each step is modernized. Not everything needs to be moved at once.

“This is about getting something better out there and not waiting till your customers leave you for someone else,” Gordon said. “There are ways to do this that help you de-risk the whole migration. Some banks have only taken specific accounts and moved them over. Or only real-time payments. You can start real-time there, then move the other aspects over.”

Said Sheril: “The more complex these requirements get, the more modern the technology has to be. You can’t do it on old platforms. You have to do it on things that are quick. We can only do it because we are on a modern 24/7 platform. Banks need to get this modernization done, but they don’t want it to distract from the focus on what’s important to them, which is their customers and their revenue.”

The post Clearing the Decks for Real-Time Payments appeared first on PaymentsJournal.

Payments Canada has still not found a new CEO to replace Tracey Black, who ran the organization for more than five years before stepping down at the end of her term earlier this week. The delay is emblematic of the problems Canada has encountered in introducing its real-time payments system, which is now years in the making.

Canada is the only G20 country without such a system in place. The Real-Time Rail (RTR), Payments Canada’s proposed real-time payment system, is years behind schedule. Payments Canada originally targeted to have the system up and running by 2019, but has pushed the deadline back several times since.

In Payments Canada’s Q4 2023 report, Black wrote: “The next update on the RTR program will be in Q1 of 2024 and I look forward to sharing more with you about this critical program.”

The latest word is that the update—not the launch—will be released in the coming weeks.

Mysterious Delays

As far back as 2020, Payments Canada said it was selecting technology partners and beginning the building process for its real-time payments platform. The target date for RTR was set for 2022.

In 2021, Payments Canada announced that Canadian interbank network Interac would be the exchange solution provider for RTR, with Mastercard providing its clearing and settlement technology.

Last June, there were “current delivery delays” that were responsible for the latest pushback on the deadline. At that time, the target date was mid-2023.

But there have also been indications suggesting that Canada’s banking industry isn’t entirely sold on the necessity for the new system. Even despite Jeremy Kronick, Director of Canada’s Centre on Financial and Monetary Policy, estimating its benefits to the nation’s economy at $3.24 billion over the first five years.

Progress on Other Fronts 

Payments Canada has been active on other fronts, expanding its membership to include newer service providers and credit unions. However, this offers little comfort until the new payments system is ultimately launched.

“It’s not enough to have access to a payment system that does not yet exist,” Alex Vronces, executive director at Fintechs Canada, told the Canadian Press. “We need the payment system to exist.”

The post Canada’s Real-Time Payments Network: When Will It Ever Happen? appeared first on PaymentsJournal.

Visa and Checkbook are continuing their ongoing partnership, with a new multi-year initiative that aims to make instant payments more available for all.

“In today’s ‘always on’ world, businesses and consumers demand quick and convenient access to cash flow – whether paying insurance claims, disbursing wages, tips or rebates – speed and efficiency have become the name of the game,” said Yanilsa Gonzalez-Ore, North America Head, Visa Direct in a prepared statement.

Through this collaboration, both companies will focus on streamlining global money movement and facilitating fund disbursements through Visa Direct. This builds on their previous joint efforts; in 2021, Checkbook was part of the Visa FastTrack program and contributed to integrating Visa’s Virtual Cards solutions.

Faster Payments for Businesses and Consumers

The collaboration between Visa and Checkbook signifies a step forward in the evolution of financial transactions. Instant payments, particularly with the release of FedNow last year, have emerged as a game-changer, offering speed and convenience compared to traditional payment methods.

Instant payments have the potential to transform varies areas of financial transactions—from payroll processing and supplier payments to peer-to-peer transfers. They also help reduce administrative burdens, minimize delays, and enhance overall business operations. According to Elisa Tavilla, Director of Debit at Javelin Strategy & Research, as more financial institutions adopt real-time payments, funds will move quicker than they do on the current systems those payments rely on: ACH.

Learning from Global Success

Although the acceleration of instant payments in the U.S. is imminent, there is much to lean from global innovation and adoption trends.

Brazil’s instant payments service, Pix, serves as a prime example of success in this arena. Processing  more than three billion transactions per month, Pix boasts a staggering 70% adoption rate among  Brazilian adults. Brazil’s central bank has recently spearheaded initiatives to enhance cross-border payments, positioning Pix as a frontrunner in these efforts and offering valuable insights for other countries seeking to develop their own instant payments solutions.

Similarly, the European Union Council has made significant strides in promoting instant payments, evidenced by an upcoming law slated to take effect in April. This legislation will mandate the full availability of instant payments in euros across the EU, signaling a commitment to advancing the accessibility and efficiency of payment systems within the region.

The post Visa and Checkbook Set Out to Ramp up Instant Payments Availability appeared first on PaymentsJournal.

Faster payment methods are experiencing a surge in popularity as more consumers want to send and receive payments in a faster way. Real-time and faster payment networks such as FedNow, RTP, Same Day ACH, and Zelle, a peer-to-peer payment platform, are seeing rises in transaction volume and value as consumers demand more speed and convenience with their payments.

FedNow, the long-awaited instant payment service built by the Federal Reserve Bank, was launched on July 20, 2023, to facilitate the sending and receiving of funds within seconds. You could say that this launch completes the missing puzzle to establish a nationwide real-time payments solution.

In a recent report, 2024 Trends & Predictions: Debit Payments, Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, describes how merchants are navigating card fees, the future of debit payments, and what customers and merchants want.

How Merchants Navigate Card Fees

Doing business, of course, comes with costs. But for merchants, the persistent pain point involves paying credit card fees. These are fees paid to the credit card provider to complete credit card transactions. Current interchange fees range from 1% to 3% of the transaction amount.

These fees can potentially erode the bottom line, so merchants have sought a workaround solution to offset these costs. One way is to encourage consumers to use debit cards. The current cap on interchange fees for debit cards sits at 21 cents and 0.05% of the transaction value.

Tavilla detailed how two prominent players in the mobile phone industry, AT&T and T-Mobile, announced over the summer that for customers to receive their monthly discount via autopay, they must have their autopay set up with a debit card or a bank account.

Everlane, a clothing store, has also found a way to encourage consumers to pay without the debit card option. It’s an alternative payment method known as “Catch” that enables customers to pay through their bank account. When Catch is used as a payment method with Everlane, the customer earns store credit that can be used for any future purchases. Tavilla explains that although this is a niche option, a use case certainly exists.

The Future of Debit Payments is Instant

When it comes to the outlook on debit payments, the possibilities are endless.

“Consumers are increasingly using mobile wallets, like Apple Pay, Google Pay as well as others,” Tavilla said. “Many of the wallet users are using their debit cards to fund their payments through the wallet.

“There’s also been an uptick in contactless cards. Most debit cards are now contactless. Our data shows that 64% of consumers say that they have at least one debit card that is contactless. Shoppers are increasingly tapping to pay with debit cards and mobile phones, especially for everyday purchases.”

More forward-looking statements by Tavilla reveal that as more financial institutions adopt real-time payments, funds will move a lot faster than they do on the current system those payments rely on, which is ACH. With ACH, payments still need a couple of days to settle.

When it comes to moving money from P2P platforms to your bank, it can easily take a few days. However, certain banks have already made it possible to move funds instantly if they support real-time payments.

What Customers and Merchants Want

Customers and merchants ultimately share the same goal to meet their needs, and that is to pay less. Customers are budget-conscious, and they want to maximize savings while ensuring that they still receive value.

Merchants want to be able to control costs and ensure a profitable margin. This includes minimizing the amount they pay for transaction fees. “Regardless of whether you’re a consumer or merchant, cost reduction, savings, and discounts seem to be top of mind and an objective,” said Tavilla.

The post Instant Debit Payments: The Next Phase of Real-Time Payments appeared first on PaymentsJournal.

Instant payments are on the verge of becoming a profit center, according to a recent survey. Participants were asked how likely it is that B2B real-time payments will become a profit center for their bank within three years, and 37% indicated it was likely, while 14% expressed an even higher level of confidence. Only 8% said it’s unlikely to happen.

The report from Finzly also looked at the path to achieving this profitability. The strongest avenue appears to be expanding the use of FedNow. 

After launching in July, FedNow finished 2023 with more than 300 participating financial institutions. But the majority of those institutions are still using it for “receive only” services.

While half of Finzly survey respondents identified “fees” for enabling their customers to send and receive instant payments as a profit opportunity, only a handful recognized the potential of Request for Pay (RfP) as a value-added service. Additionally, when attendees were asked about the biggest profit opportunity with B2B real-time payments, only 15% cited “offering RfP.”

“Identifying and executing appropriate instant payment use cases is critical to meeting customers’ needs and generating revenue,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Being able to send and receive instant payments is also essential, especially to support RfP and other FedNow functions. While receive-only is a good start, financial institutions ultimately need to be able to send and receive funds in order to fully take advantage of real-time payment capabilities that support innovative products.” 

Rapid Payments, Rapid Adoption

Many companies are willing to pay for speedier payments, with 50% of businesses indicating as much per the Finzly survey. Respondents said that $2.50 seemed like a fair price for sending $1,000, while $100 was a reasonable fee for receiving $100,000 more quickly.

Another survey from the U.S. Faster Payments Council found that 88% of financial institutions said that they will implement FedNow and/or RTP within the next two years. RTP has been implemented more, with 61% of FIs saying that process is underway or complete. FedNow has been or soon will be implemented by 44% of respondents. Only 12% of FIs said they plan to wait more than three years to implement these payment services—or won’t implement them at all.

The post Banks’ Next Profit Center: Instant Payments appeared first on PaymentsJournal.

Real-time money movement (RTMM) is gaining traction worldwide. Although real-time payments only account for only a 1.2% share of the total payments volume in the US in 2022, transactions are expected to grow 364% by 2026¹. As more businesses and consumers expect faster, more efficient payments, this trend will only grow, with McKinsey predicting that by 2027, more than half of all payment transactions will occur in real-time (a threefold increase from today). For financial institutions (FIs), RTMM’s explosive growth is an opportunity to grow their revenue and capture new customers (86% of whom see value in RTMM²). The biggest roadblock to this growth has been outdated mindsets, roadblocks keeping FIs in the United States from getting on board and adopting this potentially lucrative payment system.

FIs have been reluctant to adopt RTMM solutions based on a few commonly held misconceptions. They include the beliefs that:

• RTMM leads to increased fraud risk
• There’s a lack of consumer interest in real-time payments
• There’s no risk in waiting to adopt, and high-risk in early adoption

These common beliefs cannot be further from the truth. Subscribing to these misunderstandings can lead to disastrous results. In today’s rapidly evolving payments landscape, standing on the sideline endangers FIs, which could lose their competitive edge as well as a significant portion of potential market share.

So what is the truth about RTMM systems and its incorporation into both the financial and fraud landscapes? NeuroID’s guidebook, Three Common Myths About Real-Time Money Movement & Fraud and How They’re Hurting Your Revenue, aims to dispel commonly held myths and discover the truth behind RTMM and fraud.

Does RTMM Adoption Lead to Increased Fraud Risk?

Fraud experts still hold on to the belief that faster payments can lead to faster fraud. And it’s an understandable fear: with no way of recovering money lost in real-time, RTMM systems seem especially scary. Fraud involving authorized push payments (APP) is on the rise as the immediacy and finality of these payments give consumers a much shorter timeframe in which to dispute or revoke them³.

But it’s not the speed that makes RTMM vulnerable, but the outdated fraud prevention systems that simply can’t adjust to new styles and speeds of bad actors. Reactionary responses and manual work can’t fight real-time, instantaneous threats.

As funds funneled through RTMM move faster, fraud solutions must keep up the pace. This means employing fraud prevention orchestration technology that reduces manual operations and can make more deterministic decisions higher in the fraud capture funnel. Switching to real-time fraud prevention automation makes the process simpler, repeatable, and more accurate—enabling FIs to capture both the fraud and opportunity that comes with RTMM systems.  

Do U.S Consumers Actually Care About Real-Time Payments?

Data highlighted in the NeuroID report reveals that only 18% of banks and 12% of credit unions actually provide RTMM services, paving the way for the argument that consumer demand is lacking. However, Generation Z is leading the way in the world of faster digital payments. In fact, 66% of that cohort use digital wallets in virtually all cases. Plus, 51% stated that digital transactions will soon displace physical transactions.

Furthermore, across various generations, close to 80% of consumers want to make payments to businesses directly and quickly. These stats clearly show that U.S. consumers, regardless of age, desire to make real-time payments as it enables them to send and receive money quickly as well as have more control over their finances.

The rise and popularity of peer-to-peer payments (P2P) are also indicative of this consumer desire to access real-time payments. Some of the most popular providers include Zelle, Venmo, Visa Direct, and Mastercard Send. The new launch of FedNow is going to continue to fuel this consumer demand.

But P2P platforms have not been without controversy. Zelle has been in the headlines for a lack of consumer protection against fraudulent transactions. Zelle’s parent company, Early Warning Services, reported that Zelle users have lost approximately $440 million to fraudsters.

Despite the lack of fraud protection, customers continue to use this platform for sending money instantly and irreversibly. Convenience is the deciding factor. For FIs, RTMM systems aren’t just about meeting an immediate consumer demand—they’re about securing a future customer base. With Gen Z exhibiting high loyalty towards FIs they trust, meeting their needs with RTMM adoption means establishing a long-term customer base.

RTMM Is a Must to Stay in the Game

RTMM is not just another strategy. It’s a competitive necessity. Traditional banking services such as ACH payments and wire transfers still have their place, but for some consumers, they are simply too slow for the rapidly evolving payments landscape. Such services can take hours or even days for funds to clear. This is no longer a viable option for those consumers who want faster payments and immediate access to their funds.

RTMM systems are still developing, and some financial institutions don’t want to take unnecessary risks when it comes to implementing them. But with 15% of consumers saying RTMM availability would be a top factor in changing banks, waiting is also risky. If you competitors have a more aggressive timeline than you do, you’ll lose real revenue: it’s as simple as that⁴.

Behavioral Analytic’s Place in Combatting Real-Time Fraud

Another issue driving hesitancy among FIs is updating fraud prevention legacy infrastructure and technologies. Revamping these systems to facilitate and support real-time payments could take considerable time and expense. But it doesn’t have to be an all-or-nothing approach: there are real-time fraud solutions able to keep up with RTMM-based fraud that don’t require a rip-and-replace, and can instead work as a new, unique signal within your fraud stack.

When it comes to tackling the potential for fraud head-on, financial institutions must partner with a solution provider that leverages behavioral analytics to detect incidents of fraud. Within it’s role as a behavioral analytics leader, NeuroID is breaking down barriers and enabling safe and secure RTMM adoption.

A pioneer in the realm of behavioral analytics, NeuroID detects the intention of users through their online behavioral patterns. NeuroID alerts to fraudulent activity by differentiating between legitimate users and potential bad actors based on form interactions (such as swipes, clicks, and name entries). All decisions are enacted in real time for the safer integration of instant payments.

NeuroID’s solution is lightning-fast, with the ability to approve, deny, and review transactions in less than a second.

Closing Thoughts

RTMM will soon be table stakes for FIs. Although adopting RTMM without inviting fraud does have challenges, they are not insurmountable.

With RTMM fraud, time is of the essence. It is critical to have a solution that can make real-time decisions on who is trustworthy, and who is treacherous. Behavioral analytics are a game-changer to ensuring proactive prevention in real-time.

Leveraging the power of behavioral analytics, FIs get the information they need to streamline decision-making and avoid fraud costs, while still reaping the benefits of RTMM adoption.

Interested in learning more? Register for NeuroID’s The Dark Side of Speed webinar series. 

¹ https://insiderealtime.aciworldwide.com/Fight-Real-Time-Payments-Fraud-in-Three-Simple-Steps
² https://insights.discoverglobalnetwork.com/fintech/5-payment-trends-in-fintech
³ https://www.pymnts.com/bank-regulation/2023/senators-warn-regulators-on-zelle-fraud-risks/
⁴ https://www.accenture.com/us-en/insights/banking/payments-gets-personal-strategies-stay-relevant

The post Real-Time Money Movement: Dispelling the Myths and Embracing the Opportunities appeared first on PaymentsJournal.

Instant payments are poised to accelerate in the U.S. now that FedNow has launched. There’s an opportunity for banks and credit unions to take the lead again in payments. They can offer a cheap, convenient, fast and secure way to move money that U.S. consumers and businesses didn’t know was possible.

Like ACH, value can be created on instant payment rails that doesn’t necessarily require a catchy name that later becomes a verb. Consumers don’t know ACH, but they do know direct deposit – 94% of Americans get paid that way.

Unlocking instant payments in the U.S. will require innovation. When it comes to instant payments innovation and adoption, Brazil is one of the best markets to learn from. Pix is Brazil’s instant payments scheme and is arguably the most successful scheme worldwide in terms of adoption. In less than 3 years, the number of Pix transactions exceeds both credit and debit combined. Some 70% of Brazilian adults use Pix and there are over 3 billion Pix transactions per month (vs. ~30 million in the U.S.).

The innovations happening on top of the Pix rail are remarkable. Below are just a few examples that are enabling Pix to reach its full potential that may serve as inspiration for the U.S. market.

Pix Credit

Pix Credit is a product that allows a consumer to pay using Pix and re-pay their financial institution over time. Nubank, Digio, Banco BV and MercadoPago offer this today, and other very large Brazilian banks are gearing up to launch their version of Pix Credit soon.

With Pix Credit, cards don’t need to be issued, the payment networks and acquirers don’t need to be involved in transactions. And, Financial Institutions can charge interest much like with credit cards.

There are several reasons why consumers might use Pix Credit.

• If they have an urgent need to make a payment, but don’t have balance in their account (e.g. emergency medical or utility bill).
• When a store offers a discount on purchases for payment with Pix – consumers can take advantage of the discount, but pay back over time.
• Repaying for purchases over time may align better with their incoming cash flow.

Pix Credit is a way for financial institutions to offer a credit card-like product using the instant payment rails, but profit in a way that doesn’t hurt merchants by offering a more efficient payment system with fewer players.

QR Codes

QR codes are accelerating consumer-to-business instant payments in Brazil.

Currently, over 30% of the 3 billion Pix instant payments a month are person-to-business transactions (up from 13% two years ago).

This P2B Pix adoption was made possible by QR codes. When consumers go to a store to pay with Pix, they don’t share their bank account information with the cashier at checkout. Instead, the merchant presents a QR Code, the consumer scans it from their mobile phone, reviews the transaction details on their phone, hits pay, and the transaction is done.

This P2B instant payment is simple, fast and all that’s needed is a mobile phone. The exchange of bank accounts and related information is all handled behind the scenes via QR code.

Merchants and billers love Pix. It’s 1/10th of the cost of credit cards and they get their money instantly. As a result, they are offering material discounts to consumers if they pay with Pix, using QR codes. Amazon, for example, offered consumers an additional 10% off if they paid with Pix on Amazon Prime Day this year.

Amazon isn’t the only company that presents a QR code to a consumer at online checkout. QR codes are commonly used to initiate instant payments across many verticals and at many recognizable brands. Examples include large retailers, mobile operators, fast food (e.g. McDonald’s, Burger King, Pizza Hut), Gasoline (Shell), e-commerce and many others.

Instant payments to all of these verticals and companies wouldn’t be possible without QR code technology. Also the use of QR codes grew much faster than cards in the past because there were no hardware requirements. The QR code can be presented on the payment terminal, cashiering system or printed on the receipt. Any payment alternative requiring new hardware in every store is likely to fail.

Loyalty Point Redemption

One of the most creative applications of the Pix rail is its ability to process different currencies—such as loyalty points.

With over 400 partners around the world, ties to more than 40 Financial Institutions, and approximately 40 million consumers on their platform, one of the biggest rewards programs in Brazil recently began leveraging the Pix rail for points redemption. It’s a win-win for both consumers and merchants.

Consumers earn points when making purchases from select partners. When they redeem those points, they pay directly from their mobile app and the transaction flows over the Pix rail. The merchant receives cash instantly in its bank account, and the loyalty points are deducted instantly from the consumer’s loyalty account.

What Now?

RTP and FedNow enable U.S. financial institutions to meet modern digital demands with a 21st century payments solution. Adoption of instant payments requires pairing innovation with these rails. And, the blueprint of what’s possible is available in other countries who are 3-5 years ahead of the U.S.

“For FedNow to reach its full potential, we’ll need to harness the creative energies of all kinds of people including fintechs to think about how we enable this platform for innovation.” – Mark Gould, Chief Payments Executive, Federal Reserve on Fintech Takes Podcast Aug 23, 2023

No one in Brazil thought Pix would be a success when it launched. Financial institutions who weren’t prepared lost commercial business as a result. While it’s impossible to predict the inflection point of when instant payments will accelerate in the U.S., it is widely-agreed that instant payments are coming. What are you waiting for?

The post Unleashing the Potential of Instant Payments Through Innovation appeared first on PaymentsJournal.

The U.S. Faster Payments Council’s Secure and Instant Payments API Work Group (APIWG) released a new white paper with a clear objective: to establish definitive best practices for instant payment APIs.

Although their focus wasn’t on creating new API standards, the work group dedicated itself to providing highly relevant best practices that can seamlessly support the diverse array of standards and proprietary APIs emerging within the industry.

One standout revelation from their research underscores the intrinsic link between the maturity of these APIs and the evolution of open banking infrastructure. A mature open banking infrastructure serves as the linchpin for seamless interoperability among banks, fintech solution providers, and payment networks. This advanced infrastructure not only facilitates easy connectivity of instant payment APIs across different platforms but amplifies the potential for widespread adoption, ensuring a broader reach and scalability for instant payment capabilities.

Recommended Best Practices for Instant Payment APIs

The group found that there are several best practices that can be implemented to accelerate the growth and adoption of instant payments. They are as follows:

• API registration should be automated.
• For user authentication, develop minimum defined standards.
• Provide additional payment data to enhance payment approval.
• Integrate quick look-up directory utilities to accelerate transaction initiation set-up.
• Embed risk management, fraud, and sanction screening controls to ramp up security and protect users.

More Collaboration is Key

The U.S. is facing its own unique challenges impeding the nationwide adoption of instant payments. A considerable number of large companies are still tethered to legacy financial systems that are not equipped to handle real-time payment processing. The integration of APIs into these legacy systems demands substantial investments and ongoing maintenance efforts.

Compounding these challenges is the prevailing lack of standardization in the U.S. instant payment landscape. The ecosystem is marked by fragmentation, with disparate payment networks and providers each wielding proprietary APIs and distinct requirements. The lack of standardization adds complexity, hindering companies from selecting APIs that would integrate easily across different platforms.

“Standardized instant payment APIs would help facilitate ease of adoption, interoperability, and scale,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Unlike some other countries, the U.S. does not have regulatory mandates for real-time payments. However, industry collaboration, such as the FPC’s APIWG, can help establish best practices and consistency for instant payment APIs, and make it easier for FIs and service providers to execute new use cases more efficiently.”

The post Standardizing Instant Payment APIs Can Expedite Adoption in the U.S. appeared first on PaymentsJournal.

In a world of immediate payment options like Venmo and Zelle, most U.S. banks are still using the same payment-processing technology they installed in the 1980s. Consumers have come to embrace real-time payments, looking increasingly to digital-first nonbank financial players for increased speed and convenience. It has created a landscape where many legacy banks are lagging behind both their customers’ expectations and their competitors’ capabilities.

To explore how legacy banks can get up to speed on real-time services, PaymentsJournal sat down with John Brady, Chief Architect and Head of Engineering at BillGo, as well as Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research.

Moving Away from Batch Processing

Legacy U.S. banks have several real-time payment options right now, with FedNow going live in July as well as other options like working through the Clearing House and debit card and credit card networks. The key question is whether banks’ legacy infrastructure can truly process real-time payments. 

As Brady explained, most banks’ payment processing today is still batch-oriented. But for the first time in over 40 years, there’s a new real time payments infrastructure and technology that can move money in real time, whether that’s through RTP or FedNow.  “The rest of the financial infrastructure as well as operation needs to catch up and update to a 24/7/365 environment in order to get the most value and benefit out of real-time payments,” Tavilla said.

Most banks handle Same Day ACH by running batches multiple times a day. “To get to a truly real-time system, you’re not going to be able to run the batch for every single transaction,” Brady said. “Some of that fundamental infrastructure really needs to change in order to handle real-time payments going forward.” 

The Components of Real-Time Banking

For legacy institutions to truly come up to speed, they need to address real-time payments, real-time settlement, and real-time core processing. Given the demand for faster as well as actual real-time payments, the infrastructure behind the scenes will need to be caught up. 

“As more systems process transactions in real time, it’ll be increasingly important for the legacy core systems to be able to clear and settle in real time,” Tavilla said. “Otherwise, the lag and the complexities where the different types of payments and transactions aren’t aligned in terms of the actual movement and settlement time can pose challenges, whether it’s fraud or insufficient funds or other issues.”

Many banks will rely on a memo post so the customer perceives the transaction to be happening in real time, but it won’t actually post against the core system in real-time. “So the banks are kind of faking it in terms of this real time aspect of things,” Brady said. “As payment products get more sophisticated, it’s going to be harder for banks to do that fake-out type of real-time posting.” 

According to Tavilla, consumers in recent years have become accustomed to being able to send money to friends and family or other uses in real time, although behind the scenes. The money might not be moved and or cleared and settled in real time,” Tavilla said. “That emphasizes the importance of financial institutions adopting systems that are actually able to move the funds in real time.”

In today’s world, these banks impose transaction limits, putting a dollar limit on Zelle or debit card transactions. As banks move toward real-time settlement, those limits could potentially be increased because there is more of a guarantee that the funds will clear.

The Impact on Legacy Infrastructure

Real-time capabilities are having an impact on legacy infrastructure. Under normal payment flows in bank systems today, a bank will process an ACH transaction in a batch file, then pass it to a money movement hub or run it through its fraud systems. These fraud systems are necessarily designed to expect a delay in settlement. Once the transaction goes into the core systems, there are multiple balances, including the memo balance, available balance, collected balance, and available balance. Those balances are updated multiple times through multiple batches throughout several days as the various funds settle and clear with other banks. 

“If you think about a true real-time settlement, that whole payment processing up front is going to have to change,” Brady said. “The fraud models are going to have to change, the funds availability models are going to have to change, and the core processing on the back end is going to have to change as well.” 

Said Tavilla: “The top real-time payments use case for both FedNow as well as RTP is the ability for consumers to be able to make a last-minute, real-time bill payment. Based on Javelin’s research as well as other studies, one of the aspects that consumers appreciate most about paying bills is the instant notification or confirmation. With real-time payments, the messaging and the finality of instant bill payment would improve the customer experience as well.”

Breaking Free from the Silos

Another impediment to the full embrace of real-time payments is the siloing that is prevalent at banks.

“I’m concerned that a lot of these systems today are owned by different departments within the bank,” Brady said. “If banks don’t take a holistic approach, each of these departments is going to devise their own strategy for how to deal with real-time processing.”

There is broad agreement on what needs to happen: Bill pay needs to be fully integrated with payment acquisition systems, risk systems, and core systems. Banks also need to consider how regulations interact with that. It’s only within that kind of comprehensive framework that banks can continually improve and, ultimately, provide their customers with better service.

The post The Challenge of Real-Time Payments for Legacy Banks appeared first on PaymentsJournal.

Time is money, and more consumers and businesses want instant payments.

Worldwide, the transaction value of real-time payments is predicted to soar 289% by the end of the decade, from $97 billion this year to $376 billion in 2030.

Responding to that demand, in July the Federal Reserve launched FedNow, a new instant payment infrastructure. FedNow allows banks, credit unions, and other providers to offer services that enable individuals and organizations to send and receive payments in mere seconds, 24/7.

The new capability has the potential to roil the market as industry players jockey for position with new bill pay, account-to-account transfer, and other products. It will also likely scramble technology budgets as firms take a hard look at their systems to make sure they have the capabilities and capacity to meet customer requirements.

But FedNow is just the latest in an avalanche of industry changes that has disrupted the market and raised the bar on technology. All of these developments point to one conclusion: that financial services companies must finally fully commit to a cloud-native payments system. Only a modern cloud platform will give firms the cost-efficiency, scalability, portability, and flexibility they need to serve today’s customers and compete in today’s market.

The Cherry on Top of Constant Change

The payments market has endured ongoing upheaval over the past six to seven years. Much of the turmoil has come from fintechs and Big Tech vendors such as Apple, Google, and Samsung, disintermediating traditional financial services companies with new payments products. These startups and technology-first behemoths have ushered in new ways of interacting with customers and have raised expectations for speed and ease of use.

At the same time, new regulatory and cybersecurity requirements have sounded a continual drumbeat. These range from rules like the European Union’s Payments Services Directive 2 (PSD2) and forthcoming PSD3, designed to give consumers more control and make payment providers more accountable. They’re also meant to cyber safeguards like two-factor authentication (2FA), a validation mechanism to reduce the risk of fraud.

FedNow will accelerate funds transfer from the three to five days required for Automated Clearing House (ACH) transactions to near real time. It will also provide the digital plumbing to permit older banks and credit unions to participate in the payments market.

But FedNow-enabled real-time payments won’t just allow firms to offer new customer-facing services. They’ll also require changes that ripple throughout the organization. For instance, per-transaction costs and fees will change. So will the way liquidity is managed. Because risk of fraudulent transactions will increase, organizations will have to invest in stronger validation and security. And because transactions will occur faster and more frequently, many firms will need to boost the performance and capabilities of their core systems.

This last requirement could be a stumbling block, because many organizations still run their core processes on decades-old legacy systems. Those systems weren’t designed to accommodate the flexibility and rapid change required in today’s market. It’s time for those systems to go.

The Case for the Modern Cloud

How should organizations respond? Not by thinking about technology first, but instead, by starting with customer demands—for speed, convenience, and flexible new services. This customer-first mindset will point to the right technology platform that positions you to rapidly bring new products to market and deliver superior customer experiences, while still maintaining strong security and resilience.

Your firm might already have migrated some services to the cloud, but if you’re like many, you’ve resisted modernizing core systems because of concerns around cost, business disruption, security, and data sovereignty. It’s possible to take a progressive approach to cloud adoption that allows you to modernize components of your payments platform and run them where it makes the most sense—and these capabilities are enabled by a modern cloud platform.

A modern cloud platform is built around microservices, which organize software applications as a collection of small, independent, and loosely connected services. Each service handles a specific task, but together they provide complete functionality. This approach makes it simpler to continually enhance and scale applications. It also makes applications more resilient, because if one service goes down, it can be remediated while the other services remain functional.

A microservices architecture is enabled by capabilities such as:

Container management. Containers are standalone software packages that include everything needed to run an application, such as “libraries” of prewritten code and other “dependencies” required to make an application functional. Containers make it easier to build, deploy, and move applications from one environment to another. You can automate the deployment, scaling, and management of containers with a container orchestration platform. That enables you to balance loads across containers and scale containers up and down based on demand. It also permits you to run applications on-premises, in a public cloud, or in a hybrid of the two. The most common open-source orchestration platform is Kubernetes, which is maintained by the Cloud Native Computing Foundation (CNCF).

Event-driven architecture. This approach uses system events—such as a transfer of funds—to trigger and communicate among microservices. Event streaming lets you capture such events as they happen in real time, store them in an organized way, and share them across services and applications so they can respond immediately.

Open source. Open-source software is developed collaboratively by individuals and organizations and made freely available to the public. This approach fosters innovation, stability, and security. Open-source solutions are also more portable across cloud environments than proprietary offerings.

Advantages for Today’s Payments Marketplace

Some financial services providers might be concerned about the perceived cost and complexity of moving to a new platform. But open-source solutions are available from established, proven providers, with security and support. And the long-term benefits of open source can deliver a higher return on investment than proprietary solutions. Those benefits include:

Flexibility. With a cloud architecture built on open-source solutions, you can develop, deploy, and consume payments and other core banking applications across on-prem, public cloud, and edge infrastructure. This agile, modular approach can help you more quickly and easily respond to shifting customer preferences, tightening regulatory requirements, and disruptive new competition.

Portability. An open-source, microservices approach means you aren’t locked into a single cloud environment. You can run in a cloud environment that’s on-prem, public cloud, or both. You can also migrate quickly from one environment to another as your needs dictate.

Security. Popular public cloud offerings include security controls, but payments providers typically require customized configurations to comply with strict industry regulations. Mature, proven open-source solutions deliver the robust security required for core banking systems. And on-prem private clouds ensure data sovereignty, reducing your cyber risk. You can also benefit from open-source products that automate security functions across hybrid cloud environments.

Resilience. The cloud can offer enterprise-grade resilience and business continuity. But relying on a single cloud provider can increase the operational risk to your business. Building on an open, modern cloud foundation can help prepare you for the unexpected. You can consistently and repeatedly adapt and scale so that your operations and your business remain resilient in the face of market changes—like the advent of the FedNow instant payments infrastructure.

As you pursue a modern cloud strategy, keep in mind that your major decisions should be less about technology and more about your business. Identify your business needs and define the business outcomes you’d like to achieve. That will enable you to measure progress toward your goals.

Then you can define the technology principles and approaches that will serve as a cloud road map across your organization. With a modern cloud architecture based on microservices, container management, an event-driven architecture, and open-source software, you’ll have the foundation to deliver new real-time payments solutions, maintain security and resilience, and achieve value for both your customers and your business.

The post Why the Rise of Real-Time Payments Requires Firms to Embrace a Modern Cloud Platform Now appeared first on PaymentsJournal.

Africa’s instant payment systems (IPSs) processed 32 billion transactions last year, totaling $1.2 trillion U.S. dollars. The volume of payments and the total value of payments processed has grown since 2018 by 47% and 39%, respectively.

These figures are derived from a new report issued by AfricaNenda, an African-led organization dedicated to accelerating the growth of IPSs. In addition to the growing payment numbers, three new IPSs in Ethiopia, Morocco, and South Africa have launched in the last 12 months. That brings the total number of live domestic and regional IPSs on the continent to 32. 

But even that $1.2 trillion figure understates the value of these transactions across Africa. According to Sabine Mensah, Deputy Chief Executive of AfricaNenda, the figures were based on data from only 22 out of the 32 countries that have active IPSs on the continent to date.

Currency Effects Downplay the Impact

As of June 2023, when the report was finalized, there had been an average of about 30% depreciation of currencies in Africa against the U.S. dollar, according to Mensah. If the value of the transactions had been based on the exchange rates prior to June 2023, she said, the value would have far exceeded $1.2 trillion.

Mensah said retrieving this data from central banks and payment switches in Africa is still a challenge. Out of the 22 countries that made data available, only five were obtained directly from the respective central banks. For the remaining 17 countries, AfricaNenda gathered their information from the internet.

The report also noted that 27 African countries have yet to set up a domestic IPS, although 17 have plans on the way and three regional payment systems are also in development. In addition, according to Mensah, only three of the 32 active African IPSs that her organization tracks facilitate cross-border payments at this time. So despite the rapid growth over the past year, there is plenty of room for further development.

The post Instant Payment Systems in Africa Topped $1 Trillion in 2022 appeared first on PaymentsJournal.

With the rollout of the FedNow instant payment service, the realm of real-time payments and immediate reconciliation has opened up new possibilities for independent software vendors (ISVs) and their clientele. This transformative service not only accelerates payment processing to unprecedented speeds but also dismantles the layers—and in some cases—the fees that traditionally stood between ISVs and their customers.

While adoption of FedNow may be gaining momentum at a measured pace, it is essential for ISVs to recognize that it will soon become a prerequisite for staying competitive. Consequently, early adopters who swiftly integrate FedNow as an embedded payments solution can wield it as a potent differentiator, influencing purchasing decisions significantly. ISVs can leverage FedNow to their advantage in the following ways:

Elevating the User Experience

FedNow has the capacity to streamline the entire payment process, delivering a seamless, instant embedded payment experience to customers. In a world where buyers increasingly demand speed and convenience, FedNow becomes a value-added feature that can not only attract but also retain customers through heightened satisfaction and loyalty. It signals that your organization is at the forefront of technological innovation, underlining a commitment to forward-thinking.

Accelerated Settlement

For ISVs, real-time payment systems not only expedite the receipt of funds, but also eliminate the delays associated with traditional methods like checks and ACH transfers. This elimination of pending transactions grants both vendors and customers real-time control over their accounts and financial transactions, enhancing efficiency and reducing uncertainties.

Unleashing Growth Opportunities

FedNow can be seamlessly integrated into various software applications and platforms, spanning e-commerce, invoicing, and financial management tools. This integration empowers ISVs to offer more comprehensive services and facilitates the adoption of digital business models such as subscriptions and one-time purchases. This versatility is especially valuable for SaaS providers, e-commerce platforms and digital marketplaces. Moreover, it paves the way for global expansion and partnership opportunities by enabling faster cross-border transactions and collaboration with financial institutions and payment processors, expanding capabilities and access to a broader customer base.

Harnessing Data Insights

Data stands as a strategic asset driving business growth. Implementing FedNow as an embedded payments solution provides access to valuable real-time transaction data, offering insights into customer behavior, preferences, and trends. This wealth of information can inform critical business decisions, including the development of new offerings, the refinement of customer engagement strategies, and the enhancement of the overall customer experience through well-timed outreach and support interactions.

Mitigating Fraud Risk

FedNow offers a safer transaction environment for both ISVs and customers, backed by robust security measures that reduce the risk of transaction fraud, identity theft and payment card breaches. This heightened security provides peace of mind for customers and effectively consigns chargebacks to history for merchants, reducing risks on the seller’s end.

The implementation of FedNow as an embedded payment solution offers ISVs a myriad of advantages, ranging from an enriched user experience and faster settlement to expanded growth opportunities, data-driven decision-making, and reduced fraud risk. However, with this formidable real-time payment capability comes the responsibility of fiscal prudence. ISVs must judiciously manage their cash flow and make informed decisions regarding expenditures and investments.

Additionally, the selection of a knowledgeable and reliable partner is crucial. A partner well-versed in the technical intricacies of FedNow implementation, as well as its integration with existing solutions, can ensure a seamless transition.

By avoiding cumbersome processes, such a partner can preserve the speed and convenience benefits offered by FedNow, ultimately contributing to a positive customer experience that is paramount for long-term success.

The post Leveraging FedNow for Competitive Advantage: 5 Strategies Software Vendors Should Consider appeared first on PaymentsJournal.

With the launch of FedNow, instant payments have become ubiquitous, and their adoption will only grow. But there are complexities to consider, particularly for banks and payment service providers (PSPs) that are figuring out how to best integrate this new service without incurring significant operational costs.

In a recent PaymentsJournal podcast, Nicholas Botha, Global Payments Sales Manager at AutoRek, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discuss how banks and PSPs can overcome these obstacles and how automation can help.

Providing FedNow Payments at Competitive Rates

Instant payments, by their nature, result in a significantly higher volume of payments at a faster speed. As such, it is essential that companies are equipped with some form of automation to ensure operational efficiencies. Many are still working with legacy systems that, unfortunately, are not capable of handling instant payments.

Implementing operational efficiencies downstream will not only drive down operational costs but also ensure wider profit margins. These lower costs can eventually be passed down to customers or can bolster the financial health of the companies.

“With this new payment rail, you can expect more competition to enter the market,” Botha said. “Typically, when we see more competition, you should expect there to be pressure on those costs, which essentially means that there’s more requirement for creating those operational efficiencies to try and expand those margins as wide as possible.”

Reducing the manual components of the operation is also important. Tavilla noted that automation helps create greater efficiencies and can reduce the errors that result from paperwork or other non-digital methods.

“This is a great opportunity with FedNow for businesses and operations to improve automation,” Tavilla said. “It’s the first time in 40 years we have this new rail and this new technology, especially in the payments industry.”

Mitigating the Challenges of 24/7 Settlements  

Automation can be considered the golden ticket to ensuring that FedNow payments are leveraged to their highest potential. The use of automation ensures that payments are processed instantly, securely, and cost-efficiently—something that’s difficult to get from traditional payment flows designed for more traditional payment rails.

“Companies onboarding FedNow payment rails will need their operational flows to match the nature of what the payments are to ensure a couple of things,” Botha said. “One of the main things is to ensure customer adoption. You need to create that confidence in what has been adopted more widely and help create that fast adoption across the market by creating trust in what the process is.

“The second thing is to match your customers’ expectations. If customers are making payments in real time, and there are any issues or discrepancies, they want to know the results of those in the same nature as the payments taking place.”

How Liquidity Risk Can Be Managed Effectively

With the launch of FedNow, treasury teams now have the task of ensuring that liquidity is accessible to settle payments 24/7. Again, this is an area where the use of automation could significantly mitigate risk.

If treasury teams are reliant on legacy platforms or processes for their reporting requirements, they may be exposing themselves to more operational risk with instant payments’ 24/7 settlements.

“An effective way of looking at this would be to deploy automated reconciliation and automated reporting solutions with real-time reporting capabilities,” Botha said.

Botha emphasized that it is vital for treasury teams to have continuous access to the real-time liquidity status to manage their risk more effectively.

With Peak Times Approaching, Should Banks and PSPs Look to Cloud Hosting?

As we approach the holiday season, particularly Black Friday and Christmas, payment volumes are expected to spike. It’s important for businesses to leverage the necessary tech platforms to ensure they’re set up for success.

“Modern technology platforms that have the option to be hosted via a cloud are an effective way to reduce any risk around shortfalls or any errors within your infrastructure setup,” Botha said.

“It’s a more cost-effective way for businesses to host their infrastructure with these multi-tenanted environments that these large cloud providers have to offer. So you actually pay for the space that you’re requiring without having to provision for these huge spikes well in advance,” he said.

Where Instant Payments Are Heading

Instant payments will keep growing, and as the space evolves, banks and PSPs will need to evolve with it. Implementing and leveraging the latest technology to guarantee their customers a fast, cost-effective, and safe way to send payments will be key.

“With a new system like FedNow and instant payments, there’s a lot of potential for businesses to improve efficiency—whether it’s through automation, digitization, reduction of manual processes and also from a data capacity perspective by using cloud technology that increases capacity for businesses as well as other players,” Tavilla said.

Said Botha: “I would suggest having conversations with all different actors within the payment space, within these geographies, to really build that trust within the U.S. market with regards to FedNow payments.”

The post As Banks and PSPs Look to Offer Instant Payments, Automation Will Be a Game-Changer appeared first on PaymentsJournal.

FedNow is continuing to gain traction after its launch in July, with roughly 108 organizations now sending and receiving on the network.

Earlier this month, Michael S. Barr, Vice Chair for Supervision at the Fed, revealed that FedNow will see steady growth stating:

“While current volumes on FedNow are small, I expect that participation will grow over time and be a significant addition to, and advance on, the existing payments infrastructure,” he said. “But decisions on how widely available the service will be rest with financial institutions. We have provided the rails. Innovation by private depository institutions will determine whether these services reach a broad range of households and businesses.”

Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, agrees and also expects to see more developing in the coming months.

“We anticipate widespread adoption and ubiquity will build over time, bringing the benefits of instant payments to communities nationwide and improving the way households, businesses and governments send and receive payments,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive in a press release.

“RTP has currently has over 370 FI participants, which might seem like a small fraction of the nearly 10,000 U.S. banks and credit unions,” she said. “However, RTP’s network currently reaches 65% of U.S. DDAs.”

FedNow Is Here … What’s Next?

There’s no time like the present for financial institutions to leverage FedNow to help modernize their current payment systems. But before FIs jump on board, they need to consider a few factors.  

FedNow offers a plethora of advantages that any company would like to have, but it’s certainly not a one-size-fits-all solution. Financial institutions, especially, should begin by looking to their customers—are they a small bank or a large bank, for example.

“Some of the smaller financial institutions feel more comfortable working with a payment system that’s offered by the central bank because they think it’s more objective,” Tavilla said. “They don’t want to work with or offer products on a solution that’s offered by their large competitors.”

Smaller financial institutions also rely heavily on the partnerships they have with service providers. Therefore, looking to implement a new service would greatly depend on the availability and timelines of their service provider partners.

Overall, Tavilla recommends that financial institutions first determine which solutions make the most sense for their own operations.

“The key is to look internally at your organization and what you need and what makes sense,” Tavilla said. “Overall real-time payments are important and here to stay. For the first time in 40 years, you have technology that can move money in real-time, which is a critical fundamental component. It’s just a start.”

“You need to find solutions, or you can develop products that you know leverages or takes advantage of this capability,” she said.

The post More than 100 Financial Institutions Are Participating in FedNow appeared first on PaymentsJournal.

The FedNow instant payments rail has the potential to be a boon for smaller financial institutions, including credit unions and community banks. By leveraging FedNow, these smaller institutions can expand into business services such as on-demand payroll services and vendor payment tools, offering faster and more convenient payment options.

During a PaymentsJournal podcast, Jon Budd, CEO of Juniper Payments, a PSCU company, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, spoke about the future of real-time payments and what they mean for small financial institutions. They explained that although participation is optional for banks and credit unions, the move toward instant payments offers new opportunities for credit unions and community banks to attract new customers and increase revenue.

FedNow Could Open New Angles for Credit Unions

The process of setting up faster payments takes time because it involves significant changes to the banking system, moving from batch processing to real-time payments, available 24/7.

“It’s a slow-rolling snowball that will build momentum over time,” Budd said. “FedNow is a top-down initiative. Now that it has been deployed, it’s up to 10,000 financial institutions to upgrade their systems to offer this technology to consumers and businesses.”

And among the financial institutions participating are many smaller institutions that have stayed on the sideline up to this point.

“Many credit unions, as well as regional and community banks, have more trust and prefer to participate in FedNow because it is operated by the Federal Reserve, as opposed to RTP, which is a private system operated by their larger bank competitors,” Tavilla said. “Overall, it is definitely a positive development because it gives financial institutions options, and it also offers resiliency for instant payments overall.”

According to Budd and Tavilla, credit unions have an opportunity to leverage FedNow as they work to get into the small-business space—whether it’s offering on-demand payroll services or tools for small businesses to pay vendors and receive money from vendors.

“According to several studies, over 70% of consumers and businesses look to their primary financial institution—which certainly includes credit unions—to offer faster payments, including real-time and instant payments,” Tavilla said. “This is a great opportunity for credit unions to participate and innovate upon real-time payments.”

Real-World Instant Payments Scenarios

Instant payments can be a real game-changer, helping consumers and businesses in various scenarios. Budd relayed a recent experience he had while buying a car.

“I purchased a vehicle online from a private seller located about 1,500 miles away from me in Kansas,” Budd said. “I flew to Reno, Nevada, to inspect the vehicle and confirm its condition matched the online pictures. We agreed on a predetermined price, and the seller opted for a cashier’s check. I provided the check, and he called the issuing bank, a small community bank in Kansas that I’ve had an account with since I was 8 years old. I’ve never waited more than about three rings for someone  to pick up a call, but this time it took 20 minutes to reach someone because the bank was going through a phone system transition.”

The experience might have gone differently, Budd explains, with instant payments.

“I could go to my app and initiate the transaction, and as soon as the seller refreshes his account information on his mobile app, he would see that the funds have been deposited. The whole process would take roughly 60 seconds,” Budd said. “That’s a game-changer. Anytime you would be using a wire or a cashier’s check is a perfect time for an instant payment.”

Budd’s example is just one of many use cases involving instant payments. Funding digital wallets, paying gig workers, and sending disbursements for car loans and mortgages are just a few scenarios we expect to see more of.

In fact, according to Tavilla, the quick disbursement of loans could be one that small financial institutions specialize in. “Many consumers prefer credit unions and smaller financial institutions due to the personal relationships and better rates they offer,” she said. “These financial institutions often serve businesses in their communities, making it possible to streamline billing, enhance transparency, and improve cash management.”

Misconceptions About Instant Payments

According to Budd and Tavilla, there are many misconceptions related to FedNow, including that the government will get rid of paper currency and track consumers’ transactions. But these concerns are off the mark.

“We’ve been operating ondigital currencies for decades,” Budd said. “FedNow is simply just another avenue, a kind of ‘toll road’ to do things quicker than some of the alternatives out there. There’s not necessarily more data that the Federal Reserve could look at as compared to what they’ve been looking at before, but that’s certainly not the intention.”

Another misconception, Tavilla said, is using FedNow as a verb. “People saying, ‘I’m going to FedNow you,’ like ‘I’m going to Venmo you,’ which you wouldn’t be able to do because the Federal Reserve doesn’t provide services to consumers. FedNow is a behind-the-scenes rail similar to ACH.”

It’s important to remember that FedNow is a product upgrade, which will be standard in the future.

“We moved from dial-up internet to high-speed internet, and now that is standard,” Tavilla said. “Similarly, one day, we’ll receive our payments instantly without having to wait for days to receive our paychecks and other payments.”

Conclusion

The FedNow instant payments rail has the potential to usher in a renaissance for smaller financial institutions, such as credit unions and community banks. These institutions, with their strong customer relationships and local presence, can leverage FedNow to expand their services into the realm of real-time payments. This shift offers a range of exciting opportunities, including on-demand payroll services and efficient vendor payment tools, providing faster and more convenient payment options for businesses and consumers.

To remain competitive and attract customers, smaller financial institutions will need to offer services that match or exceed what larger banks can provide. Failing to adopt modern payment solutions like real-time payments could lead to a loss of market share and a decline in competitiveness.

Overall, the introduction of FedNow represents a significant step forward in the world of payments. Smaller financial institutions can seize this opportunity to expand their services, cater to evolving customer demands, and solidify their positions as trusted and innovative players in the financial services industry.

The post FedNow Could Mean a Renaissance for Smaller Financial Institutions appeared first on PaymentsJournal.

In a recent podcast, PaymentsJournal talked with experts from different parts of the payments world to discuss how real-time payments are proceeding throughout the world, and particularly in the United States and Australia. It featured Elisa Tavilla, Director of Debit Payments, Javelin Strategy; Adrian Lovney, Chief Payments & Schemes Officer, Australian Payments Plus; Nathan Churchward, Payments Domain Lead, Cuscal; and Kate Knudsen, Senior Program Director, BHMI.

With the launch of FedNow, the United States has fully embarked on its journey toward real-time payments. Across the globe, real-time payments are creating not only competition among payment methods but also new use cases, making previously unattainable services accessible to businesses and consumers.

Yet the road to global ubiquity in real-time payments has challenges. Technical hurdles, legacy systems, and the imperative of interoperability need to be overcome. In a world with seventy-nine countries operating real-time payment systems, achieving cross-border real-time payments requires diplomacy and meticulous planning. Furthermore, the modernization of outdated back-office systems is imperative to keep pace with the exponential growth in real-time transactions. The good news is that businesses recognize this urgency and are upgrading technology infrastructures and streamlining processes.

Real-Time Payments in U.S. and Australia

Real-time payments are quickly becoming more widely available throughout the world. In the United States, FedNow’s launch in July is starting to increase traffic and demand for real-time payments.

“In the U.S., the FedNow service recently launched with 35 financial institutions,16 service providers, the Department of the Treasury, and more set to join,” Tavilla said. “The RTP network, run by The Clearing House, hit 500 million transactions with over 370 participating institutions. With two real-time gross settlement systems live in the U.S. now, I’m optimistic that it will help accelerate the growth and adoption of instant payments here [in the U.S.].”

In many cases, real-time payments are much more developed abroad. For example, Australia in 2018 launched its New Payments Platform (NPP) for real-time payments, and it has taken off ever since.

“Around 30% of the volume that was previously processed through the bulk Electronic Clearing System in Australia has now transitioned to NPP in the past six years,” Lovney said.

Initially, purchases on the platform were mostly P2P, but now, it is increasingly used by businesses and corporations. Some examples include paying taxi or Uber drivers at the end of their shifts and making insurance or emergency payments.

According to Lovney, the next phase of use cases will involve recurring (bulk) debit payments, such as subscriptions or utility payments.

“We expect to see bulk payments coming from businesses, corporations, and government entities, such as salary or dividend payments,” Lovney said. “Australia has set a goal to potentially phase out the ACH system by around 2030, approximately 12 years after the launch of NPP.”

As Churchward hinted, all of this is slowly creating significant competition among payment methods.

“During the pandemic, as cash usage declined and electronic payment methods increased, including ACH, we saw significant growth in account-to-account payments, especially person-to-person credits, accounting for 38% of the total payment volume growth,” Churchward said. “However, NPP’s growth has outpaced that of ACH. Currently, real-time payments represent 37% of all account-to-account credit transfers among our clients, which include banks and payment service providers.”

But real-time payments are creating new use cases, not just the substitution of existing ones.

“Payment service providers, in particular, are offering receivables management services to businesses using account-to-account payments that weren’t available before NPP,” Churchward said. “Customers love using Pay ID, a feature that links their mobile number or email address to their bank account—80% of payments received by our payment service providers from business customers use this feature.”

Challenges in Implementing Real-Time Payments

The United States has over 11,000 financial institutions, and many of them, especially the smaller ones, rely on legacy systems.

“Transitioning to a payment system that operates 24/7, 365 days a year will take time, and ensuring everything works seamlessly together (interoperability) is another task at hand,” Tavilla said.

Adding to the overall complication is the fact that the United States has two operational systems in place, FedNow and RTP. As they were designed independently, interoperability is a concern.

“Both FedNow and RTP are using ISO 20022 messages, which should facilitate interoperability not only within the U.S. but also with international real-time payment systems,” Tavilla said. “Both systems are continually introducing new features, with FedNow exploring cross-border capabilities and directory services.”

And that is just in the United States.

Seventy-nine countries have at least one real-time payment system in operation, and integrating them all for real-time cross-border payments will be a real challenge. This will take diplomacy and careful planning by individual countries.

For example, the NPP in Australia is in the final stages of launching a dedicated real-time international payments business service to process cross-border transactions. The service clearly differentiates international payments from domestic ones and attaches information about the sender, including name and date of birth.

“This international payments business service is designed to accommodate various types of international payments, be it through SWIFT, TransferWise, Western Union, or others, and ensures that the domestic leg of these payments is instantly available,” Lovney said.

Dusty Back Offices Are an Impediment

Amid the technical and diplomatic challenges in implementing real-time payments, other challenges are much more mundane.

“The most significant challenge we’ve observed for companies aiming to support real-time payments is their outdated back-office systems,” Knudsen said. “While they invest in modernizing their payment front ends, the back office often lags behind. This is a big issue because the back office is where payment processing happens after authorization by the front end.”

“Many of these back-office systems were created decades ago and weren’t designed for real-time payments, making it difficult for them to keep up with the speed and increasing volume of real-time transactions,” Knudsen added.

Another problem: Because legacy systems were initially designed exclusively for card-based transactions (ISO 8583), they lack the flexibility to handle new kinds of transactions, such as person-to-person (P2P) payments.

“The good news is that many companies are recognizing the urgency of modernizing both their front-end and back-end systems to keep pace with the rapid growth of real-time payments,” Knudsen said. “We’re seeing progress in terms of upgrading technology infrastructure and implementing APIs to enable real-time processing. Additionally, companies are streamlining back-office processes, simplifying workflows, and automating manual tasks to align better with the speed of real-time payments.”

How Leading Countries are Driving Real-Time Payment Adoption

In 2022, India led the world with a total real-time transaction volume of 89.5 billion, representing 46% of global real-time transactions. In the same year, Australia processed 1.2 billion real-time payments, which is obviously far less in absolute terms but only 25% less than India on a per-capita basis. The United States recorded a real-time transaction volume of only 1.8 billion in 2022, way less per capita than India or Australia. But it seems more than likely that this will change with the advent of FedNow this year.

According to Churchward, making real-time capabilities open to non-banks and focusing on P2P payments to address customer needs is key. These steps can foster adoption and drive higher use of real-time payment systems in countries that are lagging. At least that has been Australia’s experience.

“One noteworthy feature in both the Indian and Australian markets is a focus on peer-to-peer payments and facilitating access for payment service providers that are non-bank entities,” Churchward said. “This approach has led to substantial transaction volumes.” 

“Enabling P2P payment platforms that address common pain points for consumers and businesses is a fundamental use case. These pain points include ensuring interoperability between P2P platforms and providing real-time notifications and reconciliations for businesses,” Churchward added.

As more real-time payment schemes come into play, focusing on interoperability will be key.

“Payment systems moving toward ISO 20022 is a strong foundation for cooperation,” Lovney said. “Additionally, frameworks like the Open Wallet Coalition can underpin efforts to create interoperability with other systems worldwide.”

Some companies still have skepticism about real-time payments. Churchward indicated that companies need to keep up with their clients’ demands.

“Real-time payments can be challenging but highly rewarding,” Churchward said. “They offer significant value to your clients and help them stay competitive in a rapidly evolving landscape.”

And a big part of getting real-time payments right is having the appropriate back-office software. “Software plays a crucial role in enabling real-time payments,” Knudsen said. “It needs to support any transaction type and provide connectivity for processing payments in real time, both domestically and internationally. Automation is key. Automating settlement and reconciliation processes streamlines real-time payments.”

Conclusion

Real-time payments have evolved from a budding concept to a transformative force. The industry’s focus on interoperability, adoption of standardized frameworks, and investments in modernization indicate that real-time payments are here to stay. As skepticism wanes and adoption grows, the future of payments has a real-time bent, offering immense value to clients and ensuring competitiveness in a rapidly evolving landscape.

With software playing a pivotal role in enabling such transactions, the stage is set for real-time payments to revolutionize the way we transact, offering not just speed but also efficiency and convenience.

The post In 2023, Real-Time Payments Expanding Across the Globe appeared first on PaymentsJournal.

Real-time payments through the RTP^® network have gained significant traction, presenting valuable opportunities for businesses to optimize cash flow and improve their operational efficiency. As the the FedNow^® Service expands availability in 2023, the impact of instant payments is set to grow even more. Industries such as payroll and transportation have been early adopters, leveraging real-time payments to accelerate wage access and speed up payments for sales.  

In a recent PaymentsJournal podcast, Adam Carter, VP of Faster Payments, Global Treasury Management at U.S. Bank, and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, explore the specific sectors and use cases driving the adoption of real-time payments and the transformative potential they hold for businesses in the coming years. They also address a surprising finding: Contrary to expectations, real-time payments have fueled transaction growth without displacing traditional payment methods like ACH and wire transfers.  

The Origins of Real-time payments 

When banks were getting ready to launch real-time payments through the RTP network, they believed it would mostly be used for business-to-business transactions. But after the network launched, they realized that assumption was wrong. “Instead, there was a significant amount of -business to consumer and even person to person activity,” Carter said. “They didn’t anticipate how innovative fintech partners would be in using the network to improve their clients’ experience with services like digital wallets.”  

In many cases, younger people are driving the adoption of RTP.  

“While we do believe that older generations will also catch up and start using these services, initially, it was mainly younger people who embraced them because they are used to this kind of instant interaction,” Carter said. “There definitely seems to be a demographic factor at play here.” 

With the rise of the gig economy, getting quick access to wages has become the norm. Even employees working in large retail stores can now access their daily wages through various earned-wage providers.  

“It’s not just about Uber; that’s just a good example,” Carter said. “After working a few hours as an Uber driver, you can access a portion of your earned wages with just a few clicks and have it in your account instantly. This allows you to use the money right away for things like buying groceries or filling up your car with gas, helping you on your financial journey.” 

Changes in RTP Over the Past 5 Years 

In recent years, the real-time payments space has grown enormously. Services like Zelle, Visa Direct, MasterCard Send, and the upcoming Fed Now Service have brought about shifts in customer habits when it comes to financial interactions.  

Previously, customers would keep money in separate accounts and wallets without frequent or fast transfers between them, as traditional methods like ACH transfers took several days. However, with the emergence of real-time rails, customers can now move funds much faster and in different ways from before. Digital wallets, once used occasionally for personal transactions, are now being utilized by small businesses that require immediate access to funds for operations and purchases.  

“The ability to move funds instantly has made these services more consumer-friendly,” Carter said. “Moreover, the introduction of real-time payment systems has led to overall transaction growth, with many transactions being entirely new and not cannibalizing existing methods like ACH and wire transfers.” 

According to Bodine, there was an initial belief that real-time payments would replace ACH and wire transfers. “The prevailing wisdom has now shifted to the coexistence of different payment methods,” Bodine said. “The original expectation of instant payments overtaking ACH and wire transfers has been proven wrong.” 

Early RTP Adopters 

Early adopters of real-time payments can be seen in three key industries. First, the fintech sector has leveraged real-time payments for various services, including digital wallets and similar platforms. These were among the initial adopters, and they have experienced significant growth.  

Second, industries related to payroll have embraced real-time payments for accelerated wage access, employee reimbursements, and travel expenses. The immediate availability of funds has proved a valuable benefit for consumers.  

Third, the transportation industry, particularly in freight movement and trucking, has seen a notable adoption of real-time payments. Timely disbursements play a crucial role in this sector, and real-time payments enable efficient and just-in-time delivery of funds upon the arrival of freight at its destination. 

Bodine relates a good example of how real-time payments have taken off in his home state of Indiana. 

“In my agricultural area in Indiana, where checks were commonly used, I’ve noticed that small businesses, such as agricultural suppliers and tractor maintenance providers, are now accepting real-time payments, via iPhones,” Bodine said. “Another example: Beverage companies delivering to stores, like 7-Eleven, are starting to receive real-time payments instead of issuing checks. 

“It’s fascinating to see how real-time payments are infiltrating the traditional check and cash systems in these areas.” 

Carter concurred and provided an additional example of how RTP is infiltrating markets with an example from a U.S. Bank client, Driveway.com. 

“Previously, when Driveway acquired or sold vehicles, they would give customers a check,” Carter said. “With real-time payments, customers can now process the payment request while the driver is present, and the funds instantly appear in their account.”  

The ability to see the money in their account immediately adds to the positive experience of the transaction. Furthermore, Bodine notes that there is also satisfaction in being able to send funds immediately.  

“Similar to the mentality behind using cash, people want the reassurance that the services they’ve received are paid for in real time,” Bodine said. “Instant payments provide a social and psychological aspect where individuals feel a sense of security and immediacy in completing transactions.” 

The Future of Instant Payments 

Different instant payment services, like the RTP network and FedNow Service, are expected to coexist to meet the growing demand for fast and convenient transactions. The Federal Reserve has developed the FedNow Service as its own instant payment solution. The FedNow Service began roll out in July 2023 and will expand availability over the next few years. Instant payment services will likely involve servicing both payment rails.  

Cross-border payments are also set to expand, with the key to success lying in collaboration between banks and networks.  

“Building a real-time network within a single region, such as North America, is relatively straightforward due to the integrated economy,” Carter said. “But expanding beyond that requires careful consideration and partnerships with networks in different countries.” 

The current interest rate environment is also a boon to the adoption of real-time payments. “Real-time transactions enable customers to retain their funds for longer, allowing them to leverage and earn interest on their cash longer before making payments,” Carter said. “This shift has led to businesses considering a transition from traditional ACH payments to real-time payments, as it allows them to maximize the value of their funds by extending their days payable outstanding.” 

In the next year or two, instant payments will have a transformative impact on businesses. Businesses need to understand how the movement of money in real time will affect their back-end operations and be prepared to adapt their processes accordingly. 

“A significant percentage of businesses (around 56%) are already planning to use instant payments by the end of 2024, and the remaining businesses should begin working on implementing it as well,” Carter said. “However, integrating instant payments into existing business processes and procedures will require careful consideration and potential adjustments.” 

From a banking perspective, it is crucial for institutions to be prepared to receive instant payments. Regardless of the size or type of bank, being on the instant payment rails in receive mode is essential.  

“Customers will seek out banks that can facilitate instant payments, and banks that fail to provide this service may risk losing customers,” Bodine said. “Therefore, banks should prioritize developing strategies to enable instant payment receipt and subsequently focus on implementing the capability to send instant payments as well.” 

As younger generations embrace the convenience and immediacy of real-time payments, businesses and banks must adapt to integrate these systems and meet customer demands. Collaboration between banks and networks, the expansion of cross-border payments, and the potential for longer fund retention for interest rate benefits further highlight the transformative potential of real-time payments. It is crucial for businesses and banks to understand and prepare for the impact on their operations and stay competitive in the evolving financial landscape. 

The post Instant Payments Set to Soar As The FedNow Service Comes Online appeared first on PaymentsJournal.

After recently surpassing the 500 million instant payment milestone at the end of July, The Clearing House’s RTP network announced expanded availability for its Request for Payment (RfP) capability. More participating RTP financial institutions now support the RfP feature, providing businesses and their customers a more streamlined and efficient way to request and make payments. Initial permitted RfP use cases include consumer bill pay, business to business payments, and account to account transfers.

The RfP functionality allows a business (biller) to request an instant payment from a customer. The customer (RfP recipient) can send an RTP payment in response to pay the bill precisely when they want (24/7) or schedule the payment for a future date. The payment occurs instantly over the RTP network with the biller receiving access to immediate and irrevocable funds, and the payer receiving immediate confirmation that the biller has received their payment. This setup provides customers with more control over their money and reduces the risk of insufficient funds when autopay is debited with ACH.   

BNY Mellon and Citi collaborated with Verizon to be the first company to send RfP messages to consumers who bank with Citi in 2021. Today, Bank of America, Fifth Third, PNC Bank, U.S. Bank, and Wells Fargo, which provide banking services to many high-volume corporate billers, are also among the RTP participants offering RfP capabilities. Additionally, technology providers FIS, Fiserv, Jack Henry, and Open Payment Network, are certified to provide RfP to their RTP participating financial institution customers.

Similarly, the newly launched FedNow Service also offers an RfP capability. Several service providers, including ACI, Alacriti, BNY Mellon, ESC Fin, Inc., Jack Henry, Open Payment Network, Pidgin, and Vertifi Software have received certification to send RfPs on the FedNow network. The Federal Reserve also launched an industry work group to establish best practices for consistent customer experience using RfP in December 2022.

As financial institutions and their customers broadly adopt instant payments and enable the RfP capability, more businesses and consumers will have better control and customer experience in making payments.

The post RTP Announces Broader Request for Payment Availability appeared first on PaymentsJournal.

Digital banking has emerged as a transformative force in the financial industry, reshaping the way individuals and businesses manage their finances. It encompasses a range of services that are accessible through online platforms, mobile applications, and other digital channels allowing customers to manage their accounts and conduct financial transactions like checking balances, transferring funds, and making payments to more complex activities such as applying for loans or investing, anytime and anywhere.

One of the primary advantages of digital banking is the simplicity and convenience it offers. Customers no longer need to visit physical branches during working hours to complete routine banking tasks. Instead, they can access their accounts 24/7, perform transactions, and access a wealth of financial information with ease. This convenience has significantly improved the customer experience and this improved customer satisfaction has driven the widespread adoption of digital banking solutions.

FedNow: Transforming Real-Time Payments

Last month, the FedNow initiative was launched by the Federal Reserve in the United States to modernize the country’s payment system and enable faster, more efficient, and secure transactions. It aims to provide individuals and businesses with access to instant payment services, enabling funds to be transferred and available for use within seconds.

The current payment infrastructure in the United States relies heavily on the Automated Clearing House (ACH) system and wire transfers, which often involve delays of several hours or even days for funds to be settled. The introduction of FedNow is expected to have a significant impact on the financial landscape. It will promote the development of new financial products and services that leverage real-time payments, contributing to a more dynamic and customer-centric ecosystem.

According to the “What‘s Going on in Banking 2023” study from Cornerstone Research, roughly three in 10 financial institutions said 2023 will be the year they deploy real-time payments on top of the 18% of banks and 12% of credit unions already offering them. Many have been waiting for FedNow, with Cornerstone revealing that roughly four in 10 institutions have yet to determine their real-time payments strategy—and a quarter said they will wait for FedNow to deploy.

How FedNow Will Impact the Payments Industry

FedNow is expected to bring about significant changes to the payments landscape. Here are some ways in which FedNow is likely to impact payments in the U.S.:

1. Real-time payments: FedNow enables instant, 24/7/365 payments, allowing individuals and businesses to send and receive funds instantly. This has numerous benefits for individuals and businesses, including faster payroll processing, more intuitive bill payments, improved cash flow improving reconciliation, cash forecasting and liquidity management, and enhanced overall transaction efficiency. This will also eliminate the delays associated with traditional payment methods, such as checks or ACH transfers.

• Enhanced accessibility: Small businesses, corporate and individual consumers will have access to instant payments regardless of the financial institution they use. This means that even smaller banks and credit unions will be able to provide FedNow real-time payment services to their customers, promoting financial inclusion and leveling the playing field for all participants in the payments ecosystem.

• Improved efficiency: Real-time payments, facilitated by FedNow, will enhance the efficiency of transactions, enabling faster and smoother cash flow. Businesses will have quicker access to funds, which can improve their working capital management and improve the predictability of capital via credit and loans. Additionally, consumers will experience faster settlement of bills and payments, leading to more accurate budgeting and reduced late payment fees.

• Support for innovation: The introduction of FedNow is expected to spur innovation in the payments industry. Financial institutions, fintech companies, and other stakeholders will have the opportunity to innovate and develop new products and services that leverage the real-time capabilities of FedNow. This could include innovative payment apps, integrated payment solutions, expanded data and directory offerings and an overall improved payment experience both for consumers and businesses.

• Reduced reliance on cash and checks: Consumers and businesses can adopt digital payment methods more readily, leading to a reduction in paper-based transactions. This shift could result in increased security, efficiency, and cost savings across the payment ecosystem. FedNow will also support innovative payment solutions, such as request-to-pay, which allows users to send payment requests to others, reducing the need for paper checks and streamlining the bill payment processes. The system will be interoperable with existing payment networks, enabling seamless integration with various digital banking platforms and financial service providers.

• Enhanced global competitiveness: The availability of real-time payments through FedNow will enable U.S. businesses to compete more effectively in the global marketplace, particularly with the adoption of ISO 20022 standards. Currently, more than 60 different countries possess a real-time payments infrastructure, with experts projecting that approximately 72% of the global population has or will soon have access to real-time payments. Real-time payments are forecast to facilitate additional economic output to the tune of $173 billion in formal GDP, as well as forecasted to drive $184 billion in aggregated net savings for consumers and businesses.

Implementing FedNow

Now that we’ve explored how FedNow will impact the industry, we need to highlight the key steps financial institutions need to implement to ensure they are prepared for this initiative:

• Understand the market trends. Survey customers to learn about their current banking systems and challenges.
• Educate and assess the needs of your specific customers. How many of your individual customers, small business and business customers will want to use instant payments?
• Fraud and risk. Review your fraud, security and data protection strategies and platforms, as well as operations, to assess the impact of FedNow and real-time payments. If necessary adapt your process, operations and platforms to address real-time payments.
• Evaluate technology, services, and software. To make FedNow work seamlessly in your organization, you may want to work with a vendor that can provide ready-made technology solutions for both digital banking access to and processing of FedNow transactions. This includes a digital platform that supports FedNow origination and receipt, as well as request-for-pay. This also implies leveraging, where possible, a digital provider that supports ISO 20022 along with an extensive API repository and event driven architectural framework; allowing you to be agile and take full advantage of the FedNow and real-time payments initiative. These items noted above will be key ingredients in executing your real time strategy.

It’s important to note that while FedNow promises significant advancements in the payments landscape, its full impact will depend on its successful implementation, adoption by financial institutions, and the development of complementary services and technologies by market participants.

The post 6 Ways FedNow Will Transform the Payments Industry appeared first on PaymentsJournal.

Whether paying for a taxi ride from the airport, optimizing your company’s working capital position or making that impulse purchase at the retail checkout, payments innovation has accelerated in every industry imaginable and has reshaped how businesses and individuals make payments. With the increased adoption of real-time payments in recent years, other innovations have come to the fore to accommodate the demands for faster payments. Enter ISO 20022.

What is ISO 20022?

ISO 20022 facilitates the exchange of financial transaction data by using standard messaging formats that present a richer, more powerful data structure.

A changing regulatory environment, complexity of new payment flows, and the need for improved data quality to support automation have created a growing need for corporations and financial institutions to adopt a new standard of financial messaging. The benefits derived from additional and more structured information in financial messages include a reduction in investigations, automation of reconciliation processes and a faster cash application cycle.  

The aim of ISO 20022 is to replace proprietary messaging formats with a standardized industry format that is based on well-defined data elements. Using a common payments language between banks and corporates will reduce translation requirements, eliminate costs associated with exceptions and reduce errors. In addition, preventing data loss, which causes payment delays and increases inquiries, will improve the speed of payments along the payment chain and facilitate payment reconciliation within end-user ERP systems.

Moving from MT (FIN message types) to MX (FIN+ message types) will further lay the foundation for innovations like the automation of inquiry and service processes and flexible payment routing across different payment rails like instant payments, ACH (Automated Clearing House) or CBDC (Central Bank Digital Currency).

MT and MX messaging

FIN message types (MT)

The industry has been using MT messages for over 40 years and they have evolved from replacing telex communications between banks to supporting more complex payment use cases in the inter-bank space as well as between banks and corporate customers. Created at a time when storage cost was a major consideration, MT messages use a limited set of fields and support about 10 kilobytes of data. To accommodate local practices, these messages have been customized, leading to variability and straight-though processing challenges. In many cases, data needs to map into free format fields and be parsed by the receiver. A change in sequence of data or a misplaced ‘/’ can lead to manual processing.

FIN+ message types (MX)

In comparison, MX messages have a richer and more granular data structure that supports more parties in the payment chain and accommodates structured remittance data. Supporting up to 100 kilobytes, the message has the capacity to support more complex payment use cases and sufficient structured data to support the automation needs of banks and corporates.

For example, instead of a single reference number field, the Customer Credit Transfer message supports six, including an end-to-end reference number that originators can populate and that is transported unaltered through the payment chain. Structured remittance data supports the inclusion of multiple invoices, down to the line-item level, including applicable invoice numbers, as well as line-item codes such as the Universal Product Number or the International Standard Book Number (ISBN).

Adoption of these new data elements will be an opportunity for faster, straight-through payment processing. For example, the greater specificity in data elements describing a payment party supports the segregation of name, structured address data and, if needed, account name data. This granularity supports the opportunity for greater automation in compliance screening processes and a reduction in false positives.

On the road to ISO 20022

Leading the way to a wider adoption of ISO 20022 are interbank payments and messaging platforms such as the U.S. Federal Reserve’s Fedwire Funds systems, CHIPS^[1], SWIFT^[2], and TARGET2^[3]. Their adoption of the standard will follow a specific timeline to grant other organizations enough time to adopt ISO 20022.

Larger corporations and financial institutions are preparing more targeted adoptions that will be in sync with industry guidelines. Other companies are taking a more cautious approach and are awaiting guidance from their banks and technology vendors. Smaller financial institutions will depend fully on the bank platform vendors and the testing schedule set by the Federal Reserve.

Although the transition to ISO 20022 may be a challenge, there are plenty of tools, FI support, and third-party solutions that can ease the transition. An organization’s approach to adoption should be well-defined and in line with its needs and goals.

The particular challenges of ISO 20022 adoption

Although ISO 20022 promises to provide many benefits, highlighted above, the reality is that its implementation may prove to be a challenge for most organizations. Here’s what they are up against:

• Boosting skill levels will be a concern with banks and businesses, as there doesn’t seem to be enough skilled personnel in the ISO 20022 field to educate and train, impeding wider adoption.
• Significant investment is required for modernizing legacy platforms and updating current systems, providing ISO 20022 education, and meeting the cost of translation of MT and MX message types.
• Scaling technology and testing to meet ISO 20022 will be complex.

Although these challenges may pose a real threat to ISO 20022 transition, individually to any one organization and collectively to the industry, they are not insurmountable. Much can be done to facilitate the transition.

Effective strategies for adoption

Here’s a look at what organizations can begin implementing today to start to prepare for full adoption of ISO 20022:

• Position education as a key to a smooth transition. This includes educating employees to gain a comprehensive understanding of ISO 20022. Banks can engage with their customers through educational campaigns.
• Reach out to bank partners and vendors to understand their timelines and experiences. Benefit from the experience of others and optimize your organization’s transition schedule.
• Fully exploit the rich data available. With ISO 20022, the increased data granularity should be conducive to data mining; the resulting insights may assist in enabling further automation and addressing transaction processing pain points, such as compliance screening false positives and manual reconciliations.
• Make ISO 20022 part of your payments’ modernization strategy. Gradually phasing out legacy systems and embracing new technology will position your organization to better mitigate risk and facilitate the migration and support of a digitalized payment ecosystem.

Migration to ISO 20022 affords opportunities

Adopting ISO 20022 is replete with benefits such as the potential for improved reconciliation, enhanced straight-through processing, and reduction of manual exception payment processes. These improvements are not automatic but will require an ongoing dialogue between banks, customers and vendors supporting the payment ecosystem. Banks can specifically look forward to the opportunity to provide an enhanced customer experience, lower costs due to reduced exceptions and better risk management.

With modernization of the messaging standards and data structures, along with collaboration among participants in the payments ecosystem, the adoption of ISO20022 offers the opportunity for a faster, more frictionless payment experience for all.

For more Treasury Management topics, visit Treasury Insights.  

Joanne Strobel, Head of Corporate & Investment Banking (CIB) Segments Solutions and Advisory for Wells Fargo Global Treasury Management (GTM), and Michael Knorr, CIB Industry & Advisory Lead for Wells Fargo GTM, co-authored the article. 

^[1] Clearing House Interbank Payments Systems
^[2] Society for Worldwide Interbank Financial Telecommunications
^[3] Trans-European Automated Real-time Gross Settlement Express Transfer System

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JPMorgan Chase experienced an outage on Tuesday, which disrupted all Zelle transactions and prompted users to take to social media to air their complaints. Not longer after, Zelle sent a tweet indicating that all systems were normal on their end and said that Chase was having “an issue with payment processing.”  

Although Chase—one of the seven co-owners of Early Warning, Zelle’s parent company—took ownership of the issue, it declined to reveal what caused the glitch and instead announced that the issue had been resolved by midday Wednesday.  

Modernizing Bank’s Legacy Systems is a Must 

Many banks are still using outdated and inadequate legacy systems that are incompatible with emerging technology and customer demands. Unfortunately, this truth is what has played out in full view: real-time payment networks created for app-based payment systems have clashed with banking systems originally designed to process paper checks. This disconnect has far-reaching implications and consequences.  

“These kinds of issues are going to come up. And [they] won’t be fixed until the industry goes to a true real-time processing scheme for their core systems, which is not likely to come any day soon,” Richard Crone, CEO of Crone Consulting LLC told American Banker. “The unexplained outage at Chase and its implications for Zelle point to the challenges of integrating real-time payment systems like FedNow with legacy batch-based bank systems designed over 70 years ago, which have to be adapted to accommodate non-repudiation and real-time processing requirements.” 

Modernizing legacy systems are a significant sticking point for many banks. Not upgrading these systems stands in the way of enhancing the customer service experience and boosting their profit margins.  

“It’s absolutely critical that banks and service providers sync their legacy and newer, digital, real-time payment systems,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “Customers expect a frictionless, fully-functional user experience, and when that falls short, even one time, you risk losing them forever.” 

The post Outage at Chase Bank Brings Zelle Payments to Abrupt Halt  appeared first on PaymentsJournal.

The demand for real-time payments is growing at breakneck speed. Yesterday, Nacha reported that Same Day ACH payments experienced a significant increase in the first half of 2023.  

According to ACH’s governing body Nacha, the value of Same Day ACH payments reached nearly $1.2 trillion, an increase of 51.7% from a year prior. The volume of 385.6 million Same Day ACH payments also showed an increase of 13.7% in the first half of 2023.  

What’s more, there were 199.4 million Same Day ACH payments in Q2 2023, which was an increase of 7.7% from a year prior. Those payments were valued at $612.6 billion, an increase of 26.1%. 

With ACH, consumers can easily access and manage their funds, as well as make online payments and easily transfer funds between accounts. Businesses are also benefitting by streamlining their payroll, accounts receivable, and accounts payable.  

The Clearing House’s RTP Network is also celebrating another historic landmark— exceeded the 500 million payment mark on July 22. Transactions on the RTP network in Q2 2023 reached 58 million for $29 billion. That’s an increase from 41 million transactions for $18 billion in Q2 2022. More than 350 financial institutions currently provide real-time payments on the RTP to both their customers and members.  

“The substantial increase in both RTP and Same Day ACH volume reiterates that consumers and businesses are using faster, real-time payments,” said Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research. “We will undoubtedly continue to see faster payments grow as more financial institutions adopt FedNow, RTP, and Same Day ACH to satisfy growing customer demand.”   

Although we have discussed how many businesses remain cautious against fully adopting RTP, it is still set to become the standard in payments in the very near future. Before adopting an RTP strategy, it is recommended to first get a real understanding of what your customers are looking for and adopting the best use cases to meet this market demand.  

The post Real-Time Payments Are Gaining Ground  appeared first on PaymentsJournal.

Today, the Federal Reserve announced the highly anticipated launch of the FedNow Service—the U.S.’s new instant payment system. FedNow enables participating financial institutions to safely transfer funds within seconds, around the clock, every day of the year—and make funds immediately available to their customers.

Among the initial FedNow participants are 35 banks and credit unions representing a diverse mix of large and small institutions across the country. Other early adopters include the U.S. Department of the Treasury’s Bureau of the Fiscal Service and 16 payment processing service providers that are working to onboard and enable FedNow for more financial institutions. The list of participants will undoubtedly grow in the months ahead.

The Federal Reserve developed the FedNow network to be inclusive and accessible to all 10,000 U.S. banks and credit unions of all sizes, bringing instant payments to businesses and consumers across the country. FedNow, along with The Clearing House’s RTP, will offer payment industry players vast opportunities to innovate and provide new products and solutions as real-time payments become more ubiquitous. Financial institutions that join FedNow can attract and retain customers and remain competitive with new instant payment services.

FedNow is an interbank payment system like ACH and FedWire, and not a consumer-facing service. Unlike Venmo or Zelle, there is no FedNow mobile app. Customers of banks and credit unions that participate on the FedNow network can use their financial institution’s mobile app, website, and other interfaces to send instant payments quickly and securely.  

As more financial institutions connect to FedNow and work with service providers to offer innovative solutions, more consumers and businesses will be able to enjoy the benefits of instant payments. For example, shoppers will be able pay for purchases with funds directly from their bank account in real-time, governments will be able to disburse tax refunds instantly, employers will be able pay their staff after each shift, and consumers will be able to make last minute bill payments without incurring late fees. These are only a few examples of potential real-time payments use cases. Today is the beginning of the pivotal transformation that FedNow and instant payments will bring to the U.S. and global payments ecosystem.

Overview by Elisa Tavilla, Director of Debit Advisory Services at Javelin Strategy & Research

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Real-time payments are changing the way money moves within the U.S. With payments processed securely, efficiently, and instantly, this can be a game-changer for both consumers and businesses. However, to implement real-time payments on a national scale, there are challenges that must be overcome, such as the need for a solid infrastructure.

During a recent PaymentsJournal podcast, Nick Botha, Global Payments Sales Manager/Sales Lead at AutoRek and Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, discussed the benefits of adopting real-time payments, operational considerations, and what we can learn from the UK’s implementation.

What Does FedNow Mean for Real-Time Payments in the US?

One of the biggest benefits of FedNow’s upcoming launch is that it will offer an instant payment option for both consumers and businesses. No longer will users have to wait – transfers  and settlements can take place within seconds. With other traditional payment options still experiencing delays and higher costs, FedNow will provide an innovative solution, helping the US modernize the payment environment.

“Having a government organization running real-time payments is going to be a bit of a game-changer in such a big market,” said Botha. “And with the number of benefits which FedNow has expressly defined, it eradicates the delay experienced by more traditional digital rails such as ACH transfers. One that’s more interesting to me and where we fit into the picture is that it creates new product offerings, encourages innovation, and creates competition.”

Botha explains that there will be an effect on the U.S. market. However, how much of an effect will be based on the level of adoption. Adoption of real-time payments has been considerably lower in the U.S. than it has in India, Brazil, and the UK.

In the US, Botha believes that organizations and regulators will be testing and monitoring regularly to determine where this new solution will be adding the most value.

Operational Considerations for Navigating FedNow

Although many organizations are eager and ready to adopt FedNow for its numerous benefits, including adding a competitive edge in the global marketplace, Botha says there are a few operational considerations to keep in mind.

 “The most obvious one on the surface is: how is this going to affect existing infrastructure and technology that these organizations have?” Botha asked.

“We must remember that these organizations have built or bought the existing infrastructure and technologies to accommodate certain payment flows, and with something new coming in, how flexible can your organization be?”

Botha also mentions that there are considerable costs involved with adopting both FedNow and instant payments, especially if this is a completely new experience for certain businesses.

Compliance and regulations are other considerations. It is yet to be determined what the Federal Reserve will include as part of their requirements. Organizations must remain flexible  to accommodate these regulations and change strategies accordingly.

Key questions to ask while pouring time and effort into the implementation of real-time payments are: How will this affect revenue? What if the demand is not there?

He also mentions training. How will it work? What benefits will customers be receiving? What will that mean for your internal stakeholders?

Bodine asks, “I think we touched a little bit in our previous conversation on the door that it opens up for fraud. Training is very important. Occupational fraud being a big component of any security or fraud program.”

New avenues for payments can quickly become the next target for fraudsters, yet Botha assures us that this might not be as much of a concern.

“Being run by a regulator does have an effect,” said Botha. “We’ve seen the FCA in the UK and how they’ve managed to partner up with industry players to make sure that fraud is not something that that’s been swept under the carpet. It’s brought to the forefront. It’s well understood. And that way the industry is able to combat some of these fraudsters and the potential for increased levels of fraudulent activity.”

Learning from Other Countries’ Implementations

Botha points out that, although the UK has successfully implemented real-time payments for some time, the FCA did not launch it from day one. Its implementation took more of a phased approach, something that the U.S. can consider emulating.

He believes that education is key, and communicating the benefits for users of real-time payments in the US would be critical to nationwide adoption.

“India has more than 5, 10, or 15 times the volume of transactions passing through their real-time payments schemes than the UK does, and likewise in China and Brazil,” said Botha. “So there definitely have been some success stories around real-time payments launched by regulators that the US could benefit from.”

Bodine adds, “I’m hoping that our institutions do have open ears as we move forward.”

In Closing

FedNow is poised to revolutionize the payments industry and will position the U.S. to further modernize its payments systems to remain competitive. In order to ensure successful adoption of instant payments through FedNow, organizations must count the costs, take a phased approach, and look to other regions to inform their adoption strategy.

Find out more about how AutoRek can help with your FedNow needs.

The post Real-Time Payments Adoption in the U.S. Requires a Pragmatic Approach appeared first on PaymentsJournal.

Real-time payment systems are becoming more common around the world, and the United States is about to hit its stride in that domain when FedNow debuts. This will have significant implications for all sectors of payments, including the business-to-business (B2B) sector.

In a recent PaymentsJournal podcast, Mike Kresse, Head of B2B and Money Movement at FIS, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed how real-time payments will play out in the B2B sector, and how the U.S. rollout will differ from how it played in other countries. They also delved into how interoperability, simplicity, and reduced cost will drive rapid adoption of real-time payments, even though that adoption does not have a direct mandate from the federal government. It’s similar to how movie streaming rapidly gained dominance over broadcast television.

Biggest Trends in Global B2B Payments

Although some countries have mandated the use of real-time payment systems for incoming and outgoing payments, the United States has not (yet) done so, reflecting its decentralized, market-driven approach.

“Adoption in the U.S. around real-time payments is going to be more focused around the use cases in specific industries,” Kresse said.

One such use case that is ripe for development is the automation of back-office processes, including collections management and accounts receivable and payable. Such automation is becoming more prevalent as companies seek to streamline their operations through technology.

As FedNow accelerates the adoption of real-time payments, a wider range of banks will seek to plug into its system. This brings opportunities but also certain risks.

“There’s a dark side to real-time payments—many of them become irrevocable, and that’s the problem we’ve seen in the industry as this starts,” Riley said.

As more people become accustomed to using peer-to-peer (P2P) apps to send money to friends and family, they will also naturally become more comfortable with the idea of using these apps for business transactions. As more businesses move online and embrace digital tools, they are also looking for ways to streamline their payment processes and make transactions more efficient. P2P payment apps have paved the way for this shift, and businesses are beginning to see the potential benefits of using these tools for B2B payments.

“It typically starts from a consumer-to-consumer standpoint, where consumers are looking to give other consumers money in real time,” Kresse said. “And ultimately that ends up being manifested in an app that’s typically sitting on a smartphone that’s really simple to use.”

The shift to incorporating the technology in the business world must take into account the different kinds of common transactions. “The consumer world has high volume of low-value transactions,” Riley said. “B2B is a world of low-volume, high-value transactions.” This demands a shift in fraud detection techniques and risk profiling.

As part of the shift toward real-time payments, there will be a move from accrual accounting to real-time ledgers. In accrual accounting, revenues and expenses are recognized and recorded when earned or incurred, regardless of when the actual cash transactions occur. As real-time payments take hold, companies will naturally move away from this.

Increasing Adoption of Real-Time Payments

The biggest drag on real-time payments adoption is the lack of interoperability between payments systems, particularly real-time systems. Globally, it will be important to craft a real-time payments system so hops between distinct systems are minimal.

“Even though The Clearing House and FedNow use the ISO 20022 message format, those systems are not interoperable. You cannot send a message directly on RTP and have it just transfer over to FedNow,” Kresse said

Another potential drag on adoption is that people don’t necessarily know why real-time payments are necessary or even a significant improvement on existing technologies. Given that there will not be a U.S. mandate for adoption of real-time payments, companies will have to actively market their solutions to address these concerns.

Use cases ideally should benefit payers and payees. A good example is the request-for-payment feature, in which customers can see their bill balance change in real time once they’ve made a payment. In that scenario, customers can pay their bills closer to the wire and have a more user-friendly interface, while the biller can receive the funds quicker.

Technology companies should also make the transaction process as simple and efficient as possible by minimizing the number of steps or intermediaries involved. Solutions should be intuitive and easy to learn.

“My 20-year-old should be able to pick it up and start using a B2B app immediately like they would be able to use an app on their phone even though it’s a business-facing application,” Kresse said.

Riley also added that real-time payments should have the simplicity and elegance to make them a no-brainer, like other payments technology. “When you look at the elegance of a credit card transaction, people swipe and they just assume it goes into it down the process,” he said. “But there’s a lot that goes on beyond that velvet curtain. And when you’re dealing with money movement cross-jurisdictions in a business-to-business environment, it’s much more complex, but it still has to have that same elegance.”

Looking Ahead

Over the next decade, expect to see a few key developments play out worldwide, including interoperability, as well as a continued push to immediacy.

“If we think back to 20 years ago, the concept of me being able to automatically stream any movie from my phone anywhere in the world, through any of the number of streaming services, was not something that we saw materializing really quickly,” Kresse said. “Yet within 10 years, we were absolutely there.”

The same will be true of payments.

Furthermore, as the real-time payments systems become more interconnected, costs will decline.  

“Ten years from now, we’ll be on our path to being able to send anyone money anywhere in the world at a very low cost, in a way that is safe and simple,” Kresse said.

The post Real-Time Payments Are Driving B2B Innovation appeared first on PaymentsJournal.

With the introduction of the RTP® network by The Clearing House in 2017 and the upcoming launch of the FedNow℠ instant payments service, real-time and faster payments are becoming more common in everyday money movement.  

A recent report sponsored by Volante Technologies, titled “U.S. Real-Time Payments: A Catalyst for Payments Modernization,” explores the current state of real-time payments and the multiple use cases being met, such as accounts payable, bill payments, and transfers of high-value funds.  

This article will highlight the main takeaways from the report, including the options available to banks when selecting which instant payments networks to leverage and why instant payments products for bill pay are likely to be more profitable than those involving peer-to-peer (P2P) transactions.  

The State of Instant Payments

Real-time payment systems are transforming the way businesses and consumers transfer money, and the United States is at the forefront of this payments revolution.  

The Clearing House (TCH) developed and operates RTP, the first entirely new U.S. core payments infrastructure developed in over 40 years. RTP uses the ISO 20022 messaging standard, which enables extended data exchange and accommodates business use cases. More than 300 institutions, including community banks and credit unions, are connected to the RTP network, with direct connections to 62% of U.S. bank accounts. 

The Federal Reserve’s instant payment system, FedNow, is set to launch in July 2023, and its initial transaction limit is $500,000. FedNow will also use the ISO 20022 messaging standard and has a pricing model that offers discounts to encourage early adoption.  

The Zelle instant payments network, owned by seven large U.S. banks, has more than 2,400 banks and credit unions contracted on the network. Zelle started as a P2P service but has expanded into other use cases, including paying invoices and gig economy workers. 

Real-time cross-border payments are the next expected breakthrough, and EBA Clearing, SWIFT, and TCH have launched a collaboration called Immediate Cross-Border (IXB). The project is expected to launch in the coming months, starting with the United States and Europe and using the RTP system and IXB as the switching mechanism.  

From a business perspective, real-time payments improve payment processing efficiency, reduce costs, and provide opportunities to add new business. Real-time payments have many potential benefits for customers, including faster settlement times, improved cash flow management, and an enhanced customer experience.  

Instant Payments as Revenue-Booster

Skepticism about whether real-time payments can be effectively monetized is not completely off-target, but it holds true more for consumers than for billers.  

In 2022, Javelin Strategy & Research surveyed more than 3,000 U.S. and 1,000 Canadian consumers and concluded that few consumers are willing to pay for faster payments. Only 36% would be willing to pay for bill pay, partly because P2P apps such as Venmo have reinforced the idea that faster payments should be free. And that is important, because the survey found that P2P transactions are the most common use case of faster payments, with 47.2% of Americans having made such transactions in the past year. 

Although consumers are not necessarily willing to pay for real-time payments, billers are.  

Banks such as BNY Mellon and Citi have worked with companies like Verizon to send request-for-pay (RfP) messages to consumers, who can accept the message and respond by originating a transaction to make the bill payment. Other banks such as Chase Bank and U.S. Bank have also rolled out RfP to their corporate clients, allowing them to request payment from their customers. 

The implementation of RfP by these four banks may prompt other banks to identify more business use cases, which can be monetized. Some of the use cases associated with B2B include invoiced payables, payroll, corporate loan funding, and real estate closings. Furthermore, B2B data can also be processed with artificial intelligence to improve fraud management systems and promote better customer behavior (all the better to market new products). 

A recent Javelin survey shows that 56% of U.S. companies are expected to use real-time payments by next year, so the market for these products is clear.  

What Banks Should Do Now

Financial institutions need to modernize their payments infrastructure to remain competitive with traditional providers and new entrants in corporate banking. Modernization in the United States should include a migration from existing messaging formats to ISO 20022, the growing global standard. Both FedWire and CHIPS are migrating to ISO 20022—FedWire in 2025 and CHIPS in 2024—so banks must prepare for this shift, as it’s inevitable. Banks should also devote resources to helping their clients understand these changes and how to navigate the migration efforts. 

Institutions have a choice between two real-time payments networks—the RTP network and the FedNow service—and must decide whether to use one or both. Because the two networks are currently not interoperable, a payment initiated on the FedNow service cannot be completed if the recipient’s bank supports only RTP, and vice versa. It is recommended that institutions, at the very least, have the ability to receive payments from both networks. 

With the squeeze on income from deposits, banks are naturally looking for other sources of income. The payments-as-a-service (PaaS) model involving real-time payments can be a big part of that. Institutions should analyze the use cases that are most important to their clients and determine what capabilities are needed to support them.  

In addition, speed, visibility, and ease of navigation are key factors preferred by Millennials and members of Gen Z. Adopting real-time payments is an opportunity to shift operations to focus on the preferences of the younger generations (who soon will be dominant in the economy) while also developing products that will monetize instant payments in various use cases.  

The post Banks Developing Instant Payments Products in the U.S. Should Focus on Billers to Generate New Revenue Streams   appeared first on PaymentsJournal.

Real-time payments adoption has become widespread, and as a result, financial services companies need to be better equipped to overcome any operational challenges that may come up.

During a recent PaymentsJournal podcast, Reed Luhtanen, Executive Director of the U.S. Faster Payments Council, Tony Cook, EVP of Payment Operations & Real-Time Payments at FirstBank, and Cheryl Fitzgarrald, Program Director at BHMI, delve into what is needed to get an organization up and ready to support real-time payments.

Current State of Real-Time Payments

Payments have undergone a massive shift in just a few years, with real-time, remote, and digital forms of payments becoming the norm. “Lots of folks are getting engaged through the Fed, The Clearing House, and the Faster Payments Council to learn about what faster payments are and how it might affect them,” said Luhtanen.

“We recently conducted a Faster Payments Barometer survey and about 90% of our respondents said that they are either in the process of implementing [real-time payments], they’ve already implemented, or they’ll be implementing in the next two years.”

According to Luhtanen, businesses are looking to leverage this new technology for payroll, funding loans in real-time, and to pay bills.

The main benefit of real-time payments, according to Cook, is to get funds into customers’ hands faster. “At FirstBank, we’re starting with the ability to receive real-time payments only, but we see enormous benefit just from starting at that point alone.”

“If you think about all the great opportunities, especially in areas like payroll or the gig economy—as well as the ability to defund wallets—we’re excited about the opportunities there and for our customers to get paid faster. Some of the other core benefits that we get really excited about is just the overall 24/7 availability,” he said.

“Most of BHMI’s clients are large processors and financial institutions that are processing on behalf of banks, credit unions, and merchants, said Fitzgarrald.  “Over the last five years, we have seen the use of real-time payments grow dramatically.  Our clients are offering a wide range of new real-time payment services to their retail, business, and corporate customers.  This has ranged from simple account-to-account payments to more complex business payments.”

With Opportunities Come Challenges

With any introduction to a new technological advancement, there will be inevitable kinks that will need to be ironed out. While there will always be early adopters eager to try out the latest innovation right around the corner, bad actors will be nearby, just as eager.

“Anytime a new payment technology comes about, some of the earliest adopters are going to be the folks who are going to try to steal money from other people,” Luhtanen said. “There’s going to be a lot of work to be done to figure out where the best lines of defense are, where the layers need to be put into place. Working collaboratively is going to be critical on that front.”

So, what are the steps that financial institutions can take to ensure they can implement real-time payments effectively? It all depends on where your organization currently stands.

In terms of the operational changes that FirstBank has implemented to support its foray into real-time payments, Cook said, “From a receive-only perspective, there’s definitely a lot that must be put in place operationally and it’s maybe not as complicated as you think. We haven’t found the need to make any wholesale or major operational changes or upgrades like bringing in a large amount of staff for 24/7 support. It’s really an expansion and extension of what we’re doing to support other payment rails.”

According to Cook, liquidity management, fraud prevention, compliance—in addition to both customer and employee education—are crucial factors to implement real-time payments successfully. But while many companies would like to jump on board and implement real-time payments, there are significant hurdles to overcome first. And many are already finding themselves in front of some of these hurdles.

“One of the biggest challenges we see companies facing is how to overcome their dependencies on legacy systems that were designed decades ago and not designed for real time payments,” said Fitzgarrald. “This is primarily the case with back-office systems that cannot match the real time capabilities of payment front ends.”

How To Support Real-Time Payments

Real-time payments adoption will only continue to accelerate on a global scale, but as noted, before real-time payments are deployed, a strategic plan is imperative.

“What is it you’re trying to do with your business? How could faster payments really affect you and provide advantages to you? There’s lots of folks out there who can help you connect the dots both on the solution provider side, but also on the intellectual service provider side,” said Luhtanen.

“Identifying those trusted resources to bring in as partners is going to be critical to building that strategy and figure out how you put it all together from a financial institution perspective,” he said.

According to Cook, aside from implementing the software solutions and other technological tools necessary, we must not forget about one of the most important resources in the faster payments puzzle: the people.

“Something that’s important to the adoption and onboarding of real-time payments is education and awareness for your employees,” he said. “Internal employees are used to how ACH wires and checks work and it’s hard to understand some of those fundamental differences.”

“Focusing on those fundamental differences and making sure there’s a broad understanding, as well as painting a picture of what the future holds with real-time payments and all the possibilities with innovation, those are really important pieces to make sure your teams understand.”

But it’s also important not to forget the role that software plays in the implementation of real-time payments.

“Software is at the core of every payment and it’s the heart of every company’s payment operation. So, software plays a huge part in the modernization of payment operations for real- time payments,” Fitzgarrald said.

Looking Ahead

Getting onboard with real-time payments will certainly open many opportunities for businesses, banks, and customers. What remains to be seen is what the implications for real-time payments will look like. As an example, retail businesses, according to Luhtanen, may be used to operating 24/7, but are not necessarily used to receiving constant settlement payments throughout the day. Luhtanen recommended having guidelines and best practices in place.

The post How to Become Operationally Ready for <br>Real-Time Payments appeared first on PaymentsJournal.

In March, Ken Montgomery, the first Vice President of the Federal Reserve Bank of Boston and FedNow Program Executive stated: “With the [July] launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service.” While the summer deployment is likely to have a few hiccups—and may even get delayed if the history of major technology introductions is any indicator—banks that aren’t at least making plans for enabling “receive,” are going to have a rude awakening.

RTP has been around since 2017 and uptake has been paltry, but most industry experts believe that the floodgates will open with the release of FedNow. Systemically important banks are all in line and giddy to serve up the next coming of payments and this is good news for 80% or so of the depositors in the U.S.

Community banks, on the other hand, are not attacking instant payments with the same fervor. Some have been playing the waiting game and have not implemented RTP to see what the competitive FedNow service will look like. That’s fair enough to some extent as there are no plans for RTP and FedNow to be interoperable. But it’s April, and FIs that don’t have clearly laid out plans to get in the instant payments game are going to be in reaction mode to maintain their deposit base. This will be particularly apparent for those in the gig economy who will work their delivery shifts, do their freelance work, drop off their passengers, and expect to see their money right then and there.

The gig economy allows us to do anything from anywhere, and small communities love their food deliveries as much as those in the big city. A worker for one of the delivery services typically does it as a side hustle. They put their hours in, clock off, head home, jump on Xbox and around July of this year, they’re going to expect to see their shift wages in their account roughly 20 seconds following the end of that shift. And guess what’s going to happen if their bank doesn’t support instant payments? They’re going to find another bank in about the time it takes to fill in an online account opening—and rest assured banks with full instant-payments capabilities will be eagerly waiting in the wings.

Community banks need to partner now with technology providers—and even other banks—to make sure they’re equipped for the summer unveiling. A wait and see approach is no longer prudent, and at a minimum, these banks need to be shoring up communications to their depositors that an instant payments offering is imminent.

Overview by Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research.

The post Community Banks Will Have Challenges Implementing Instant Payments and Gig Workers Don’t Care appeared first on PaymentsJournal.

Visa recently announced Visa+, a new service that will allow money to be sent and received across differing digital payment platforms. Currently, most digital payment transfers take around 3 business days to complete. It is an instant payment solution, meaning the transfer will be completed instantly in real-time. These instant P2P payments are faster, more secure, and provide better financial freedom by not having funds held up between transfers.

Visa+ is not to be confused with Visa Direct. Visa Direct are P2P transactions, whereas Visa+ is the payment rail that enables instant payments. The two work in tandem with one another.

Visa+ is partnering with PayPal and Venmo to initiate a pilot. Although PayPal and Venmo are owned by the same parent company, their technological infrastructure does not support the instant transfer of funds between the two platforms. The aim is to enable digital payment transfers between the two different platforms. Later this year, all Venmo and PayPal users in the U.S. will be able to move money seamlessly between the two platforms.

Visa+ does not require users to have a Visa-branded debit or credit card. The only requirement to use it is users will need to link a payment address to the pre-existing Venmo or PayPal accounts. We like that it does not require yet another account creation, we already have too many passwords memorized! It enables more payment-related use cases, including instant payouts for earned wages of gig workers, creators, and marketplace sellers. Millions of users across digital wallets, neobanks, and other payment apps are said to have enabled interoperability with Visa+.

Given Visa’s sheer size and number of transactions that fly on their rails, it will make an impact by providing this instant payment capability. It is building interoperability across payment platforms, something that hasn’t been achieved yet. According to the U.S. Faster Payments Council’s Third Annual Faster Payments Barometer, interoperability is one of the most important topics in the payments industry today.

Alongside PayPal and Venmo, other payment providers such as DailyPay, i2c, TabaPay and Western Union will be plugged into Visa+. Through these partnerships, Visa+’s reach will expand. As the demand for instant payments grows in the U.S., payment providers will need to catch up with the trend. It is providing an excellent opportunity for smaller payment providers to keep up with the demand as they leverage the technical infrastructure provided. We expect more payment providers to partner with Visa+ in the future. 

Overview by Sophia Gonzalez, Research Analyst, For Debit and Payments at Javelin Strategy & Research.

The post Visa+ Gets an A+ in Our Book appeared first on PaymentsJournal.

It is no mystery that FedNow is set to bring modernization to a whole new level within the U.S.  payment system.  

Although the launch of FedNow in July is highly anticipated, it will still place the U.S. a bit late in the entire faster payments game. A recent Forbes article quoted a summary compiled by ACI Worldwide, which said: 

“As a proportion of electronic payments, RTPs are forecast to be just 5% by 2027 in North America — lower than in all other global regions: Europe (13%), Asia Pacific (APAC – 12%), Middle East, Africa and South Asia (MEASA – 79%) and Latin America (LATAM – 56%).”  

“Several of the leading economies are distinct laggards in moving to real-time payments. The U.K., Canada, the U.S., Germany, France and Italy — all top 10 global economies by GDP — are forecast to place 17th, 19th, 33rd, 34th, 35th and 42nd, respectively, for consumer adoption in 2027.” 

The U.S. government has never issued a mandate for banks to offer real-time payments to their customers. Additionally, most major banks have been reluctant to offer this feature as well. And this has come with a hefty price for the consumer. 

Although the FedNow initiative has been in the making over the last seven years, Aaron Klein, a senior fellow at the Brookings Institution, noted that the “slowness in setting up FedNow, has cost consumers hundreds of billions in the form of overdraft fees, check-cashing fees and late fees.” 

Real-Time Payments as Another Revenue Stream for Banks 

It’s clear that consumers want real-time payments as a service offering from their local banks. Banks that refuse to offer this service will see their customers go elsewhere, taking away a sizeable market share with them.  

It’s time that banks, whose payments represent from 20% to 40% of their revenue, strongly consider implementing real-time payments within their institution. It’s about reconfiguring their current business models and enhancing their current user experience as well as their customer’s journey. 

Faster payments is the key differentiator that will determine whom customers will look to for their financial service needs. And banks that enable this capability will come out ahead.  

The post FedNow As the Impetus for Growth in Instant Payments  appeared first on PaymentsJournal.

While the financial world awaits the summer rollout of the FedNow instant payment service, two political figures—coming from well left and well right of center—this week conflated FedNow with their own bogeymen, fundamentally miscasting what the service is and what it will do.

Whether a true lack of understanding or a willful disfiguring of the facts, the remarks of Robert F. Kennedy Jr. and U.S. Rep. Marjorie Taylor Greene demonstrate the challenge faced by any advancement in financial services or products to rise above the din and clearly communicate what it is (or, in rebutting Kennedy and Greene, what it is not).

What They Said

Kennedy’s tweet claimed that the Fed would “introduce its ‘FedNow’ Central Bank Digital Currency (CBDC) in July. CBDCs grease the slippery slope to financial slavery and political tyranny.” Predictably, that tweet—which wandered into other areas of unrelated grievance—gave rise to replies and retweets that incorporated Kennedy’s position into their own.

Greene posted a news story from CNBC about the planned July launch of FedNow and wrote: “We should go back to the gold standard, not digital currency payment systems. Hard pass.”

Both got it fundamentally wrong.

What FedNow Is

FedNow, like The Clearing House’s RTP before it, is a financial messaging system that initiates, routes, and settles payments in real time, enabling swifter and less expensive money movement. Participating institutions will have seven-day, 24-hour access to the system.

The Clearing House has operated its RTP system since 2017, with the participation of about 300 financial institutions. FedNow is likely to broaden the reach of instant payments nationwide.

Initially, FedNow will be confined to payments between financial institutions in the United States. Other Fed payment services come with fees, and FedNow will be no different. Banks will decide whether to pass those fees on to customers.

What FedNow Isn’t

Put simply, FedNow is not the money. It is a system by which the money moves—in real time, with immediate settlement, all the time.

It’s not a currency, digital or otherwise.

It’s not a standard for backing currency.

The field of payments isn’t well understood by people outside the sector, as the tweets by Kennedy and Greene underscore. From opposite sides of the fringe, they seem to have found a kinship on a distrust of the Fed, and certainly, there’s a legitimate debate to be had about whether it needs to insert itself this far into payments and compete with the private sector in this way.

Still, whatever one’s position on CBDCs, or bitcoin (or cryptocurrency in general), or digital payments, or anything else, we cannot move toward meaningful discussion if we cannot agree on a simple set of operational facts that underpin the debate.

Fact: FedNow is a messaging system for instant payments.

That’s it. Kennedy and Greene—and they’re not alone—are bringing needless noise to the issue at hand.

The post Separating FedNow Facts and Fiction appeared first on PaymentsJournal.

The real-time payments landscape is different depending on where you look. Regions in Asia-Pacific have been making strides for some time now, looping in government involvement to bolster engagement and increase adoption. In other areas of the world, such as the U.S., adoption isn’t as prevalent. At least not yet.  

ACI Worldwide’s latest “It’s Prime Time for Real-Time 2023” report, looks at the countries that have experienced widespread real-time payments adoption, and highlights use cases and even collaborations at the industry level, that have further facilitated adoption.  

Craig Ramsey, Global Head of Real-Time Payments and Banking, ACI Worldwide said: 

“This year’s report highlights how consumer and business adoption of real-time payments accelerates when the conditions are right. The countries at the top of our league table—Bahrain, Brazil and Thailand—are all relatively recent enablers of real-time payments. 

“Concerted industry collaboration and government mandates, widespread merchant adoption, strong brand recognition for a scheme, and related services, such as digital wallets, have provided the perfect combination for strong growth in these markets.” 

APAC Leads the Way  

The APAC (Asia-Pacific) region is one of the most innovative regions to watch for in the real-time payments landscape. The ubiquitous use of mobile-centered experiences, as well as QR-code payments, are driving massive adoption.  

Transaction volumes for real-time payments are projected to grow from 49.2 billion in 2022 to 96.7 billion by 2027. Growth is accelerating across several regions, including Malaysia, the Philippines, Singapore, and Australia. What’s more, Indonesia is the latest country to join the fold in adopting real-time payments. 

Governments and central banks in APAC have been instrumental in driving up adoption. In fact, Malaysia and Indonesia have been spurring the advancement and adoption of real-time payments and digital payments. For example, according to a Deloitte report, the Indonesian government released two sets of regulations: Operation of Electronic System and Tranaction and Trading Through Electronic System. Both regulations ensure the stimulation of growth of the digital payments market within Indonesia.  

The Malaysian government’s Short-Term National Economic Recovery Plan was created to boost the percentage of both electronic and mobile payments for offline goods and services througout the country. 

FedNow As a Catalyst for Real-Time Payments Growth 

According to the ACI Worldwide report, real-time payments in the U.S. makes up a small piece in the overall payments scheme, having only a 1.2% portion of the total payments volume for 2022. 

However, with the upcoming launch of FedNow in July 2023, it’s anticipated that a resurgence of real-time payments activity will follow closely behind.  

The post A Glimpse into Real-Time Payments and How Adoption Differs Globally  appeared first on PaymentsJournal.

Real-time payments (RTP) continue to become more of a part of everyday life for consumers. While RTP systems are more mature in other parts of the world, the U.S. is slowly catching up. The Clearinghouse launched its RTP Network in 2017, the first payments rail in the U.S. designed to handle real-time transfer of settlement and funds. The Federal Reserve is scheduled to launch its FedNow RTP service sometime in 2023.

The manner in which real-time payments evolve in the U.S. may be a bit different than in the rest of the world, however. This is due to the massive number of financial institutions in the country (more than 9,000 combined banks and credit unions) as well as a different regulatory environment.

To discuss the unique ways in which real-time payments may evolve in the U.S., PaymentsJournal recently hosted a podcast with Rodrigo Figueroa, COO of Chargeback Gurus, and Brian Riley, Director of Credit Advisory Service at Javelin Strategy & Research.

How Do Real-Time Payments Work?

Simply put, a real-time payment is when a sender initiates a payment, the RTP provider validates it, the funds are immediately settled in the receiver’s account, and a confirmation message is sent back to the sender. RTP transactions allow for open loop transfer directly between bank accounts, unlike services such as Venmo, which tap into a prepaid fund balance managed by that payment platform.

“More importantly, each bank has an immediately updated ledger; when you have a debit shown on one bank, that same position is recorded immediately on the ledger of the receiving bank,” Figueroa said.

He added that digital trends in other aspects of life and consumer expectations are forcing banks and payments providers to offer real-time payments capabilities.

“From a behavioral perspective, we are getting used to everything being in real time,” Figueroa said. “So, this isn’t coming out of nowhere.”

Eventually, we will have a global set of interoperable, connected real-time payments rails, though the industry is not quite there yet, he added.

Benefits of Real-Time Payments

Real-time payments have several benefits. The obvious one is the convenience for sender and receiver to immediately see their updated accounts after the payment is sent. Real-time payments are especially desired by those who work in the gig economy and perhaps cannot wait weeks or even a month to get paid for the work they do, Figueroa noted.

“For a lot of people, cash flow matters,” he added. “They can’t wait until the end of the month for a check.”

In general, consumers have come to expect “instant gratification. Everything on our phone is a few clicks or swipes away,” Figueroa said.

Another key benefit of real-time payments is the extra data involved in them. The payment record includes all of the data associated with the transaction, thus eliminating the confusion that can result when a pending transaction is settled with an unclear or cryptic description days after it was initiated.

Figueroa also noted real-time bill payments as a key benefit, since RTP funds settle the instant, the payment is made. This helps consumers avoid situations where they pay a bill online on the date it is due, but it doesn’t settle until a few days after that.

Challenges to Overcome

Still, real-time payments are not without their own unique challenges. One is fraud, noted Riley. Since the payments are immediately settled, criminals can engage in payments fraud and make fraudulent transactions before anyone notices.

“The easier you make it for consumers, the easier you also make it for crooks to take advantage of,” he added.

Another issue is difficulties with refunds and chargebacks, Riley added. For example, when making a payment now on the Visa or Mastercard network, it takes a few days to settle. If a consumer wants to return a faulty item or wants a refund on a service that was not provided as described, it’s easier to initiate a dispute and return the payment during this intermediate time. It becomes much more difficult in a real-time environment.

“It will be interesting to see how the regulations develop around this,” said Riley. “This is a really important piece that affects the whole ecosystem.”

This will be exacerbated by the sheer number of transactions made daily in the U.S. Riley noted the real-time payments system M-PESA in Africa, which may process 100,000 transactions a day.

“That’s similar to the volume we might get here just in the state of New Jersey,” he said. “In the whole U.S., we’re talking billions of transactions. It’s a massive amount of volume”

It’s not just sheer volume, but the unique regulatory environment in the U.S. that will make real-time payments implementation here different than in the rest of the world, noted Figueroa.

In other countries, the regulatory statutes are generally created before innovation is built, whereas in the U.S., often technology innovation gets ahead of regulations.

“I’m not saying that’s good or bad, it’s often just how it is here in the U.S.,” Figueroa noted.

On the flip side, being a bit late to the RTP game means that “the U.S. gets the benefit of looking at what happened around the world [as it relates to RTP] and seeing the good and bad and creating a better product,” he added.

Furthermore, given the fragmented nature of the U.S. financial system, there may never be one cohesive real-time payments network that everyone uses, said Figueroa.

“The U.S. may never have one standard because we have so many competing entities,” he observed. “Having such a big market allows all these elements to compete with one another. Don’t take it for granted that it will eventually all consolidate into one network, like in other countries. The key is having interoperability between all these competing networks.”

The post How the Real-Time Payments System Will Evolve in the U.S. appeared first on PaymentsJournal.

As we await the unveiling of FedNow, which is slated for this summer, banks and their corporate customers are trying to figure out the best ways to integrate instant payments into their daily AP/AR operations.

The press has called FedNow everything from a payment’s savior to a crypto killer and its value proposition has serious breadth. One its intriguing features is the irreversibility element. This means that within seconds of a sender initiating a transaction, it will be settled and cleared. That’s good news for the receiver of the funds as they will not have to adopt a liability mindset and wait for a reversal window to close before they count those dollars. From the sender side, there will be a little bit of queasiness about the finality element, but the benefits of FedNow, as proposed, outweigh the disadvantages.

In the B2B space, FedNow will be a challenge for corporates, and particularly banks that serve those corporates, as it relates to payments liquidity. The first release of FedNow is not slated to have a mechanism that provides proactive messaging about inadequate funds. In other words, companies will not be aware of a low-balance scenario (an underfunded account) prior to a non-sufficient funds notice from the Fed. One banking source indicates to Javelin that their customers would much prefer to have “liquidity technology” that intercepts low funds notifications and borrows short-term funds to cover payments needs prior to an NSF. Note, the Fed will be offering a liquidity management tool in conjunction with FedNow, but this will only be at select times during the day and again, does not solve for a non-forecasted, low-funds scenario. According to ACI Worldwide, “a treasurer’s task becomes even more complex when there is no forecast to rely on and they can’t predict a pattern of spend because they are dealing with a new payment method. How much money should they re-invest, versus keep it available for transactions?” 

Banks and corporates will have their hands full with the introduction of FedNow, but a real-time liquidity play is something these entities will need to address expeditiously in the wake of the July release.

Overview by Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research.

The post Banks Will Need to Solve for Real-Time Liquidity Using FedNow appeared first on PaymentsJournal.

With FedNow launching this July, successful implementation of real-time payments systems will require banks to test both the technical and operational side of their operations. In a previous discussion with PaymentsJournal, Form3 touched on the importance of banks having not only the technical aspects in place, but also transaction reporting and operational considerations.

Testing early is key to ensuring that both real-time payments (RTP) and FedNow functionalities operate at their peak, delivering on the benefits they set out to bring. During a recent PaymentsJournal podcast, Miriam Sheril, Head of Product, US, at Form3, and Steve Murphy, Director of Commercial at Javelin Strategy & Research, discussed why testing — which is typically an afterthought for many banks — should be more of a priority.

The Importance of Being Agile

The race to ubiquity for real-time payments should not just involve throwing money into the latest technology to support real-time payments. Careful testing early on should be at the forefront before full implementation can happen successfully.

“It’s not just having the best technology and technology that’s fit for purpose, but it’s also how you go about your entire project and life cycle of getting that technology in place,” said Sheril. “Testing becomes an afterthought for banks – and for all companies, frankly.”

“They build it, they do their documentation, they work on the operations around it, they implement the ecosystem [of tools needed (like a UI)] around the new solution, and then start testing it end-to-end and find issues — whether it’s a technical error that’s wrong or the procedure that’s wrong,” she said. “[They find those issues] late in the game, which means they have to go back and fix it. It’s more costly, it takes more time, and it’s difficult.”

“For real-time, if you wait until the end to do all this testing, you’re going to end up having an issue. Your project might end up getting pulled if it costs you double the amount of time to fix that. Being an afterthought is a mistake in this new agile world. For real-time payments specifically, you can’t do it so late because it’s 24/7, it’s all brand new.”

According to Sheril, RTP and FedNow won’t interoperate, so even if a bank is on RTP, if it wants to receive the FedNow payment, it’ll have to connect and get its solution working for FedNow. “There are similarities, but there are also differences, and you have to test those differences,” she said. “If there are enough differences, that means you need to adjust your solution and you need to test how that solution works for FedNow.”

“There are some things that should be the same, and banks should try to make them the same so they don’t have to retest. Hopefully, many banks can align to whatever they’re doing for RTP, if they’re already on RTP, in which case, light touch testing might be appropriate. This is another example of where testing earlier will help you. The only way to know that it’s going to be the same is if you test it as early as possible. This is the shift in mindset that we need to see happen so we’re not all facing the issues later in the game.”

Rethinking Testing Strategies for Real-Time Payments

Although real-time payments have already been around for roughly five years, it’s still a new process that has plenty of room for error. That is why preventative maintenance in the form of early testing is necessary.

“Real-time is interesting, there’s the good and the bad,” said Sheril. “The good is that it is brand new, and brand new is helpful. You’re not building or adjusting something that’s already in production. Since RTP and FedNow are new, those who are implementing it are implementing new solutions, new systems. Many are using it as an opportunity to do their first stage of modernization and put in a new core just for this. That gives them a little flexibility because they’re not worried about breaking something that already exists. The flip side is that it is brand new. Brand-new things can also be risky.”

When it comes to testing, there’s the technical aspect of it and there’s the operational part — with each having its own level of difficulty, according to Murphy.

Sheril agreed. “That technical piece, it’s kind of the same for everyone,” she said. “The gateways provide messages; they put rules and different error codes around the messages. It’s not very nuanced. You can build and test that pretty early on and use an experienced service provider, who can test that holistically for everyone, and it doesn’t have to be nuanced.”

“When we go live with our RTP solution, we’ll have tested the gateway piece. Holistically, it’s going to work because if it works with one bank, it works for the other bank. Then there’s that whole second part of it that’s really specific to each bank and each customer. How do I plug it into my operations, into my core banking, into my resiliency posture, my risks, etc.? And that has to be tested as well,” she added.

“I have to test that my operations team, who suddenly had to go 24/7, can support that 24/7, that they know what to do when [an] alert comes out, that they can follow those next steps, that they can get the money to where it needs to go and make the funds available [if an exception occurs] — and that part’s harder.”

The Testing Process for Banks

When it comes to testing, it will largely depend on the type of use cases carried out — and also depend on the bank. It’s not a one-size-fits-all approach.

“If you’re a bank that has a lot of bill pay that you support, you’re going to test the request for payment flow,” said Sheril. “Not every bank’s going to do that. But at the end of the day, there’s a set of messaging that these schemes provide and you test those. Form3 is going to test all of them and have them ready and available whether you use it or not. It’s going to depend on what core you use, and what your operations procedures look like. It’s going to depend on how you integrate into other systems within your environment.”

Learn more about Form3’s instant payments testing simulator here.

Will FedNow Revamp Testing Methods?

For those who have already implemented real-time payments, the testing methodology is probably already there, and it may need to be adjusted.

Those who are waiting for the launch of FedNow have a golden opportunity to start on the right foot, honing in on the end-to-end process.

“If you’re a bank that’s been on RTP, you’ve done that, you have a head start, and it’s not that different,” said Sheril. “There are differences so you should test that gateway differently, but your end-to-end processes should be pretty aligned.”

“If you haven’t been on RTP and you’ve just been waiting for FedNow, this is something that’s brand new,” she said. “You have an opportunity to do this differently. You don’t have to go in and touch something that’s already in production. Anytime you can start something from the scratch, you have an opportunity to do it right and really focus on end-to-end process.”

“Consider a modernization effort. We have seen a few banks who have said that for real-time being new in the U.S., the volumes haven’t picked up yet. It’s also an opportunity for me not to just put in a new gateway scheme connection, but a new modern core.”

The post Test, Test, Test: Setting Up to Succeed With Real-Time Payments appeared first on PaymentsJournal.

In today’s always-on, need-it-now world, both merchants and consumers alike are quickly relying on real-time payments as a preferred method of payment. This summer, real-time payment adoption is expected to soar when the U.S. Federal Reserve rolls out FedNow.

For merchants, the value of real-time payments is in speeding up the time frame for improving cash flow management, increasing liquidity, and offering better back-office efficiencies. For consumers, it offers a fast, frictionless way to send and receive payments between friends, family, or even vendors, regardless of time or distance.

However, the convenience of real-time payments doesn’t come without risk. Faster payments provide easy access for bad actors to exploit for money laundering and financial crime. This poses a huge threat to fintechs, banks, and payment service providers (PSPs) that need to have strong anti-money laundering (AML) controls in place.

Sanctions Bottlenecks Risk Customer Experience

To protect businesses from high-risk customers and ensure the integrity of the global financial system, sanctions screening is an integral part of AML, know your customer (KYC) and counter-terrorist financing (CTF) programs.

However, as the popularity of real-time payments accelerates, the time it takes to review sanctions alerts also increases exponentially—creating a potential bottleneck. On average, it takes three to five minutes of a human reviewer’s time per transaction, and that’s if the alert is worked immediately. Alerts are generated overnight and often sit in queues, increasing the average time worked to 30 to 60-plus minutes. This means that the real-time alert processing is no longer happening in real-time if it’s done by a person—jeopardizing customer experience and devaluing the instantaneous nature of instant payments.

Financial institutions (FIs) must deliver a seamless customer experience for real-time payments, including speed, security, and convenience to create a competitive advantage, maintain revenue, and prevent reputational damage.

Cross-Border Payments Risk Regulatory Enforcement

While domestic real-time payments are relatively low risk, cross-border payments are another story. Cross-border payments are exceedingly more complex since they involve bridging multiple currency systems and regulatory jurisdictions, and generate far more sanctions alerts.

Today, cross-border payments no longer take days, they are nearing real-time, with many transactions now being processed in minutes, or even seconds. This means for sanctions screening to be effective, the information included in payment messages needs to be good quality, which is often the biggest challenge for compliance.

According to SWIFT, “Banks that receive suspicious payments must often follow a trail of breadcrumbs across time zones to find missing data. Simply misspelling a name can quickly result in higher costs, missed shipments, idle factories, and empty shop floors.”  

The increased potential for financial crime and sanctions evasion with cross-border real-time payments has attracted the attention of regulators. You need to know where the money is going, not just who is sending it. Over the past six months, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has brought several enforcement actions on FIs that were in violation of sanctions compliance controls, specifically related to their failure to use geolocation tools.

In November 2022, OFAC announced a $362,158.70 settlement with Payward, Inc., aka Kraken, a virtual currency exchange for cryptocurrencies. Kraken agreed to settle its potential civil liability for apparent violations of sanctions against Iran. Due to Kraken’s failure to timely implement appropriate geolocation tools, Kraken exported services to users who appeared to be in Iran when they engaged in virtual currency transactions on Kraken’s platform.  

Additionally, in September, Tango Card, a Seattle-based company that supplies and distributes electronic rewards, agreed to pay $116,048.60 to settle its potential civil liability for apparent violations of multiple U.S. sanctions programs. According to the Department of Treasury, “in total, between September 2016 and September 2021, Tango Card transmitted 27,720 merchant gift cards and promotional debit cards, totaling $386,828.65, to individuals with email or IP addresses associated with Cuba, Iran, Syria, North Korea, or the Crimea region of Ukraine. While Tango Card used geolocation tools to identify transactions involving countries at high risk for suspected fraud and had OFAC screening and Know Your Business mechanisms around its direct customers, it did not use those controls to identify whether recipients of rewards, as opposed to senders of rewards, might involve sanctioned jurisdictions.”

Regulators Call for Use of Innovative Technologies to Combat Risks

The debate over whether FIs should pursue advanced technologies—including artificial intelligence (AI) and machine learning (ML)—to drive sanctions compliance has shifted from “if” to “when, how, and on what scale?”

Even regulators now recommend technology to combat risks specifically related to real-time payments. Last Fall, OFAC published Sanctions Compliance Guidance for Instant Payment Systems. In its guidance, OFAC reaffirmed that financial institutions should take a risk-based approach to manage sanctions risks; and encouraged the development and deployment of innovative sanctions compliance approaches and technologies to address the risks.

OFAC specifically calls out the availability and use of emerging sanctions compliance technologies and solutions. It states that “technology solutions for sanctions compliance, which have advanced significantly in recent years and become more scalable and accessible, can be leveraged to help mitigate a financial institution’s sanctions risk, including with respect to instant payment systems.”

How AI Can Help

Alert fatigue is draining on compliance teams and adds time to the sanctions screening process. Sanctions screening software generates many sanctions alerts, and 99% of those alerts are false positives. For each alert, payment is held up pending review. This means real-time isn’t near real-time anymore, it just becomes a wait.

In response, FIs directly employ or contract out dozens or hundreds of people to manually review these alerts. Using time and money to review thousands of false positives is an efficiency problem that can lead to missing that rare true positive.

Following OFAC’s guidance, AI tools can mitigate many of the sanctions’ risks associated with real-time payments, including:  

• Accelerating exception processing to near real-time, thereby mitigating sanctions risk and maintaining speed-of-transaction.
• Instantaneously resolving exceptions (sanctions alerts) and allowing the payment to progress with no effect on the customer.
• Determining those payments consistent with past customer behavior, which a financial institution has previously vetted and cleared for potential sanctions implications. Therefore, the exception can be reviewed and processed in real-time.
• Evaluating data fields in the payment messages associated with exceptions, eliminating the false positives, and escalating only potentially true positives to compliance teams.
• Leveraging geolocation tools to identify potential sanctions violations.

I recently had a conversation with a BSA officer from a top 30 U.S. bank who said that their bank strategy is to move to real-time payments. He said that real-time payments for domestic payments will have sanctions screening after settlement. However, he warned, while this works for domestic payments, it wouldn’t work for international. In his opinion, automation is the only way to achieve real-time for international payments because their manual real-time payments sanctions alert review for international payments will slow the process down (20 min SLA), which is no longer real-time.

Real-time payments will continue to grow exponentially with it expected to surpass half a trillion payments globally by 2025. To be a major player, FIs will need to adopt real-time payments. With that said, it has never been more important for organizations to leverage all the tools at their disposal including AI to ensure fast, seamless screening and continuous monitoring to identify potential financial crime activity for both domestic and cross-border payments to ensure customer experience and prevent regulatory violations.    

The post Using AI to Combat Financial Crime in Real-Time Payments appeared first on PaymentsJournal.

With the upcoming launch of the FedNow Service, real-time payments continue to be a topic of discussion as demand grows among customers and businesses. More financial institutions are seeing the importance of enabling a range of real-time use cases to remain competitive and enhance the customer experience.  

Where Real-Time Payments Stand in Availability 

Less than 10 years ago, real-time payments capabilities were limited to specialized and sometimes costly options, such as wire transfers. Since the launch of Zelle in 2017 and The Clearing House RTP® network a few years ago, real-time payments have become increasingly accessible.  

“Fiserv has about 1,200 financial institutions that have launched some form of real-time payments,” said Tim Ruhe, Vice President of Real-Time Payments at Fiserv. “And a lot of that is Zelle person-to-person payments. And now most of those financial institutions are looking at how they expand their real-time payments capability for consumers and businesses and how they connect to The Clearing House and/or the FedNow Service so they can launch a whole new generation of real-time payment capabilities.”  

Use cases grow when financial institutions partner with technology solution providers.  

“Here in the U.S., five years ago we launched the RTP network in order to provide true real-time payments all the way from the front-end customer experience to the back-end clearing and settlement,” said Keith Gray, Vice President of Strategic Partnerships at The Clearing House. “We have 300 banks and credit unions that are offering some form of real-time payments via RTP to their customers, receiving and sending as well in many cases. 

“That covers about 65% of the U.S. account base. If you’re a company using the network, you can reach about 65% of your customer base with a real-time payment right now. And that number continues to grow every week as we add new financial institutions through technology partners like Fiserv and many others. The types of use cases continue to grow and evolve. Things like same-day payroll, where you work your shift and get paid today, are a growing trend.”  

Gray also mentioned that Square and Elavon use the network to allow their merchants to instantly transfer money from merchant accounts into their bank accounts. 

As the use cases grow, the launch of the FedNow Service will help drive real-time payments toward ubiquity. 

“We still have a little bit of work to do to get to ubiquity, which would be when every individual or financial institution in the country has access to these new payment capabilities,” said Dan Gonzalez, Vice President of Customer Relations at The Federal Reserve. “But as we get ready to launch the FedNow Service this year, we’re excited about the possibilities it’s going to bring in connecting with every financial institution. So, while there are 300 [FIs] connected to RTP today, there’s still 9,000-plus financial institutions that we need to work to get connected to an instant payment system.”  

Gonzalez likened the rollout of the FedNow Service to passengers eagerly awaiting to board a plane.  

“We’re in the process of queuing everybody up and boarding participants onto the airplane,” he said. “We’ve got a number of service providers, and a number of financial institutions that are currently in the testing process. They’re exchanging messages through our network in a test format to get ready to go. We’re going to continue that for the next few months to get folks ready. 

“Once we have that airplane boarded, we’ll close that door for those first organizations, take them out onto the runway, get them taxied up and then ultimately launch that airplane later this summer. We’re excited about what’s coming and ultimately creating that path for a seamless experience to get more financial institutions connected to the network.”  

Gaming apps use real-time payments to enable money movement into and out of the apps. Although many real-time use cases are at the consumer level, soon the business-to-business (B2B) ecosystem will be benefitting from this capability.  

“The awareness factor has really leapfrogged over the past several years,” said Steve Murphy, Director of Commercial Payments at Javelin Strategy & Research. 

“If you went back to 2018 and I said to my kids, ‘I’m going to Zelle you some money for Christmas,’ they would have said, ‘What’s a Zelle?’ 

“And now that’s really at the tip of the tongue. Everybody knows that brand name.  I think that’s moving rapidly into the B2B space as well.”  

The Beneficiaries of Instant Payments 

Instant payments are about more than just moving money quickly, and it’s not just financial institutions that stand to benefit. Consumers are top of mind when it comes to real-time payment use cases. It’s about getting the money they need, right away.  

“The initial benefits we’re seeing are for consumers because consumers don’t have the big lines of credit that businesses do,” said Ruhe of Fiserv. “So cash flow is super important, especially for getting paid. That’s why you see a lot of real-time use cases not just for person-to-person payments but claim payouts and gig economy payments because getting paid is really important.”  

“Consumers will benefit by having better visibility into their account balances and a greater understanding of when funds are available and usable to them,” said The Federal Reserve’s Gonzalez.  

The next strategy for increasing use cases will be serving small businesses. “As we talk to financial institutions, they’re developing roadmaps for capabilities for all their customers, for consumers, and businesses and small businesses, said Ruhe. 

“But I predict one of the next big focus areas will be on small businesses. Small businesses also have to have a careful eye on cash flow. Real-time payments definitely help with cash flow. We’re seeing a big push to help small businesses with that cash flow by enabling more real-time payments capabilities for them.”  

“Businesses will benefit by having better control over their funds, understanding or having the ability to pay invoices in real time, taking advantage of payment discounts, and having various opportunities to manage those funds in real time with greater visibility,” added Gonzalez.  

In a digital world, The Clearing House’s Gray noted, payments need to be faster, cheaper, and easier. 

“Another thing we hear from the banks on the network is that there’s a huge value in being able to get paid faster or pay faster,” Gray said. “The immediacy is a big deal. We call it RTP for a reason. If I owe a million bucks, I can wait until midnight tonight, I can hold it in my account to 11:59, and then I can send it. And especially in a rising-interest-rate type of an economy, that’s a thing that becomes a huge deal as well.”  

Said Ruhe, “It’s not just about real time. The money gets there instantly. There are two other important features. One is it’s guaranteed, it’s confirmed. If you hit send and you get the confirmation, you know it’s there. 

“But just as important is it’s 24×7 now. That’s not in the name. We don’t call it 24×7 payments. We call it real-time payments. We as consumers operate 24×7. If I have to wait till Monday for the payment to get there because I’m trying to send money on a Friday evening, that’s a problem. 

“Our digital world operates 24×7, and the legacy payment systems do not. These new real-time payment rails do. These payments work evenings and weekends, which is important.”  

Leveraging Multiple Real-Time Networks 

To determine whether leveraging multiple real-time payment networks is possible, we must unpack the current capabilities of each platform and its role.  

“There are going to be two live real-time payment networks,” Gray said. “Both networks speak the same language, both are built on the same platform, ISO 20022. 

“I believe there will be some level of ubiquity across both networks. The networks will be able to talk to each other in some form. That’s the intent, anyway. The Fed is going live with the FedNow Service this year, and I’m sure we at The Clearing House will pick up those discussions down the road.  I don’t think it’ll ever work exactly like ACH does because of the nature of the networks. 

“ACH works in a batch process. We send files back and forth to the Fed. It’s a very straightforward process. And a bank just connects to one ACH network.” 

“With real-time payments, each transaction is processed individually within seconds. There is no concept of a batch. To get full ubiquity across the industry, you’re going to need to be connected to both networks, and you will need some type of routing capability like the Fiserv payment hub solution, as an example.”  

On that road to coveted ubiquity, financial institutions must first analyze their own goals.  

“Having ubiquity is going to be key, but there will be different ways for that to be facilitated,” The Federal Reserve’s Gonzalez said. “If one endpoint is on one network, that transaction would go to that rail. If it was on another, it would go to a different rail. I think it’s really going to be up to the financial institutions to look at their needs and see how those can be fulfilled by either network. A lot of that will be driven by the complexity of the organization, what their objectives are with real-time payments.”  

“There’s going to be a certain amount of overlap, but there won’t be 100% replication,” Mercator’s Murphy said. “Depending upon who the banks are trying to get to on the endpoints, they have to consider both networks.”  

The FI View on Sending Real-Time Payments 

Although a growing number of FIs can receive real-time payments, sending them requires additional capabilities.  

“Many FIs have started with enabling receipt of payments,” said Ruhe of Fiserv. “That doesn’t require any change to their user experience. They can just start getting payments and letting customers get paid faster.  

“Once they move to originating real-time payments, they must present some new capabilities to the user. They must change something they already do. If they have a digital payouts capability, they’re going to make changes to the service that they offer the customer for digital payouts. 

“If they are offering real-time transfers, they have to update the real-time transfers application, and that’s what their road maps really are taking into account. ‘How do I enable more of these send capabilities, a real-time bill payment capability, a real-time payables capability’? 

“Part of this is just working through the project backlog of making the changes to those applications to enable real-time. Because a real-time payment is not just a new standalone thing. A real-time payment is a new feature of a service you probably already offer.”  

The ability to both send and receive a real-time payment will quickly become a baseline expectation of a financial institution, Gonzalez noted, although send capabilities will be more challenging to acquire. 

“As these networks continue to grow and develop, and as we launch the FedNow Service later this year, the receiving capability is really going to be table stakes,” he said.  

“It is more challenging to implement the sending capabilities because of the interfaces and updates that need to be made. However, a lot of the technology providers and service providers are starting to ramp up their capabilities to send and make it easier for financial institutions to implement the send capability.  

“As we evolve and continue to grow the network, the process will become more streamlined and easier for those downstream financial institutions to be able to send for their customers.”  

Murphy offered a history lesson on how real-time capabilities have evolved. 

“Mercator did some research back in middle to late 2018 after The Clearing House RTP Network launched,” said Murphy. “We talked to eight of the larger financial institutions that were doing direct connects. 

“We asked about the challenges and how they were implementing. Most were doing receive first. A couple of them are doing receive and send simultaneously. When we asked them about the challenges from a technology standpoint, they were rating it about 5 to 6 out of 10. The larger concern was internal communications, the operational procedures that had to be in place to support sending. This is something that most of the institutions now will be looking at.”  

“A receive is a very easy pass for most FIs because technology providers like Fiserv can turn that on for you very easily,” The Clearing House’s Gray said. “Phase One has always been that we want to enable our customers to get paid faster. It’s a service they want, it’s a service they expect, and it creates a new deposit channel into the bank.  

“Now, it’s technology providers that most banks leverage. The vast majority of banks rely on a technology provider for their real-time payment-based connectivity and services. Each of those technology providers offered receive first. 

“Now they’ve all moved into or are moving into different send-based applications. Send is different than receive in that there are many use cases that are spend-based use cases where receive is one capability. You can’t just flip a switch and ‘turn on send’ because it could be a small business app, it could be a Treasury app, it could be a consumer app. 

“We see new use cases coming on board every day and most are being driven by a technology provider working with their banking relationship. It’s a technology provider that is providing a bank a service or an application they can turn on.”  

A Look Into The Future Of Real-Time Payments 

With many U.S. banks working toward providing real-time payments for customers and businesses, the innovation does not end here. New capabilities and solutions are in the works.  

Gonzalez of The Federal Reserve sees strong potential for merchant-focused offerings. 

“One large technology provider just made an announcement that its created a new platform to enable pay-by-bank for merchants,” Gonzalez said. “I do think the use of an instant payment or real-time payment network to facilitate  point-of-sale and other merchant transactions will come around. There’s been a lot of discussion in the industry about that capability as an alternative to some of the traditional payment methods. Pay-by-bank is one that I think is interesting and certainly worth the industry keeping an eye on.”  

Ruhe of Fiserv agrees and anticipates a focus on small businesses as well, adding, “A lot of the focus has been on consumers so far. At some point, the ability to use this in a merchant payment scenario will be coming. I think cross-border will be coming.  Small businesses have these same cash flow issues. They operate 24×7, and they’ve been largely underserved. Giving them the ability to pay and get paid instantly more often is going to be a big focus area of our industry in the next year.”  

Murphy of Mercator sees a strong use case in cross-border payments, “One of the things I’m hearing about is the potential for use for real time cross-border. There’s a lot of activity going on with the RTP Network, EBA clearing, and SWIFT. You might start seeing some of that during the latter portion of this year.”  

The Clearing House’s Gray outlines the broad benefits of real-time payments data, “Another thing we’re seeing is applications being developed that leverage the data capabilities of a real RTP Network payment, the ability to send information across the network as well as the actual payment. A corporate biller can send a request for payment that includes not only the request but the data associated with it (the invoice and the bill and where I want you to pay me). And that gets delivered to a small business or a consumer who can then make the decision to pay it now or pay it later.”   

What Fiserv Is Doing to Get FIs and Their Customers Connected to These Networks 

FIs do not have to worry about the complexities of processing real-time payments. With Fiserv solutions, they can easily get connected to real-time networks. 

“We’re creating solutions that are very much turnkey solutions,” Ruhe said. “Solutions that you can consume as a service or as an infrastructure. It makes it easy to implement and turn on so that you can start processing real-time transactions. That’s certainly true for stage one of getting connected to these networks. 

“The next thing is we’re baking real-time capabilities into every other kind of processing service we have. You may have a business that wants to do digital disbursements, and we have a digital disbursement service that we sell through financial institutions and to large businesses. So we’re enabling real-time as a feature out of the gate so our clients don’t have to do a lot of heavy lifting. It’s a feature they can just turn on.  

“We’re baking support for real-time into solutions across the board, whether they’re consumer solutions, small-business solutions, FI connectivity solutions, or business payment solutions. Bake it in, make it easy, let’s make customers happy.”  

In the end, Fiserv is playing a key role in enabling consumers, FIs, and small businesses to fully benefit from all that real-time payments have to offer.  

The post Everyone Benefits from the Real-Time Payment Networks   appeared first on PaymentsJournal.

Despite the fanfare around the launch of FedNow this year, many businesses are skeptical that real-time payments (RTP) can be monetized and are adopting a wait-and-see approach. Although it is true that RTP technology has not come into full force and use cases have not been completely fleshed out, banks and fintechs need to have a strategy so they are not left behind as RTP becomes the standard over the next few years.

During a recent PaymentsJournal webinar, Chris Nichols, Director of Capital Markets at SouthState Bank; Reed Luhtanen, Executive Director at U.S. Faster Payments Council; Carrie Blankenship, Payments Innovation Principal at Volante, and Steve Murphy, Director of Commercial Payments at Javelin Strategy and Research, shed light on the various RTP business cases and gave an overview of how the space is set to change.

Strategy for RTP and FedNow

With real-time payments—or faster payments as they’re referred to in some countries—adoption has varied. According to Luhtanen, it’s important to take a step back and look at the contrasts of adoption to get a full picture. “In many countries where you hear about advancements and being ahead of the U.S. when it comes to faster payments, there were government mandates put in place that caused those advancements to happen,” he said. “There’s essentially a monopoly service that’s pushing that forward in those countries.”

“The U.S. hasn’t gone that way,” he added. “We’ve got a market-based approach with a number of different flavors of fast, if you will.”

There are certainly several considerations in developing an RTP strategy, and for many, those considerations convene at figuring out if they should be looking at RTP or FedNow—or thinking about both. “It’s about getting an understanding of what are your customers looking for,” Luthanen said. “What are the demands in the marketplace that you’re trying to solve for, and what are the use cases that are going to move the needle?”

“Part of that knowing is building out that strategy and getting informed and involved in different forums. What are other folks in my peer set doing? What are their customers telling them?”

According to Nichols, FedNow is likely to have more acceptance throughout the financial space, but that doesn’t mean The Clearing House network should be counted out. “Over time, we think The Clearing House is going to compete with FedNow on pricing,” he said. “We want to be able to take advantage of that when the time comes.”

In the current ACH space, if you have one ACH network or one ACH provider, you have access to all of them. But as Blankenship points out, in the instant payments space in the United States, that’s simply not the case yet. “It comes down to an issue of I can send a payment to Chris, but I can’t send one to Reed,” Blankenship said. “Whether there are commercial small businesses or retail customers, they’re not going to understand the difference. In the foreseeable future, the importance of leveraging both RTP and FedNow really cannot be underestimated simply for the fact that there’s that lack of interoperability between the two that wouldn’t be understood by your customer base.”

“Once they’re interoperable, you can declare for one or the other, but in the short run, it’s certainly a really important consideration to think through, the idea of leveraging both,” she said.

FedNow and the RTP network will differ in some nuanced ways when it comes to settlement accounts, risk tolerance, and technical implementation. “In order to send a real-time payment, you need a settlement account. With FedNow, that’s a direct federal reserve account,” Murphy said. “With TCH, it’s a joint account that’s managed on a continuous settlement basis.”

Transactions may post at slightly different times between the two and differ in risk tolerance. “RTP currently has a $1 million single transaction limit. FedNow is going to start with $500,000,” Murphy said. “The banks can set their own ceilings below those limits, depending on their risk tolerance, and we’re expecting these overall transaction limits to increase over time.” The systems are also both based on ISO 20022 messaging standard, which institutes a common platform for the development of messages in financial services.

Monetizing RTP

In the United States, real-time payments have been around for roughly five years. Although payments are generally commoditized, there’s an opportunity—specifically for banks—to monetize RTP and provide more value-added services.

“I believe you’ll see the industry move more to a subscription-based model where you subscribe for a year for a bulk of transactions and go from there,” Nichols said. “But that’s not where we believe the fight is. We believe the fight is over the ability to create new and innovative products, like using the components of RTP and FedNow and combining it with certain integrations such as fraud, identity escrow, and just a number of other products we believe will be higher-margin products that banks and fintechs can charge for.”

Luhtanen noted a large financial institution he spoke to that’s winning more auto loans because it is funding using RTP and the dealer wants to ensure that the payments are coming through right away. “Things like that can be key differentiators and make your service more attractive,” he said.

The Business Case for RTP

For FIs, there are typically many competing priorities, and it can be difficult to keep a focus on the right ones. One of the best pieces of advice, Blankenship said, is to know your enterprise goals. “Faster payments can facilitate or enable those goals that are already in place,” she said.

“Think about loan growth” she added. “What happens if you can fund a loan two to three days faster on an individual loan? Three days of interest may not be significant, but you can make thousands of those loans and you fund them two to three days faster.”

The stronger case is that real-time payments will be standard in the future, and companies that don’t get on board will fall behind.

“Studies that I’ve seen in the last year have indicated that a vast majority of companies are either ready to use or utilize the capabilities in these instant payment systems within a couple of years,” Murphy said. “It’s a competitive necessity, but more like an opportunity cost if you don’t do something about it now.”

Getting on Board With RTP

Companies can set up their own RTP payment hubs or they can partner with a fintech company like Volante that will help them through the process. This will be especially important for smaller banks that don’t have the resources or the inclination to handle RTP technology in-house.

Regardless, companies should understand that the IT aspect is only part of the battle.

“RTP launched in late 2017 and a colleague of mine, we did some interviews a year later with some of the early adopting banks, including Citi and JPMorgan Chase,” Murphy said. “And the interesting thing is that they said it was roughly a five out of 10 in terms of IT complexity, but a bit more complex when it came to operational synergy.

“That’s what banks have to keep in mind, having operations in place. In a separate conversation with TCH, they indicated that they’re ready at around 300 bank connections, and more than 80% of those are smaller banks. So it’s pretty obvious that the smaller institutions need that type of resource.”

Regardless of how banks prepare, they need to get ready now for real-time payments. “A bank that waits is not going to be able to handle some of these new products that are coming down the line, are not going to be able to change their operations quickly enough,” Nichols said.

Murphy notes that real-time payments are already starting to be a differentiating factor.

“Small businesses are already seeing some merchant services providers that are offering same-day instant cashouts,” he said. “Some of those businesses may need that liquidity on a Saturday to be able to go to market and get their next set of supplies to be ready for Monday morning. These are the things that are already out there. Just like movies on demand, just like purchasing on-demand Instacart in an hour, those expectations are already set.”

The post Financial Institutions Without an RTP Strategy Risk Being Left Behind appeared first on PaymentsJournal.

GCB Bank, a major institution in Ghana, has successfully completed the first Pan-African Payment and Settlement System (PAPSS) client transaction in Ghana, according Myjoyonline. The transaction involved a Ghanaian incorporated entity initiating a supplier payment from GCB in Ghana Cedis (1 USD = 460 GHC) to a beneficiary in Nigeria who received the payment in Naira (1 USD = 122,443 NGN) instantly.

Readers can reference our posting from last year where we described the continental initiative called the African Continental Free Trade Area (AfCFTA), which has a remit to significantly boost intra-Africa trade, particularly trade in value-added production and trade across all sectors of Africa’s economy.  This in turn is part of a broader master plan called Agenda 2063: The Africa We Want.

PAPSS was adopted in 2019 and launched commercially in Jan. 2022. It is unclear from the referenced article today whether or not this is the first actual cross-border transaction on PAPSS or only the first initiated from Ghana. A quick review of the PAPSS website did not provide any data, but we would guess that there have been other transactions given the commercial launch date. The article goes on to quote some folks and provide thanks to various participants including the Bank of Ghana (central bank), the Ghana Interbank Payments and Settlement Systems (GHIPSS), which is the local equivalent of Fedwire, and the African Export-Import Bank, among others. 

Although prefunding occurs for direct participants through integration between PAPSS and the local central bank RTGS system, settlement is done on a net basis every 24 hours. So this is another ongoing development in the ever-changing cross-border payments space, something we recently covered in member research for B2B developments. There are several other instant payment cross-border initiatives underway, including those involving CBDCs, and we’ll be keeping readers updated as they release information.

Overview by Steve Murphy, Director, Commercial Advisory Service at Javelin Strategy & Research.

The post Real-Time Cross Border Payment Initiated in Ghana appeared first on PaymentsJournal.

As the U.S. moves toward broad adoption of real-time payments (RTP) later this year with the deployment of FedNow, it can learn a lot from the UK’s implementation of real-time payments.

A recent webinar featuring Miriam Sheril, Head of Product at Form3’s U.S. division, Connie Blacklock, EMEA Head of Real Time Payments at J.P. Morgan, and Steve Murphy, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, shed light on what banks should consider when it comes to real-time payments, the vast differences on what the space looks like in the U.S. compared with other regions, and what the payments industry can expect in 2023.  

Differences Between U.S. and U.K. Payments Ecosystems

The U.S. and U.K have some important differences between their financial systems, which U.S. banks need to keep in mind. In the U.K.’s faster payments system, for example, payments appear to move in real time, but settlement between banks actually happens only a few times per day. That’s different than the U.S., where on real -time payment networks, settlement happens immediately.

The U.K is also looser about who it allows to tap into its real-time payments system, allowing using bank intermediaries to access the network. “In the UK, you can be a financial institution that doesn’t have a banking license, but you can actually still participate in the scheme,” Sheril explained. In contrast, “The US has some pretty strict rules confirming that there are no intermediaries allowed. If you’re a bank, you need to directly participate in RTP or FedNow.”  

Allowing non-banks access to the real-time network can lead to innovation. “It really opened up the market for UK Faster Payments when the Bank of England changed the [participation] rules in 2017,” Blacklock said. “It really helped open doors in the market.” It is unknown whether this may happen in the future in the U.S.

Move to Real-Time Payments Involves Resilience and Availability

As banks start planning for the rollout of real-time payments in the U.S., they should not focus solely on the technical aspects. According to Blacklock, banks should focus not just on getting the payments right but also on transaction reporting and operational considerations.

“It’s easy to think about reporting as an afterthought because you’re so focused on the payment processing, but reporting is what gets you your data,” said Blacklock. “And it’s what clients need to make their businesses run. Definitely put reporting as a top agenda in terms of your planning.”

Another key focus should be on resiliency and stability. Because real-time payments occur instantaneously, a blip in the system can wreak havoc. With a real-time payments system, the lack of time lag reduces the room for error. In a few seconds, millions of transactions can drop or fail, and it is impossible to manually replay all the transactions. Thus, whatever can be automated in error recovery should be.  

It’s also important that U.S. banks align their teams for this upcoming transition to real-time payments. This includes making sure that everyone involved is familiar with how real-time payments work, what the cloud is, and how application programming interfaces (APIs) work.

Banks will need to focus on staffing for a 24/7 payments ecosystem and look ahead for any particular challenges that may arise. Sheril listed some specific concerns she heard from banking executives, including:

• “My operations team don’t work 24/7, how will we adjust?”
• “With reconcilement, how will those reports work? Because now I have a 24/7, no-end-of-day process, and what does that even look like?”

Murphy agreed that the people aspect of implementing real-time payments will be more significant than the technological aspect. “A while back, we interviewed about six or seven of the largest banks who had implemented RTP in some way, shape, or form,” he said. “And what they said was that the operational piece was much more challenging. The technology piece was a challenge, but on a scale of one to ten, it was probably more like a five or six.”

Blacklock also underscored the importance of planning for exponential growth in RTP. “Don’t be naive and think that your volumes are going to stay low, because again, fingers crossed for everyone who is choosing to go into RTP, you’re going to see high volumes and you’ve got to have your systems ready to do that,” she said.

RTP and Fraud

In many ways, fraudsters are benefiting from real-time payments, as they leave no time for customers or banks to second-guess them. The only way to solve for this will be via machine learning solutions, which will be developed as the RTP rollout proceeds.

“I was recently at an industry event, and what I heard was that, at least on the B2B [business-to-business] side, there really hasn’t been a large uptick in fraud yet,” said Murphy. “But fraud in general is bubbling and increasing. TCH [The Clearing House] does not provide layered services [addressing fraud] to the banks. They just provide the network and they are expecting the banks to develop their own systems of behavioral modifications and algorithms over time. FedNow is probably expecting to provide a couple of fundamental layered services for the banks. But mostly the reliance is going to be upon the banks themselves to build up their antifraud capabilities.”

What to Expect in 2023

Of the thousands of banks in the U.S., only a few hundred are currently on the TCH RTP network. More banks are expected to hop on the RTP bandwagon with the launch of FedNow. This will take time, though. “I don’t think 2023 is the year of huge volumes of faster payments in the U.S.,” said Sheril. “2023 to me is more banks signing up, starting their work, planning their budgets to get there. As more banks get on board there will be more use cases, driving a virtuous cycle of improvement.”

In contrast to the United States, the adoption of real-time payments is set to increase dramatically in the UK and the EU. “Last year, the volumes of real-time payments in the market increased 23% from 2020 to 2021 [in the UK],” Blacklock said. Furthermore, the UK is designing a new real-time payments architecture scheme, with a new platform and clearing system using the ISO 20022 messaging standard.

According to Murphy, next year will also feature innovation that has been a long time coming: cross-border real-time payments. “There is an initiative underway between TCH, EBA CLEARING, and SWIFT called IXB,” said Murphy. “They’re expecting to commercialize cross-border payments in 2023. And I would guess the first use case will involve Euro-US dollar conversions. But I would imagine that the UK is going to be one of the next markets that they’ll add next.”

In the United States, banks should get started now by planning their technology and human resources for the deployment of real-time payments. This involves gearing up for a 24/7 payments ecosystem, involving changes in staffing, reporting, and training. It will also involve getting everyone on board about the tech involved, including the RTP network itself, as well as cloud storage and APIs. Banks should also prepare for cross-border real-time payments, which will likely be operational next year. Those will connect with a real-time payments network in Europe and likely with a newly overhauled system in the UK.

The post Helpful Lessons for Real-Time Payments Implementation appeared first on PaymentsJournal.

As our highly digitized economy continues to evolve, cash flow and liquidity management are paramount to businesses. Modernizing payment processes away from manual processes—such as checks and extended terms—is crucial for businesses to control their cash position. How can real-time payments help?

It’s also crucial for consumers, who tend to believe their funds are sent and received in real-time, although some payment methods can take days to reach recipients and settle in their accounts. This can create uncertainty and a lack of clarity around cash management as bank account balances are not current. In this new era of instant gratification, businesses, and their consumers have rising expectations about how and when to sell and purchase goods, trade stocks, and monitor cash positions precisely in real-time. 

Businesses using real-time payments (RTP) in their day-to-day operations will have better cash management. These businesses are getting paid and paying on time—no longer waiting days or weeks for their payments to process. Maintaining a steady cash flow puts their business in a stronger position for increased revenue, greater transparency, improved payments reconciliation, reduced unauthorized payments, reduced reliance on cards, and overall customer and supplier satisfaction.

Still, many business leaders don’t understand how real-time payments can transform their operations for the future—let alone what they are.

Real-Time Payments Defined

Real-time payments are initiated and settled faster than the average bank transaction—they are nearly instantaneous. Traditional payment methods can take several days for funds to reach a recipient’s account, and they won’t know about or see the payment until the bank has cleared it. When The Clearing House launched the RTP® network in 2017, businesses and consumers could make real-time payments 24/7/365 since RTP rails are always online and available to process transfers, including weekends and holidays.

The immediate nature of RTP transferring funds more cost-effectively than standard credit card transactions removes cash flow bottlenecks so people can see their money instantaneously, up to the second. Real-time payments are irrevocable push transactions, so only payers can initiate the payments—other parties can send a request for remittance but cannot begin the process. Once the payer sends the money, it can’t be reclaimed.

Every bank account owner is eligible to receive a real-time payment—a game changer when time is sometimes more valuable than money. Today, a digital experience without instant payment tends to be lackluster, fall short of customer expectations, and put a merchant at a disadvantage.

How RTP Can Transform Your Business

Real-time payments are bound to affect how we transact and conduct business —consumers, businesses, and financial institutions will all see the benefits of faster payment methods. Here are a few ways:

Improve liquidity: Merchants with fewer liquid assets don’t have to wait for checks to clear or payments to settle to cover their costs. Real-time payments make payroll on demand a practical reality so vendors and employees can get paid faster, which minimizes the risk of supply chain disruptions. Even gig workers and contractors can receive payments in full right after a job, increasing the fluidity and convenience of conducting business.

Reduces Risks: With other B2B payment methods, there are potential credit risks, chargebacks, payment failures, and limit restrictions. Many companies will even float payments to try and create an instant, real-time experience, but traditional cash flows prevent this workaround from being a seamless solution. Real-time payments help remove those headaches and intermediaries to provide more security and confidence during transactions.

Advanced Financial Management: RTP offers businesses more control of their payment processes, including accessing and moving funds immediately. Merchants can see their funds in seconds to plan and adapt their finances more efficiently. Business owners can meet short-term commitments, minimize borrowing, and optimize the use of surplus cash. Transparency develops both B2B and customer loyalty and relationships and also creates a better payment experience for customers.

The pandemic caused a severe disruption within the supply chain, creating a domino effect throughout the B2B relationship. Real-time payments are gradually staking their claim as a financial solution, providing new opportunities for merchants and customers seeking secure, user-friendly online payment options.

However, the rapid adoption of digital technologies, especially in the financial industry, is reshaping economies like never before. With RTP’s ability to move money quickly, so both payer and payee know precisely when the transaction occurred, more businesses are well-positioned to resemble the “pay now” experience in the B2C market. Innovative technology-backed processes, like real-time payments, are quickly becoming the business baseline.

The post Real-Time Payments Explained appeared first on PaymentsJournal.

Consumers want faster, convenient, and reliable payments and real-time payments (RTP) have delivered on all fronts. Today, it is no longer limited to a select few. According to Bankless Times , 72% of the world’s population now has access to RTP.  

“Global adoption of RTP is expected to experience an annual growth rate of 23.6% from 2020 to 2025,” said Sophia Gonzalez, Debit and Payments Analyst at Javelin Strategy & Research. “Though not widespread in the U.S. for general purchases, U.S. cardholders do utilize RTP for P2P transactions.”  

“For example, money exchanged on the Zelle network is considered a form of RTP,” she said. “Europeans have paved the way for a broader application of RTP and enabled RTP at the POS. In fact, Europeans account for over half of the global market in instant payments. Currently, European financial institutions charge consumers anywhere between a few cents to as high as €8 per transaction.”  

“The U.S. can take many learning lessons from Europe’s application of RTP. Currently, the Clearing House is the only RTP network in the US; however, FedNow, the Federal Reserve’s network, is set to launch later this year.” 

The Benefits of Real-Time Payments

Although speed is an important benefit to using RTP, it’s not the only one. It’s the immediate, on-the-spot clearing and settlement that enables businesses to see less of their money caught up in sluggish processing that sweetens the deal.  

By having immediate access to funds, both consumers and businesses have a clearer picture of their overall financial health and liquidity, ensuring the efficient management of funds.   

RTP is revolutionizing industries such as the retail sector, where merchants can accept customer payments easily, especially in underserved areas. Not only will this drive more sales for the businesss, but customers will benefit from a more frictionless payment experience.

What’s more, real-time payments are sent alongside data that is specifically formatted to a global messaging standard. This enables businesses to reconcile payments automatically, enhance efficiency in the back-office, slash processing delays, and facilitate the resolution of errors.  

That being said, RTP payments can also be considered a key driver in the quest for financial inclusion. As RTP continues to drive digital payment modernization via P2P payments, online banking, and mobile payments, it opens the door to underserved communities, such as the unbanked and underbanked worldwide. It also paves the way to assist with new payment technologies such as digital wallets and cryptocurrencies.  

Real-time payments will also enable users to pay their bills easier and faster. They can make payments on e-commerce marketplaces, directly from their bank account, as well as payment on delivery.  

The post Access to Real-Time Payments Expands Worldwide  appeared first on PaymentsJournal.

It’s been about five years since real-time payments (RTP) became a reality in the U.S., and their popularity and adoption continue to skyrocket. According to a survey U.S. Bank  conducted among 1,000 financial executives across various industries in May and June of 2022, 56% said they will adopt real-time payments by 2024.

Furthermore, 41% of companies described as “RTP leaders” saw an increase in revenue compared with the previous year, while only 33% of “RTP laggards” reported the same. A further 39% of RTP leaders saw an increase in profits in the past year, while 44% said they saw their brand value increase.

To learn more about the importance of businesses adopting real-time payments and integrating them into their overall digital strategy, PaymentsJournal sat with Mike Jorgensen, Head of Emerging Solutions at U.S. Bank, Anuradha Somani, Head of Payments, Global Treasury Management at U.S. Bank, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

Real-time Payments as a Competitive Differentiator

The growth of real-time payments continues to rise: In the second quarter of 2022, companies made more than 41 million real-time payments, totaling $18 billion — a 12% growth in volume from Q1, according to The Clearing House.

According to The Clearing House, roughly 62%of accounts in the U.S. can receive real-time payments “and if all the payments providers and banks had everything turned on, that figure could reach about 90%,” noted Murphy.

But real-time payments aren’t just about instant payments; they also mean that payments can be reconciled 24/7 and give businesses access to more and larger amounts of data related to payments, said Somani. She added that businesses shouldn’t just think of real-time payments as something to tack on as an afterthought, but rather using them to create “a fundamental change to your business model.”

“It gives you the ability to create a friction-free and seamless experience, so the payment moves to the back of the mind for the consumer,” she added.

Jorgensen noted some industry-specific examples, including broker-dealers enabling clients to fund their accounts instantly so they can immediately begin trading rather than having to wait the typical two to three days for an automated clearing house (ACH) transaction to clear. Or a car dealership buying a vehicle from a consumer being able to instantly transfer the funds. Jorgensen also referenced the gig economy, and workers being able to immediately get their pay at the end of their shift.

“Real-time payments offer companies the possibility of creating a differentiated experience,” Jorgensen added.

He cited the experiences of rideshare companies such as Uber and Lyft as examples of this seamless payments experience.

“In the old days, you would take a taxi and then pay them at the end of the ride,” Jorgensen said. With ride share companies, “the payment is invisible, real-time, and embedded in the experience.”

It’s not just business-to-consumer (B2C) businesses that benefit from RTP, but business-to-business (B2B) as well. Murphy noted that “there is an increasing demand from people in offices to get the same experiences [at work] that they get on their personal apps.”

Some B2B use cases include paying invoices instantly and funding payroll instantaneously, especially so that employees can receive instant earned wage access, Murphy added.

RTP and Digital Transformation

Businesses need to think about how real-time payments will be integrated into their overall digital transformation agenda, said Somani.

“It’s not just about changing a single ACH into RTP, but how does this integrate into my larger payments ecosystem, and how does it integrate with different business cases and use cases?” she added.

For example, there are a lot of back-office considerations when it comes to RTP, noted Jorgensen.

“You have to think about how RTP will affect your normal accounts receivable and accounts payable functions,” he said. What do you do if a payment comes in at 1 a.m.? Most businesses aren’t staffed to have accounts funded 24/7.”

Embracing real-time payments means “changing your entire payments system as part of a larger transformation agenda,” added Somani.

That is why it is critical for businesses to identify the right partners to work with as they embark on their digital transformation journey, including financial and technology partners.

“You are not trying to retrofit anything, but innovating and integrating into your existing systems,” she added. “This requires the right partners to help identify what pain points exist today, what is the ideal end state when it comes to payments, and how do we get there.”

A “Netflix Moment” for Payments

Jorgensen observed that business that adopt and implement real-time payments will have a significant competitive advantage over those that don’t. He cited the U.S. Bank survey that showed that nearly 60% of those polled will implement real-time payments by 2024, meaning that “the other 40% are at risk.”

“If a company doesn’t adopt RTP and they can’t figure out how to integrate it into their front-end and back-end operations, they will lose competitive advantage, speed to market, and even the ability to scale quickly,” he added.

The post Why Businesses Need to Adopt Real-Time Payments as a Competitive Differentiator appeared first on PaymentsJournal.

During the past decade, real-time payment (RTP) networks have been developed worldwide, including within the U.S., India, China, South Africa, Denmark, and Sweden. Real-time payments occur almost instantaneously and work on a separate rail system from traditional digital payments. While the primary use cases so far have been person-to-person (P2P) payments, as RTP develops, new use cases will involve merchants and third-party companies that provide value-added services.

A recent white paper from Equinix, “Real Talk About Real-Time,” discussed how the adoption of a real-time payment infrastructure is changing the payments landscape.

The Current State of RTP Adoption

RTP is still nascent — most payments continue to be made using legacy systems, over traditional card rails. In fact, The Clearing House deployed the first American RTP network in 2017. Big banks have gotten on board with The Clearing House network, but smaller- and medium-sized banks have largely held off for the time being. Wider adoption is expected next year, when the Federal Reserve deploys its own RTP network, FedNow.

When FedNow is deployed, it will likely lead to a flurry of innovation and reorganization of payment systems. “While real-time payment systems are not intended to replace legacy systems such as ACH [automated clearing house] or card networks initially, real-time systems offer a unique opportunity to consolidate payments functionality that is currently dispersed between various interbank and closed-loop systems,” the white paper stated. “Implementing a data-rich, always-on, real-time payment system can provide a foundation for banks and non-bank payment providers alike to improve service to their customers and develop new products.”

Globally, the most common use of real-time payments is peer-to-peer (P2P) payments. In such systems, banks adopt a proxy identifier for the people involved in the transaction, typically a phone number or email address, and complete the transaction via a mobile application. Examples include Swish in Sweden and MobilePay in Denmark. Those applications validate funds and send settlement instructions to a government-run RTP infrastructure.

Reasons Behind Differential Uptake in RTP Infrastructure

As RTP infrastructure becomes more common, uptake of the technology, partly due to the presence — or lack — of developed financial systems already in place, will differ. Countries without developed financial systems took the lead in mobile payments, and some of those same countries are doing the same with real-time payments.

“Many have observed a supposed ‘leapfrog’ effect in markets that lack high-volume systems such as ACH or debit card networks,” the Equinix white paper noted. “In China, retail giants Alibaba and Tencent now dominate the market for mobile payments with their Alipay and WeChat Pay apps. India’s UPI [United Payments Interface] has also seen huge volume growth in a market previously marked by a high degree of cash payments. Compared to these and other success stories (such as the rise of M-Pesa in Kenya), the share of real-time and mobile payments made in the U.S. or in most EU member states is relatively small.”

But the “leapfrog” effect doesn’t account for all the differences in adoption. RTP has had success in markets with digital payment habits, such as Sweden and Denmark, because of the elegant customer-facing apps built on government-run RTP networks. In the U.S., apps will need to create value-added services and connect seamlessly to existing networks in an effort to help wean customers off legacy payment methods. This will likely happen when FedNow is up and running.

Upshot for Banks

For merchants and banks, the payments ecosystem will look very different when RTP is mainstream. Because real-time payments can be transacted any time, more and more transactions will happen outside of business hours, making time zones and business hours less relevant. It will affect banks’ business models and change the players involved in financial transactions.

“Banks will no longer be the sole gatekeepers of payments and financial services. Fintechs and other non-bank payment service providers will leverage real-time payment systems to connect with customers and other service providers. Stakeholders currently outside of the financial services industry will also play a role, including merchants, billers and tech companies.”

Banks need to realize that their main business of sending payments will not be enough to survive in the future. “As real-time payment systems enable the creation of new value-added services, the mere exchange of value will no longer be seen as a product,” noted Equinix. Banks need to reorient their business models more toward a value-added business versus a payments business. Equinix gives some ideas for value-added offerings, including linking payments to loyalty programs, automating invoicing, and interfacing with third-party networks and databases. In any case, banks will need to develop new revenue channels, understanding that payment services will no longer be dominated by a few larger banks.

What This Means for Merchants

Real-time payments will offer significant benefits for merchants, making their businesses cheaper and more convenient. “Real-time systems also offer reduced or eliminated interchange and merchant service fees, meaning that retailers receive more funds each time a customer pays. Smaller retailers in particular may find the combination of instant access to funds and lower service fees a huge boon to their liquidity management processes and overall business,” according to the white paper.

In order to accept real-time payments, merchants will need to update their tech, such as with quick response (QR) codes that will allow consumers to make a purchase. What’s more, merchants also may need to invest in new payment terminals, which can outweigh some of the potential savings from service fees. Still, it will likely be worth it given the savings in service fees from moving away from credit cards.

RTPs can also be a convenient way to pay workers, leading to a shift away from biweekly paychecks. Because these payments are instant, merchants can manage when they choose to disburse the funds rather than sticking with the traditional weekly or biweekly payments that are currently the standard because of legacy systems.

Overall, the next few years will be an exciting time for real-time payments worldwide. Banks should consider refocusing some of their business strategies toward value-added services they can provide on top of the payments services they offer. Merchants will benefit from reduced fees and payment speed, but will need to balance these benefits with the IT investments needed for processing RTPs. It seems likely that, as RTPs gain traction, the payments ecosystem will become more varied and decentralized, in-line with the U.S. economy as a whole.

The post How Real-Time Payments Will Shake Up the Payments Landscape appeared first on PaymentsJournal.

AutoRek, an end-to-end payments reconciliation platform, recently conducted a global payments survey. It is aimed at understanding real-time payments (RTP) in the UK and U.S. RTP are an emerging payment system, and with that comes concerns around regulation, compliance and reconciliation. With rising demand from consumers for RTP enablement, the payments industry has been scrambling to meet the need. According to the Global Payments Lead at AutoRek, Nick Botha, 2022 was a turbulent year for both UK and U.S. payments.

According to the AutoRek survey:

• 70% of U.S. payments firms are confident in their ability to accommodate RTP
• 50% of UK firms feel prepared to accommodate RTP
• 60% of all firms expect payment methods and volumes to increase in the future

Can Automation Bridge the Gap?

PaymentsJournal spoke with Botha in a webinar last month. They explored how automation could help prepare businesses to accommodate emerging payments. Automation enables businesses to bridge the gap between front-end and back-office processes to monitor payments, accurately reconcile, and remain compliant against regulation. Botha shared as the digital payments space grows, so do regulation measures. It is critical for companies to evaluate their current processes and determine where their payment reconciliations are weak.

The AutoRek survey discovered that 65% of payments firms currently utilize spreadsheets for accounting. 75% of U.S. firms utilize spreadsheets and 50% of UK firms utilize spreadsheets. This poses the organization at risk for regulatory breaches, dependency of skilled persons to manually populate spreadsheets, and in inflexibility to meet new regulations as they come to the surface. 

According to the AutoRek survey:

• 63% of payments firms agree their regulatory burden will increase by 2024
  • This is especially prominent in the U.S.: 47% of US respondents foresee compliance expenditures increasing and only 29% of UK firms anticipate spending more on compliance
  • Among regulatory topics, customer protection, operational resilience, crypto payments and overall data protection were ranked as the most important for regulation
• 29% of U.S. firms noted that their back-office costs grow in tandem with payment volume growth
  • This is in direct contrast to UK firms who state that their back-office costs grow at a slower rate than payments volumes
  • UK firms have a wider adoption of back-office automation

Real-Time Payments Regulations

It does seem ironic that the UK feels less prepared to accommodate RTP (on average) but has a better grip on compliance than the U.S. This could be due to harsher existing regulations in the UK than in the U.S. Botha noted that his “payments report has demonstrated clear differences between UK and U.S. regulatory landscapes, strategic priorities, and future outlooks.” U.S. firms need to invest into and enable automation to support RTP regulations that are guaranteed to come. It’s not if, but when.

Overview by Sophia Gonzalez, Research Analyst, Debit Advisory Service at Mercator Advisory Group.

The post AutoRek Survey Poses Differences Between U.S. and UK Readiness for Real-Time Payments appeared first on PaymentsJournal.

Instant payments, or real-time payments depending on your preferred nomenclature, have come a long way in the U.S. There was a time when the only “instant payment” was the exchange of physical cash from one person to another person in close proximity.

However, the past few years have seen payments innovation go into hyperdrive. Arguably these last five years have seen more payments innovation than in the last five decades combined.

A recent whitepaper from Wells Fargo, titled “Instant Payments: Enabling Better Business Experiences,” outlines how much of that innovation has been driven by digital, real-time payments. Instant payments began in earnest in the consumer space with digital, peer-to-peer (P2P) payments services such as Venmo and Zelle. Consumers now expect payments to be digital, instant, reliable, and secure.

That’s why it is imperative businesses of all sizes take advantage of real-time payments. This is not only to please customers but also to help with their own cash flow and liquidity. It will make employees happier and more loyal.

The Massive Growth of Digital, Instant Payments

The average consumer has been increasingly trained to use digital payments services in recent years. Even those who resisted this trend became digital payments adopters during the pandemic. The physical exchange of cash was discouraged. It’s perhaps no surprise then that 92% of small businesses now accept contactless payments — up from 67% in 2019. This is according to Mercator data outlined in the Wells Fargo whitepaper. Meanwhile, three-quarters of consumers have taken advantage of P2P instant payments service in 2021. Instant payments are now the expectation.

According to Wells Fargo’s head of Enterprise Payments Strategy, Ulrike Guigui, “Today’s customer expects a payments process that is simple and immediate. Now that digital, instant payments are widely available, consumers — as well as a business’s suppliers and partners — expect to be able to use them across almost all transaction types and businesses.” In response to their customers’ changing expectations for speed and convenience, businesses must embrace instant payments to meet customer demands.

Instant payments also provide greater data options so businesses can have a plethora of new information that can accompany these payments, helping businesses reconcile the payments more quickly and gather greater data intelligence about the transaction, added Sarah Grotta, Director of Debit and Alternative Products at Mercator Advisory Group.

Types of payments are based upon a different type of data standard, Grotta continued “and that gives you a little bit more information you might see in your statement or your summary of transactions that involve cards. You might see the merchant name or an abbreviated name of the merchant. You know the date, the time, that sort of thing — faster and real-time payments take it up to the next level.”

Liquidity and Cash Flow

In the current economic climate of rising interest rates and inflation, cash flow is more important than ever, especially for small businesses. Some estimates say that the average small business has around 30 days of cash on hand. The ability to receive payments instantly — from not only customers but especially suppliers — can greatly ease this concern. For example, the average outstanding invoice for businesses is 36 days, according to Trade Finance Global. This means many businesses may have to take out loans to cover expenses while waiting to get paid. Meanwhile, there is also a lot of manual, time-consuming work involved: accounts teams generally create a paper invoice, file it, fetch it when chasing, and then keep track of its status as the team waits for payment — multiplied by however many customers or suppliers the team has to manage.

According to Wells Fargo, the ability to have instant access to incoming payments can give businesses cash when they need it. “Timely access to working capital gives a business more options for payments and operations,” said Guigui. “Instead of borrowing capital or delaying spend, businesses can use liquidity to help pay down debt, fund strategic initiatives, or simply strengthen the balance sheet in order to be in a better position to pay suppliers and employees.” 

Simply put, instant payments can reduce uncertainty from payment delays and boost working capital.

“Merchants may be taking different types of card payments at a merchant terminal,” added Grotta. “There are use cases and solutions in the marketplace today where that merchant could … [receive] the deposits from those card payments that same day … rather than waiting until the next day or waiting over the weekend until the following week.”

Instant Payments to Employees

Current economic conditions don’t apply only to businesses, but workers, too, especially low-to-middle-income employees and gig economy workers. Many employees need immediate access to cash, which has driven the rise of earned wage access services in recent years. Many employees simply do not want to — or can’t afford to — wait every week or two to get paid.

Increasingly, employees want to get paid daily or even hourly, accessing their pay in real time as they earn it. These workers may have varying daily needs that require instant access to earned wages right after the work is performed, at the end of the shift, or upon completion of a project. In fact, 78% of U.S. workers said that no-fee access to on-demand pay would increase their loyalty to an employer, according to the whitepaper by Wells Fargo.

Finding the Right Instant Payments Solution

In the U.S. there are several instant payments solutions to choose from. There are several factors for businesses to consider when choosing. First you must consider what meets your business’ needs. Some solutions, for example, settle payments instantly and others settle the next day.

It’s also important to determine what solutions best meet customers’ needs, which include factors such as user experience (UX) and specific features. The analysis of which solutions customers are most likely to find valuable is a worthwhile exercise in settling on the right solution.

Finally, businesses must determine which solutions will be the easiest to integrate. Setting up the instant payments process should be seamless and easy for not only customers but businesses as well. Ultimately, solutions that are straightforward and seamless are the ones that will win in the coming years.

In the next 12 to 18 months, Grotta predicted there will be more and more announcements from financial institutions “on new ways to utilize real-time and faster payments that have benefits for businesses and consumers.”

Download the Wells Fargo Whitepaper

The post How Instant Payments Are Taking the Industry by Storm — And Why Businesses Don’t Want to Get Left Behind appeared first on PaymentsJournal.

The faster payments trend shows no signs of waning across the globe. According to an article from Finextra, some are now requiring new rails for real-time payments worldwide. Furthermore, the European Commission has drafted a law calling for regulation of instant payment services.  

What’s slowing full-scale adoption is the disjointed processes between banks and fintechs. Banks are not currently offering a one-stop shop for financial services. Fintechs tend to conduct their operations within closed ecosystems and lack interconnection with other providers.  

In this disconnected environment, it may delay payments. Also, the situation may restrict data access. Furthermore, cross-border payments are a challenge. In response to some of these challenges, an up-and-coming solution has been proposed—an initiative called P27, which is spearheaded by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB, and Swedbank. The goal is to offer an open access, ISO 20022 compliant infrastructure to facilitate real-time payments, both domestically and cross-border, using a multitude of currencies.  

Its purpose is to integrate the complete payments infrastructure via a platform that enables payments to move instantly. To start, this will take place between Denmark, Finland, and Sweden. It will follow the Single Euro Payments Area (SEPA) standards, ushering in the coherence of payments in Europe.   

PaymentsJournal has covered other initiatives to support real-time payments in this article.   

“RTP are expected to take off in 2023,” said Sophia Gonzalez, Research Analyst at Mercator Advisory Group. “Consumers, merchants and financial institutions alike see the value in RTP – consumers do not have to wait multiple days to see a transaction clear on their financial statements, merchants have instant access to earned funds, and issuers can better reconciliate with RTP processing. Strategically, small banks and fintechs should take advantage of the readily available open-access infrastructure to facilitate RTP. If they do not, they risk being left in the dust by financial giants.” 

The post Will the Nordics Revolutionize Real-Time Payments?  appeared first on PaymentsJournal.

Real-time payments (RTP) are financial transactions that are settled almost instantaneously. This year marks five years of real-time payments in the U.S. That is since the Clearing House deployed the first real-time payments network in 2017.  

While all the big banks are on the Clearing House network, most small- and medium-sized banks are not. The reluctance to jump on board with The Clearing House RTP network is due to an alternative payments network the Federal Reserve is developing. The network is called FedNow, and is set to be released in July.

A recent article in Forbes interviewed Ted Forman, President of Payments Solutions at Jack Henry. He gave his take on real-time payments. He said that because RTP is a new field, and the Federal Reserve’s RTP network isn’t out yet, the RTP space hasn’t matured yet. Third-party solutions that can take advantage of RTP are just not out there yet, but they will be, and largely because of demand from youth.

“Financial institutions are starting to understand that they need a payment strategy. I believe that interchange revenue is slowly going to be cannibalized,” he told Forbes.

PaymentsJournal has written about the potential for real-time payments to change the payments landscape. It will be interesting to watch how the introduction of FedNow next year will lead to advances in payments. This will be especially interesting for those that are through third-party solutions that are built on the network infrastructure.

The post Real-Time Payments in the U.S. Are Still Going Strong appeared first on PaymentsJournal.

Instantaneous movement is technically impossible, but real-time payments get pretty close.

Real-time payments (RTP) are financial transactions that are settled almost instantaneously. They use separate digital network “rails” to process payments 24/7 every day of the year. Real-time payments are fast, which is helpful to companies and individuals that either want to pay or receive funds on a moment’s notice.

In a recent podcast, PaymentsJournal discussed the current state of RTP in the U.S. with Miriam Sheril, Senior Product Manager at Form3, and Steve Murphy, Director of Commercial and Enterprise Payments at Mercator Advisory Group. They spoke about how The Clearing House Payments Company pioneered the first RTP network in the U.S. and provided insights into why faster payments are different in the UK compared with the U.S. Sheril also teased an upcoming webinar she’ll be hosting next month and what audiences can expect.

Evolution of Real-Time Payments Space

When looking at the real-time payments landscape, the U.S. has lagged other regions. By 2010 several countries already had real-time payment rails, including India, China, Japan, and the UK. In the U.S., however, the first — and only extant — real-time payments network was deployed in 2017 by The Clearing House Payments Company.

And since then, adoption of real-time payments has gradually increased. “The Clearing House has around 260 banks on the network right now,” said Sheril. “That doesn’t seem like a lot considering the U.S. has 10,000-plus financial institutions.”

Some of the reluctance to jump on board with The Clearing House RTP network is likely due to the alternative payments network the Federal Reserve is developing, called FedNow. That network has been in the works since 2019 and is slated to launch next year.

Banking institutions prefer to use Federal Reserve infrastructure because of its perceived stability and influence on the economy. That’s true in other payment network schemes as well. “The Federal Reserve service has 9,000-plus institutions on its ACH [automated clearing house] network, while the Clearing House EPN [electronic payments network] service, a competitor, has closer to 200,” said Sheril. “Many banks are going to wait until FedNow is out to really adopt real-time payments and launch it.”

Banks Offer RTP

According to Murphy, a minority of banks have started offering real-time payments, and those banks include some of the biggest players in the industry. “The 260 banks that are connected to RTP represent somewhere between 80% and 85% of account access,” said Murphy. “The large institutions have a direct connection into RTP. It’s the smaller banks that haven’t jumped in yet.”

Murphy added that most banks are partnering with a payments service provider (PSP) to connect into the real-time payments rail. For banks, it’s simpler and more cost-effective to contract out this out to a third party.

“When it comes to connecting to schemes, there’s a large cost for a bank to do it in-house,” said Sheril. “It all costs money — the connection itself, the messaging, meeting formatting standards, and using a collecting party service provider.”

Form3 takes care of the interface with the RTP network so banks can focus on banking, not information technology. “Even some of the larger banks who really have never looked at this model before are thinking, ‘Wait, this makes more sense for us to have someone else who does this. We’ll focus on banking instead.’”

When FedNow becomes available, it’s unclear whether banks will use both The Clearing House’s RTP and FedNow. Sheril believes banks will likely use both. While Murphy predicts that the two networks are not going to be 100% interoperable. PSPs such as Form3 will be helpful to banks in navigating the two networks.

Learning From Real-Time Payments in the UK

As the U.S. advances in its real-time payments journey, there’s debate about how much it can learn from other countries such as the UK.

The network in the UK was built with objectives in mind that don’t match the U.S. market. “As far as I know, it was more of a consumer-to-business and person-to-person transfer system and not as much business-to-business [B2B], which is one of the reasons why RTP was built the way it was built to create more B2B traffic,” said Murphy.

Sheril agreed. “Some of the use cases that work in the UK — and work really well — won’t hit here [in the U.S.].” For example, the UK has a standardized account numbering system for banks that makes it easy to do peer-to-peer (P2P) transactions. In the U.S., Sheril noted, “we may need some extra infrastructure or work-around that space.”

Sheril, along with Connie Blacklock, EMEA Head of Real-Time Payments at JPMorgan, will be further going into the similarities and differences between faster payments in the UK and the U.S. They’ll talk about how the move to real-time payments brings with it a need to adopt new technologies. And they discuss what banks need to consider from a fraud perspective.

The post Fintechs Are Driving Adoption of Real-Time Payments appeared first on PaymentsJournal.

The European Commission has proposed a new draft law. Banks would be required to offer instant payments, in euros, at no additional cost. The plan will allow consumers to transfer money within 10 seconds, regardless of the time or day of the week, according to Euronews. 

At a time when prices are increasing for everyday basics, if this proposal goes through, it gives consumers more flexibility.

Mairead McGuinness, Financial Services Chief at The European Union, described the move as “seismic and comparable to the move from mail to e-mail.”

Before this proposal, the financial system holds as much as €200 billion in transit. With this proposed draft law, these funds can be released and inserted into the economy, per Euronews.

Not only will it improve cashflow for businesses, but it will also bring significant savings for small- and medium-sized businesses. Overall, instant payments are faster, more secure, and more affordable.

We have covered the benefits for businesses to adopt instant payments in Europe. However, banks will need to be address some interoperability challenges first. Open banking has addressed these issues so that merchants can take advantage of real-time payment rails.

What’s driving this move towards instant payments is the opportunity to create competition. Currently, Visa and Mastercard are monopolizing cross-border payments.

The post Europe Proposes Draft Law That Requires Banks to Offer Instant Payments appeared first on PaymentsJournal.

As Real-Time Payments Accelerate, Companies Need to Get Operationally Ready

Although real-time payments (RTP) are experiencing rapid growth worldwide, many financial companies lack the infrastructure necessary to take advantage of this growing trend. But it’s less about capability, and more about “operational readiness.” In order to achieve operational readiness, businesses must have both their front-end and back-office systems working in unison to process payments instantly. 

During a recent webinar, PaymentsJournal sat down with Casey Scheer, Director of Marketing at BHMI, Cheryl Gurz, RTP Product Manager at The Clearing House, and Sarah Grotta, Director of Debit and Alternative Products at Mercator Advisory Group, to discuss the state of real-time payments—the latest trends, the challenges that companies are facing, and how they can be better prepared to accept RTP. 

Where Real-Time Payments Currently Stand 

Toward the end of 2021, Mercator released a survey of more than 3,000 consumers about their familiarity and experience with real-time payments. A large share of respondents (54.5%) said they have never used a service that allowed fast money transfers.

That said, nearly half of respondents experienced real-time payments to some extent. Roughly 21.8% said they’ve used a person-to-person (P2P) service such as Zelle to quickly transfer money, while slightly fewer respondents (19.3%) had used a P2P app to send funds to a person in another country. The various use cases outlined in the survey, including the ability to pay a bill quickly, as well as get a refund back immediately, show that there’s still a lot of opportunity for education.

Developing Trends in RTP 

A big driver of real-time payments use is that funds are received instantly, or in some cases, within a few minutes. And nearly three-quarters of consumers surveyed rated having the ability to pay their bills instantly at least somewhat important.

“This is a use case where we’ve seen some recent announcements from financial institutions developing solutions around bill pay, and we’re also seeing some of the fintech providers of bill pay platforms beginning to add faster real-time payment options,” said Mercator’s Grotta. “That’s spurring a lot of growth. Account-to-account transfers are [also important] , and sometimes this is actually a bill payment transaction itself because consumers may need to consolidate their balances to ensure that they have enough funds to cover an automatic bill pay.”

Grotta also shared a forecast for The Clearing House RTP Network during the webinar, based on data seen from Mercator’s primary research studies around real-time payments, as well as growth seen from other payment types like debit push payments and immediate P2P transactions. “We’ve developed this particular forecast, and in some ways, we actually consider this a relatively modest initial growth period because we realized that launching a brand-new payment rail is not something that happens overnight,” said Grotta. “But we are in fact forecasting over the next couple of years that the market is really going to be entering a period of steep growth.”

Difficulties Companies Face with RTP 

One of the obstacles to RTP readiness is back-office systems.

“The front office is kind of like getting a brand-new Tesla. You’re taking a 100-mile journey and the first 99 miles, it’s new, agile, and fast,” Scheer said. “However, in the last mile of your journey, the back office is like getting into a horse-drawn buggy, and it’s slow, outdated, and not agile. It causes a huge traffic jam.”  

According to Scheer, this bottleneck effect occurs when organizations have fast processing speeds on the front end and slow processing speeds in the back office.  Legacy back-office systems weren’t designed to support instant payments. “These systems were built decades ago, and because of that, they’re batch-oriented and not designed to support real-time payments,” she said.

Another major challenge is most back‑office ecosystems are comprised of multiple, disparate systems that lack interoperability and cannot provide a real-time enterprise view across all payments data.  As a result, companies are bogged down with manually intensive procedures to perform back-office functions such as transaction research, reconciliation, and disputes management. 

A modern back-office ecosystem is capable of processing any transaction regardless of the payment type or payment source and providing real-time access to consolidated payments data.  This includes supporting new payment messaging standards such as ISO 20022.  However, modernizing an existing home-grown back‑office system is no easy task. It requires extensive software development time, talent, and effort.

Today, many organizations recognize the need for a modern payments back office that is fast, agile and resilient.  They are looking for a back‑office system that can accommodate new faster payment methods and adapt as their needs change.

How to Get RTP Ready 

According to The Clearing House’s Gurz, education is key to comprehending how RTP payments can best fit within a business. There are plenty of resources available to educate companies about RTP, including public websites and podcasts.

The next step is connectivity. Businesses must have a way to receive payments from their banks, and this requires some technical prowess. That would mean implementing batch to batch integrations, uploading BI files, or implementing APIs. It comes down to establishing which way works best within your business.  

“One thing about real-time payments is that we like to call it precision payments, because it only takes 15 seconds,” said Gurz. “If I need to have a payment today due to my supplier by 5:00 PM, I can make that payment at 4:59 PM. It really puts new focus on liquidity management and your cash flow because you can schedule to the last minute.”  

Gurz emphasized that real-time payments should provide a benefit, not only to the workflow and cash flow of a business, but also to customers.  

“Don’t just look at your integration with your bank,” she said. “Make your customer service better.”

“Lastly, I suggest that businesses looking to become operationally ready use real-time payments to add benefit,” she said. “Don’t look at this as a lift and shift activity. And don’t look and say, ‘Oh, I’m using ACH, now let me move them all to real-time payments.’ That’s not why you’re doing this. You now have a toolkit with a new tool in there and this tool could be for your emergency payments. This tool can be for service issues. This tool should be used to solve pain points which your current payment types are not good enough for.”

Conclusion 

As adoption of real-time payments continues to accelerate, businesses need to become more operationally ready. Educating their staff about real-time payments is key, as is establishing connectivity, as Gurz pointed out.

Modernizing legacy back-office systems is also essential if an organization wishes to extend the full benefit of real-time payments to its clients. Today, most organizations, even those currently sending and receiving payments via the RTP network, have a bottleneck in the back office. No matter how fast the authorization occurs in the front end, a payment isn’t complete until funds are cleared and settled.

To be operationally ready for real-time payments, organizations will need to embrace transformation in the back office and either buy or build a system capable of processing payments in real time and adapting to future changes in the industry.

The post Is Your Company Operationally Ready for Real-Time Payments? appeared first on PaymentsJournal.

Enabling real-time payments is vital for any bank or credit union to remain competitive. Consumers have grown accustomed to sending and receiving real-time payments through a variety of fintechs, such as peer-to-peer (P2P) payment apps.

Demand for real-time payments has become even greater lately, as inflation makes the need to receive cash quickly more vital, and more and more people are working freelance or in the gig economy and need to get paid quickly.

However, it is complex and labor-intensive for many financial institutions to connect to the existing real-time payment networks, and many lack the proper tech infrastructure. That’s where partnerships come in; by partnering with a respected vendor, FIs of any size can future-proof their business and easily connect to all the major real-time payment (RTP) networks.

To learn more, PaymentsJournal sat with Parag Rohan Jain, GM of Fiserv’s NOW Network, and Sarah Grotta, Director of the Debit and Alternative Products Advisory Service at Mercator Advisory Group. Also joining the discussion were Michael Curran, AVP of Digital Enterprise Solutions at the $11 billion-asset Bethpage Federal Credit Union, and Jeffrey Staw, Chief Innovation Officer at Open Technology Solutions, a consortium that provides technology support to several credit unions, including Bethpage.

Complexity of Connecting

The biggest reason small to mid-size financial institutions should look to partner when it comes to real-time payments is the sheer complexity of connecting to RTP networks, said Jain.

That’s why Fiserv created the NOW Network, which acts as a gateway and routing engine connecting banks and credit unions seamlessly to real-time payment networks and routing transactions to a large spectrum of end points.

“As expectations for real-time capabilities increase, financial institutions need to enable their customers to reach as many of these end points as possible, or risk losing customers,” Jain explained. “It’s laborious for them, however, to connect to all these networks. But through one integration with NOW, we can enable financial institutions to easily connect to all the real-time payment networks.”

Grotta added that due to the complexity of real-time payments, financial institutions don’t need to jump in all at once. For example, they can start by enabling their clients to receive real-time payments, and then work toward originating them.

“You can walk before you run, and understand the rules of the road before jumping in fully,” she said.

Curran noted that Bethpage, a Fiserv customer, benefits from integrating with the NOW Network by gaining access to well-known RTP networks such as Zelle and others.

“These are brand names that advertise on television and that consumers are familiar with,” he said. “They’re leaders in real-time money movement and we want to partner with them.”

Staying Relevant Amid Competition

Jain said that it is imperative for all financial institutions to give their customers access to real-time payments in order to remain competitive. Those that don’t will be left behind.

“Financial institutions need to act fast to give their customers what they want, before they decide to work with another institution that offers the connectivity they are looking for,” Jain said. “More users than ever before are gaining access to real-time payments, and this includes both consumers as well as businesses.”

Grotta added that financial institutions that don’t currently have a road map in place need to start planning as soon as possible.

“You can’t find yourself playing catch-up when dealing with something that has the complexity of real-time payments,” she noted. “You need to have this in place for customers sooner rather than later. Consumers are increasingly expecting real-time payments.”

In fact, remaining competitive was the number one driver for Bethpage to partner with the NOW Network and offer real-time payments to its members, said Curran. Currently, the institution enables receiving real-time payments only but hopes to originate them as well shortly.

“We’re in competition not only with banks that have big pockets, but consumer expectations from other industries as well,” Curran explained. “Amazon can deliver most products by the next day, or even same day in some cases. But when customers move money digitally, it takes two to three days. Financial services are really lagging behind retail and other industries and looking to play catch-up. As a credit union, we are constantly looking for opportunities to jump ahead and move forward.”

Since adopting real-time payments, Bethpage has seen it used in a variety of payment types beyond just person-to-person payments. These include merchant funding, online gambling, and receiving wages. The last example is critical, as many workers increasingly do not have typical 9-to-5 jobs where they get paid every two weeks, and instead, work in freelance roles or in the gig economy where they get paid at irregular intervals.

“Real-time payments in the wages category, especially, could be a game changer for us, and we don’t want to be caught behind,” Curran added.

Jain also noted that “in this high-interest-rate environment we are currently in, the cost of capital is high and that’s boosting the desire for on-demand money.”

In general, beyond even just payments, consumers have grown to have a “right now” mentality, and banks and credit unions need to be able to meet those expectations, said Open Technology Solutions’ Staw.

“People want things to happen, and they want it quickly,” he said. “That’s why so many fintechs have been able to be successful; they bring a new service to market fast, and they focus on one specific area that they are really good at.”

Through technology partnerships, “financial institutions can better compete in this area, and consumers can now get these services from your institution rather than a fintech,” he added.

Looking Ahead

As technology rapidly changes, so do the expectations of consumers when it comes to payments, and Fiserv is constantly evolving its capabilities, said Jain.

“We are constantly thinking about how to provide real-time capability for new use cases and new end points,” he said.

Curran added that this spirit of constant innovation is why Bethpage thinks of Fiserv as more than just a technology vendor but as an R&D partner.

“Working with Fiserv has made it possible to offer these services that are in demand today, and also be ready to offer whatever new services emerge in the future.”

The post The Value of Partnerships on the Road to Real-Time Payments appeared first on PaymentsJournal.

In member research late last year, PaymentsJournal explained an initiative (IXB) launched in 2021 between TCH, EBA Clearing and SWIFT to bring real-time cross border payments between the U.S. RTP system and Europe’s RT1. 

The initiative is called IXB (Immediate Cross-Border) and yesterday a new article on the TCH website announced that the pilot is on track for live processing of Euro and U.S. dollar exchanges in real-time during the coming months. This is an example of private organizations combining expertise to deliver a highly anticipated new service. As we have highlighted on PaymentsJournal, there are several initiatives attempting the same thing in various regions. So this is an exciting development for one of the high volume global trade corridors.

The article goes on to explain that 25 financial institutions on both sides of the pond have been closely cooperating with the IXB pilot initiative in order to take the pilot service live and into full commercial rollout during 2023. Although no specific timeframe is mentioned, the article also states that additional currency corridors will be added closely following the rollout, so it is clear that a more global service for major corridors is in the end game for the IXB service. One can only speculate, but likely priorities would be other high volume corridors (e.g.; Asia Pacific). 

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post IXB Nearing Full Commercial Launch appeared first on PaymentsJournal.

For businesses of any size, maintaining a smooth cashflow has always been a key priority. In fact, according to recently published research in the Bottomline Business Payments Barometer, 69% of businesses in the UK and 73% in the US reported that receiving money quickly has never been more important. But what many do not realize is the key role real-time or instant payments can play in resolving wider cashflow issues.

Such payment methods enable companies to hold on to money longer, while still paying staff and suppliers on time. That explains why 60% of US businesses claim to have adopted real-time payments, and a further 25% state they plan to in the next 12 months. In comparison, just under half of those interviewed in the UK (48%) say they are using real-time payments, with annual adoption remaining steady at 35%. Although the rates of adoption are impressive, there remains a large chunk of businesses unconvinced of the benefits of real-time payments. It is also questionable whether companies are referencing true real-time instant payment rails or same-day ACH, wire and card payments. In the US, the most popular example is The Clearing House’s RTP network. The Federal Reserve’s real-time solution, FedNow, is due to launch in 2023 and will also fall under the definition of a real-time network.

The Argument for Real-Time Payments

Irrespective of the pace of adoption, many businesses remain skeptical. SMBs typically operate on very thin margins, so the ability to hold on to cash for as long as possible generates resilience, reduces credit risk through near real-time settlement and provides opportunities for innovation to satisfy customer demand. The main obstacle currently is a lack of education, with almost a third of US respondents claiming they have no need for it, and over a quarter saying they are unsure of the benefits. This is similar in the UK, with a quarter of respondents having no need and a fifth unsure of the benefits.

Within the industry, we also hear concerns about fraudulent transactions. Faster payments mean faster fraud. The report shows that fraud is still a genuine concern – and is becoming more of an issue in the wake of the pandemic and changing working habits. While real-time payments are not more vulnerable to fraud than other payment methods, such as checks, credit cards or bank transfers, real-time payments are irrevocable. If the payment has been fraudulently redirected, there is no way of recouping that loss. Real-time payments also have the huge advantage of being fee-free and instant, unlike credit cards where merchants will routinely charge 3% interchange fees per transaction and may not transfer funds until the end of the day.

Clearly, banks and the industry at large need to demonstrate how instant payments can positively impact a business’s liquidity. Banks must ensure they offer real-time payment services as a matter of course so it becomes simple for corporate customers to begin using them. If commercial banks miss the window of opportunity, there are plenty of hungry fintech providers and vendors waiting to lead the charge with their own software. 

Real-Time Payment That Embraces Chat

Real-time payments are the only payment method to include ancillary data attached to the specific payment transaction, which means an electronic record is automatically created for each payment rather than a long and complex physical paper trail. This not only eliminates waste, but it also saves the accounts receivable team the time and effort of monotonous paperwork, reconciliation and chasing.

Traditionally, the accounts team would create a paper invoice, file it, fetch it when chasing, and then keep track of its status as they wait for payment – multiplied by however many customers or suppliers they have to manage. It is a draining and repetitive task, prone to human error. By incorporating these messages, real-time payments eliminate all this at a stroke, making every transaction more traceable and transparent.

The Role of the Fed and Interoperability

The Fed has a trusted position in the US as the processor of choice for smaller, regional banks. Following the creation of a Faster Payment Taskforce, it is launching FedNow, a new instant payment service enabling financial institutions of every size, and in every community across the US, to provide safe and efficient instant payment services in real-time, around the clock, every day of the year.

To drive adoption, it needs private-sector alternatives in the market, such as The Clearing House and Zelle. The challenge now is to ensure that this service is interoperable with these private providers. Thankfully, the Fed and The Clearing House have a historical blueprint detailing how to ensure it works, based on lessons learned from creating the national automated clearing house (ACH) network.

The Future of Payments

Real-time is a simple proposition, which boosts user security while increasing speed and system stability. It removes costly interchange fees associated with cards and leaves money in businesses’ accounts until the last moment, instead of having to release it to cater for batch processing dates. Whether it is just-in-time payments, direct remittances, customer refunds, or even daily payroll runs and expense payments, the option of making an instant payment is clearly going to have a significant impact on how businesses manage their money, now and long into the future.

The post Leveraging Real-Time Payments To Improve Cashflow appeared first on PaymentsJournal.

Real-time payments (RTP) is a payment system that allows for the immediate, online transfer of funds. Unlike traditional payment methods like checks or ACH transfers, which can take days to process, RTP payments are instant and typically settle within seconds. This makes RTP an ideal option for time-sensitive transactions, such as paying bills or splitting a restaurant check. RTP is also becoming increasingly popular for person-to-person (P2P) payments, as it eliminates the need to wait for a check to clear or for funds to be transferred from one bank account to another.

This topic in the Paypers is one that will be familiar with many readers since we cover it in research for members as well as ongoing commentary on these pages.  The author of this piece is a senior at a payments fintech.  The opening points compare real-time payments to credit cards, which the author indicates was the closest thing to real-time before actual immediate payments came to be.  This is debatable, but in terms of a payment experience one can buy something and see the transaction accepted in real-time, although settlement with the merchant bank is typically one or two business days.  The other drawback pointed out about cards is chargebacks, which is not a thing with real-time payments.

‘Risk reduction for the merchant is a big motivator for real-time payments, as RTPs cannot be reversed. Real-time payments also need to provide a high level of security and encryption. An important part for both the consumer and the merchant is knowing that if they put in their credentials, the transaction is safe, and their data cannot be breached. So, benefitting from high security is another appealing part of the product.’

The author goes on to discuss comparative faster and real-time systems in LATAM and the U.S. although for some reason ignoring RTP from TCH, which has been available since 2017.  Other points touched include the beneficiaries of real-time payments, as well as the prospects for worldwide ubiquity in five years.  Given the number of new immediate payments systems and the differences by country, having a smoothly operating inter-country experience is still an ambition, but one that is being worked on even now. The author even touches upon BNPL. Worth a quick read for those interested in the topic.

‘Real-time payment networks are local by nature, which means that if you want to accept real-time payments in Brazil, for instance, you need to integrate to PIX; if you want to access real-time payments in the US, you need to integrate to Zelle;similarly, if you want real-time payments in another country, you must integrate to another API. …Thus, the biggest challenge globally is that real-time payments are still very fragmented. From a merchant’s perspective that sells a product or service globally, they must build several integrations, with every API looking different. In other words, achieving global real-time payments will be a relatively large uplift from a technical integration perspective.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

The post Adoption of Real-Time Payments in the Americas appeared first on PaymentsJournal.

The technology and payment rails to enable real-time payments in the U.S. already exist, though real-time and faster payments still have not entirely permeated the U.S. financial system.

That’s because many of the more than 10,000 banks and credit unions in the U.S. today have been slow to adopt real-time payments. The reasons for this are myriad, including the complexity of integrating new payments types, the complexity of dealing with different payment rails, and the fact there is a lack of a federal mandate to do so.

However, financial institutions need to embrace faster payments and real-time payments now or risk being left behind. To find out why this is such a pressing issue for banks and credit unions, PaymentsJournal sat with Dave Keenan, Senior Vice President for Card Services and Payments at Fiserv, and Sarah Grotta, Director of Mercator Advisory Group’s Debit and Alternative Products Advisory Service.

The Time is Now

Keenan began by observing that consumers and businesses are increasingly expecting real-time payments, and failing to deliver that can lead to severe consequences down the road.

“There is going to be a sea change in payments that is going to drive different consumer and business behavior, and financial institutions are going to need to adapt if they are going to retain those relationships,” he added.

Luckily, for banks and credit unions that have not begun down this path, it’s still not too late. But they cannot delay any longer.

“You’re not out of the game if you are still at [the] starting blocks; don’t worry, it’s still a marathon not a sprint,” Keenan said. “But it’s time to move.”

He advised financial institutions to talk with their trusted vendor partners about how they can help and find out what options are available immediately, as well as “find out what your customers, your members, want and what solutions they are using. That is a good indicator of what they will value.”

Grotta noted that many banks and credit unions don’t need to immediately start with the most cutting-edge real-time payments technology, but rather, can start by taking small steps.

“Some financial institutions are also waiting for the right business case to materialize or for the market to mature,” she continued. “But your customers want this now. You can start with a few use cases to get your feet wet.”

Peer-to-peer (P2P) payments are a clear example where real-time settlement can be implemented, Keenan said. Enabling workers in the gig economy to get paid faster is another. He cited research showing that more than 50% of gig economy workers are willing to pay a fee to get paid immediately as proof of the demand in this area.

There are also numerous business-to-business use cases, such as vendors getting paid immediately after making a shipment to a client.

“Small businesses, which rely greatly on cash flow, want this,” he added. “Pretty much everybody prefers when they are owed money to get it faster, and we are just now starting to see a number of use cases blossom.”

Grotta added that there are internal efficiencies that banks and credit unions can also realize by implementing real-time payments. Fraud detection, for example, can be more robust because it can spot potential attacks or fraudulent patterns in real time as opposed to long after the fraud attacks have occurred.

Financial institutions can also make better use of customer data to gain greater insight into spending patterns or cash flow trends and be able to offer more proactive assistance to clients.

“There’s a lot of opportunities,” she added. “I don’t think we’ve really scratched the surface yet.”

Taking Advantage of Technology

Technology already exists today to enable real-time payments. the ATM. When a consumer takes out cash from an ATM that is not operated by their financial institution, that ATM operator has to “talk” to the withdrawer’s institution to ensure there is enough money in the account to meet the cash withdrawal request. If there is, the cash is dispensed and the account is debited. This is all done in  real time.

“We’re talking about technology that is 50 years old,” Keenan said. “The rails to support this are very mature.”

Keenan further noted that over the next 10 years, the amount of money moved by real-time payments networks will exceed that of the card ecosystem today.

“And that’s very exciting,” he added.

Grotta said that banks and credit union clients will not care what technology is used or how their institution provides real-time payments, just that they do so and that the user experience is topnotch.

“If you look at the P2P payments space, it has taken off because the user experience is so good, and when someone gets money through a P2P app, they know it is available to them immediately,” she said. “They don’t care what is happening in the back office.”

And more and more consumers every day want this experience.

“Consumers and businesses want to do business with those solutions that help them get their money faster,” said Keenan. “That’s just obvious.”

The post Why Banks and Credit Unions Need to Adopt Real-Time Payments Now appeared first on PaymentsJournal.

Real-time lending is a type of financial technology that allows borrowers to receive funding in a matter of minutes, rather than hours or days. This innovative method of lending is made possible by cutting-edge technologies that allow lenders to quickly assess a borrower’s creditworthiness and make a decision on whether to approve the loan. While traditional lenders may take days or even weeks to process a loan application, real-time lenders can often provide funds within minutes of receiving an application. How would real-time auto loans make an impact?

As financial institutions think about the opportunities to monetize their investments in faster and real time payments, one of the use cases that is frequently discussed is providing loan proceeds.  While transaction speed is nice to have, the ability to transact over weekends and on banking holidays probably has a greater impact. 

Today, U.S. Bank announced that they are offering auto dealerships the opportunity to receive loan funds immediately after a loan contract is finalized by the bank.  The transaction is processed through The Clearing House RTP network and is now available at 800 dealership locations.

Here’s more from the bank’s press release:

Following a successful pilot completed in June, U.S. Bank has already enabled more than 800 auto dealers to receive funds from auto loans via a real-time payment. The bank expects to deliver the solution to more dealers in the coming months as the bank continues to improve operational efficiencies for auto dealers.

While the traditional ACH payment method for funding auto loans can take several days – especially when sales are made outside of banking hours – real-time payments to dealers are fast, secure and available seven days a week, including holidays.

Auto dealers using real-time payments gain a competitive advantage, with greater control over cash flow and improved Contract-in-Transit metrics, a key performance indicator for auto dealers and their employees. The solution is also available to recreational vehicle dealers.

U.S. Bank is focused on delivering innovative real-time payment solutions to resolve what our customers tell us are their payments pain points,” said John Hyatt, president of dealer services at U.S. Bank. “We’re simplifying loan payment processes to help our dealer clients better control their cash flow, which gives them a competitive edge and peace of mind. Dealer interest in this solution over the last few weeks has grown rapidly, with many particularly excited about finalizing their deals within moments after a consumer is approved for a loan, especially during the evenings and even on Saturdays and Sundays.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post U.S. Bank Launches Real-Time Auto Loan Service appeared first on PaymentsJournal.

What’s possible in global payments continues to be redefined, revisited, and reimagined. The traditional lines between banking, payments, and commerce have all but dissolved. The rules that once limited who participates in money movement — and how that movement happens — have been rewritten. This connected world is creating new opportunities to shape the future of commerce and financial services.

The Global Payments Report from FIS is designed to help financial institutions and merchants navigate global and local trends in payments.

The Current Global Payments Landscape

The seventh edition of The Global Payments Report offers a snapshot of the current payments landscape: globally, by region, and in 41 select markets. The report tracks consumer payments when shopping online and at the point of sale, identifies key payment trends, and projects scenarios through 2025 for payment method shares as well as market size. A series of thought leadership articles, with perspectives on current themes in the world of payments from FIS payments experts, complement original research.

The report has two parts, outlined below.

Global and Regional Trends

Part one focuses on global and regional trends in the payments industry. See what FIS experts think about the trends transforming the payments ecosystem, including:

• How super apps have transformed Asia and attracted tech giants that want to own a piece of the super-app pie.
• What’s in store for merchants and financial institutions as crypto and central bank digital currencies continue to shake up the global financial landscape.
• How embedded finance is changing the way customers manage their lives.
• What the evolution of real-time payments means for consumers, businesses, and financial institutions.
• How financial technology is influencing financial inclusion.
• Key developments transforming Europe’s payments landscape.

Breakdowns for Global Payments by Individual Country

Part two focuses on individual countries and examines trends in the way consumers pay for things. This section is particularly helpful for international FIs and merchants looking to customize their business plans for local markets.

The section provides market guides for 41 countries, each of which starts off with an overview of the financial trends in the country, and then describes how consumers purchase goods at points of sale and in e-commerce. The authors then use their research to project how this will change by 2025, complete with sleek graphs.

Help For Financial Executives

Overall, this report would help financial executives learn more about how the payments industry is changing globally and how that will affect the markets they do business in.

To learn more about the state of payments, consider reading
The Global Payments Report from FIS:

The post The Global Payments Report from FIS appeared first on PaymentsJournal.

Real-time payments occupy a unique niche in the payments industry, both for its diversity and its rapid growth. The Clearing House RTP® network processes more than $16 billion each quarter, and Zelle processes more than $120 billion. Direct push payments such as Mastercard Send and Visa Direct settle payments in less than thirty minutes and usually within seconds, and same-day Automated Clearing House (ACH) payments settle within hours.  

All these options have different use-case benefits and combine to create a very rich environment. However, this level of choice can confuse financial institutions (FIs) as they discern where to place their bets based on what their customers will find most important.  

To learn more about how FIs need multiple payment rails to achieve true payments innovation and why it is key for FIs to access rails through a unified “payments hub,” PaymentsJournal sat with Mark Majeske, SVP of Faster Payments at Alacriti, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group. 

Banks Should Not Just Focus on One Payment Rail 

With the myriad choices available to FI executives, one might wonder why they do not simply focus on a one-stop-shop payment rail. “Not all rails have the same advantages,” Majeske explained. The RTP network, which was launched in 2017, covers 60% of the U.S. demand deposit account (DDA) market, so if a bank or credit union wants to cover the other 40%, it needs another payment rail. 

Other options have similar blind spots or unknowns. The FedNow^SM Service is coming out in 2023 with high expectations but zero ubiquity. Conversely, ACH is well-established but generally does not process payments over the weekend. “I don’t think there is one rail out there that is going to satisfy everyone’s needs,” Majeske continued. “There has to be a level of flexibility within financial institutions and service providers to provide a broad number of opportunities for banks to service their needs.” 

Once banks and credit unions identify the needs of their customers and members, they can move to monetizing real-time payments as well. “When you identify a big need, there is also the opportunity to actually charge for that solution—if you have found an area that can create real value,” Grotta added. Currently, FIs tend to look at faster payments in terms of cost center vs. profit center, which has restricted innovation. But FIs should start thinking about real-time payments as a value-add. “I think the tide is changing,” said Majeske. 

Consumers Are Willing to Pay for Speed 

Recent evidence shows that consumers are willing to pay extra for the convenience of real-time payments. PayPal, for example, has for the first time begun enabling customers to send funds to their bank demand deposit account on weekends and holidays—at about a 70% adoption rate. Venmo has also been charging for faster payments, and consumers are paying. Clearly there is value there, and even if in the past consumers did not see the extra value in real-time payments, there will be more opportunities to enrich the payment experience by adding additional offerings such as messaging.  

“We have to look beyond the movement of money as just a ‘to-and-from’ transaction,” said Majeske. “We are going to see Amazon-like solutions being put in front of us that add enough value that customer[s] will pay for it, and I think financial institutions have long awaited that period of time.” 

Moreover, banks and credit unions have a way to ease into these new payment offerings—payment hubs. Right now, adding real-time payments functionality as a one-off for every different rail each time a consumer wants to complete a transaction is extremely time-consuming and costly. “Payment hubs can play a huge role in this to make it easy for banks to follow a ‘grow-as-you-go’ model,” Majeske noted.  

Integrating New Payment Types 

Bringing that “grow-as-you-go” model to life requires the integration of new payment types as needed. For example, Alacriti’s Cosmos Payments service currently includes the FedNow Service, and though no one can say with certainty what the next five years will bring, industry experts can make educated assumptions. “The key is flexibility and design,” said Majeske. That way, banks and credit unions can overcome the inherent hurdles in adopting new rails. 

One such roadblock is fraud, which can cause FIs to endlessly fret and prolong implementation as they try to set up robust defenses for essentially unpredictable criminal activity. “Enterprise-level fraud systems are designed and built for wire and ACH, but not for real-time instant decisioning on transactions that happen to be going out on Saturday and Sunday,” explained Majeske. “[Alacriti’s] Cosmos product, in addition to offering rails, can offer the capability of satisfying the need to augment [banks’ and credit unions’] current fraud systems.”  

On the back end, banks and credit unions might also want to bring in a funding agent to help manage liquidity, which will help avoid weekend dead zones with low funding and even enable rolling transactions over a three-day weekend. Overlays are also important for launching a real-time payments product. TCH RTP network and the FedNow Service are designed on the premise that the FI will create the UI/UX experience for the customer, which also makes it take longer to create innovative products. As such, Alacriti is also looking at delivering ready-made FI-branded models so financial institutions do not have to worry as much about the customer-facing element.  

Because of course, with mounting payment choices available to financial institutions, the most important determining factor is the needs of the customer. “When you look at payments in general, in the past five years we have had more change than we have [had] in the previous forty years,” Majeske emphasized. “And I think we’re going to see even more in the next five years.” Whittling down real-time options in the modern world is not always easy, but starting from the roots of customer service is always a safe bet. 

The post Why Banks and Credit Unions Need Multiple Real-Time Payments Options appeared first on PaymentsJournal.

Consumers today have been conditioned to expect everything in a real-time digital environment. Whether they’re taking out a loan, buying clothes, making an investment or performing countless other activities, customers expect their transactions to happen instantly and with minimal friction.

Online payments, by and large, have not kept up. This is an issue for merchants, whose customers are frustrated with long settlement times and payment processes that require extra steps. Instant payments solve this by not only offering a seamless experience, but also helping merchants build customer trust and reduce churn. 

Benefits such as improved speed, lower operational costs, better conversion rates and a seamless checkout experience await businesses that adopt instant payments. 

Barriers to adoption 

So why aren’t instant payments ubiquitous in Europe? There are several factors. 

One is the continued use of physical plastic cards in countries such as France, Spain and Ireland. Though payments via cards can be instantly authorised, they are not settled on real-time payment rails. For example, online card payments can take up to 10 days to settle. Not only does this make it harder for merchants to manage their cash flows, but it also slows down the refund process for customers. Digital wallet transactions can be faster, but still suffer from a 24-hour delay. 

Bank transfers solve this issue when instant payment rails are available. But in Europe, this infrastructure suffers from a lack of interoperability. One such example is Single Euro Payment Area (SEPA) Instant Credit Transfer, or SCT Inst. Launched by the European Payments Council in November 2017, it was the first pan-European instant bank payments scheme. But SCT Inst has several flaws. For example, it is optional for banks, and it uses two different infrastructure solutions, RT1 and TIPS. Banks can choose to opt into either. Yet these two systems aren’t interoperable, so a bank using TIPS can’t make an instant payment to a RT1 participant and vice versa.

Historically, SEPA was also reserved only for banks. Following the implementation of PSD2, open banking has helped provide merchants with greater access to these rails.

How to realise the promise of instant payments through open banking 

Luckily, recent initiatives to create open banking standards in Europe now make instant payments within the reach of any merchant. Open banking allows registered third parties to access their customers’ bank account if the user consents.

These standards allow businesses to take payments and retrieve data directly from customers’ bank accounts, with expressed permission, via open application programming interfaces (APIs). When instant bank payment systems are available in a country, like the Faster Payments system in the UK for example, open banking can offer instant payments that are seamless and secure for both consumers and businesses.

Take TrueLayer Payments, which brings instant bank payments to customers in Ireland, France, Germany, Spain, Lithuania and the Netherlands. Using open banking and Europe’s fastest payment rails, TrueLayer Payments delivers the following benefits to merchants and their customers.

• Improved speed: Immediate settlement doesn’t just benefit merchants. It also speeds up refunds for customers. Instead of waiting for their money to return to their accounts, consumers receive it instantly. The result: a better experience and increased customer loyalty.
• Lower operational costs: Legacy payment approaches require time-consuming, manual tracking processes, which are both costly and prone to human error. With instant payments, however, these processes are automated. Instant bank payments also help businesses avoid the interchange fees and chargebacks associated with card payments, making instant payments far more cost-effective. 
• Higher conversion rates: Instant payments can help businesses improve their conversion rates. Cards and manual bank transfers both require customers to punch in sensitive data, which takes time and effort. If they feel that a payment process takes too long, they may simply leave before completing it. Instant bank payments solve this issue by using biometrics on mobile devices to authenticate payments. This creates a fast, seamless experience that’s more likely to convert customers.
• Increased liquidity: Many businesses — especially small businesses — struggle with managing liquidity because of how long it takes traditional payments to settle. Instant payments powered by open banking can change this dynamic. Deloitte notes that real-time payments can be “especially impactful to small merchants who may be used to waiting days for their settlement, possibly creating a positive impact on their cash flow and daily sales outstanding.”  
• Improved security: Traditional payment approaches come with high fraud risks, especially as it pertains to card-not-present (CNP) transactions. Global financial losses related to card payments are estimated to reach more than $34 billion this year, and in 2020, CNP fraud accounted for 76% of all fraud losses. Open banking reduces much of this risk because card details are not shared in the transaction. Instant bank payments also harness biometrics to authenticate users, adding further security.

Key industries that benefit from instant bank payments 

While businesses across all industries can benefit from instant bank payments, a few industries stand out in particular. 

Financial services

Any platform that allows its users to invest in both traditional financial instruments or cryptocurrency should facilitate instant payments. Firstly, users of these platforms do not want to go through a lengthy onboarding process. In a TrueLayer survey, 61% of European investors said they’d leave a sign-up process that took longer than 10 minutes. As noted earlier, open banking protocols can allow users to seamlessly authenticate themselves.  

Secondly, speed is essential when trading. Traders want instant deposits because waiting even an hour to make an investment can cost users a lot of money, especially in fast-moving markets. It’s perhaps no surprise then that almost half of current investors (46%) say they were likely to switch providers for instant withdrawals. Providing access to instant withdrawals and deposits creates trust in an investing platform and makes customers more loyal.  

E-commerce

Shopping cart abandonment is a big problem for online retailers. Their customers are often fickle and won’t tolerate long, complex checkout processes. And when they do complete a purchase, they want to be sure they have access to quick, easy refunds. Failing to offer either can cause merchants to experience customer dissatisfaction and churn.

Instant bank payments offer smooth, frictionless flows that make paying as simple as scanning a fingerprint or using a face ID. They also facilitate instant refunds, fostering loyalty in the process. Together, these features help merchants offer a smoother shopping experience, increasing conversion rates and preventing abandonments.

iGaming

Like trading and crypto, iGaming companies need to offer a fast experience to keep up with customer demands. Users need instant access to their pay-ins, and more than half of iGaming users are likely to switch to a service that offers instant pay-outs as well. Both features are key to bringing an in-person gaming experience to a mobile app.

Instant bank payments with TrueLayer allow companies to offer just that. Transactions settle in real-time, allowing users to access their deposits quickly. And when the time comes to withdraw their winnings, customers get peace of mind in knowing their funds are available immediately. 

With instant bank payments, both businesses and consumers in Europe can experience the many benefits of speedy, cost-effective, and highly secure digital transactions. Visit https://truelayer.com/payments to learn more.

The post The Promise of Instant Payments in Europe  appeared first on PaymentsJournal.

In our digital world, instant money transfers have become the norm. Whether we’re sending money to a friend or paying for something online, we expect the funds to be transferred immediately. This wasn’t always the case, however. In the past, bank transfers could take days or even weeks to go through. But thanks to real-time payments (RTP), we can now enjoy the benefits of instant money transfers.

RTP is a type of payment system that allows for real-time processing of transactions. This means that once a transaction is initiated, the funds are transferred immediately – there’s no waiting period. RTP is becoming increasingly popular as it offers a number of advantages over traditional payment methods. For example, it’s great for businesses as it reduces the risk of fraud and chargebacks. It also cuts down on administrative costs associated with processing payments.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Monetizing Real-Time Payments

Consumers Do Not Want to Pay a Fee for Instant Money Transfers:

• Consumer payers often already consider payments to be immediate if they are credited in the eyes of the biller.
• 54% of consumers would not be willing to pay a fee to send funds internationally in real time.
• 64% of consumers would not be willing to pay a fee to pay bills in real time.
• 71% of consumers would not be willing to pay a fee to receive insurance claims in real time.
• 65% of consumers would not be willing to pay a fee to send or receive money to/from a checking account in real time.

About Viewpoint

U.S. payments industry participants are largely in agreement that faster and real-time payments are part of the industry’s evolution. While integration projects to prepare for these new payment types are moving forward with only the slightest consideration of a real business case, the search is still on to look for those use cases where value can be provided and customers will be willing to pay for the benefits.

In this Viewpoint, we consider the use cases where faster payments are generating revenue for providers today and the solutions that are likely to be profitable in the future.

The post Consumers Do Not Want to Pay a Fee for Instant Money Transfers: appeared first on PaymentsJournal.

Real-time payments are becoming increasingly popular as a way to facilitate fast and efficient transactions. With real-time payments, fees can be collected almost immediately, and disbursements can be made without delay. This is especially beneficial for merchants, who can receive their deposits much more quickly. It also makes bill pay and other B2B transactions much simpler and more efficient.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Monetizing Real-Time Payments

Business Use Cases Generating Real-Time Payment Fees:

• There are several use cases where businesses are already paying for the benefits of real-time transactions.
• B2C disbursements such as marketplace payments, refunds/rebates, insurance payouts, and loan proceeds.
• Merchant deposits that help manage cash flow.
• Bill pay, including the use of Request-for-Pay (RfP).
• B2B transactions, mostly processed through same day ACH.

About Viewpoint

U.S. payments industry participants are largely in agreement that faster and real-time payments are part of the industry’s evolution. While integration projects to prepare for these new payment types are moving forward with only the slightest consideration of a real business case, the search is still on to look for those use cases where value can be provided and customers will be willing to pay for the benefits.

In this Viewpoint, we consider the use cases where faster payments are generating revenue for providers today and the solutions that are likely to be profitable in the future.

The post Business Use Cases Generating Real-Time Payment Fees appeared first on PaymentsJournal.

Real-time payments (RTP) is a type of electronic payment that allows for the immediate transfer of funds between two parties. Unlike traditional payments, which can take days or even weeks to process, RTP payments are typically processed within seconds or minutes. This makes them ideal for situations where time is of the essence, such as emergency situations or online shopping. RTP is made possible by cross-border cooperation between global card networks, which allows for the instantaneous exchange of funds between banks in different countries. As a result, RTP has the potential to revolutionize the way we make cross-border payments.

One of the most exciting use cases for real-time payments, in my opinion, is really beginning to take shape. As Finextra reported in this article, EBA Clearing, SWIFT, and The Clearing House have been working together for some time on their IXB initiative and they are now ready to pilot with a market-ready solution expected in 2023. There have been other examples of real-time cross-border products in Asia and the Nordics, and let’s not forget that the global card networks have been offering fast cross-border transaction options for years now. But this represents the opportunity for the U.S. real-time payment rails to connect with Europe, with interesting opportunities for both consumer remittance and corporate activity. Here’s an excerpt from the article:

The IXB project follows proof-of-concept trials conducted in October with the support of seven financial institutions. The PoC [Proof of concept] demonstrated the ability to synchronize settlement in one instant payment system with settlement in the other and to convert real-time messages between both systems.

Based on the ISO 20022 message standards, Swift Go and the instant payment systems of EBA Clearing and TCH, the service initially will support instant payments in the US dollar and euro currency corridor.

Russ Waterhouse, EVP for product development and strategy at The Clearing House, says: ”The trans-Atlantic pilot service will provide valuable input for the development of a fully-fledged IXB service to meet customer expectations across the globe.”

It is envisaged that the IXB pilot will be followed by a full service offering in 2023.

Jean-François Mazure, head of cash clearing services at Societe Generale, says: “From a user experience perspective, we believe that the IXB initiative represents a significant step towards a faster trans-Atlantic payment corridor, removing frictions and bringing value to all our customers, both individuals and corporates.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Real-Time Payments: Cross-Border Dollar and Euro Payments Take Shape appeared first on PaymentsJournal.

Real-time payments are becoming increasingly popular, especially among merchants and smaller financial institutions. With real-time payments, merchants can receive payments instantly, without having to wait for batch processing or bank transfers. This helps them to manage their cash flow more effectively and avoid any delays in receiving payments. Smaller financial institutions also benefit from it, as it allows them to offer a more efficient service to their customers. In addition, real-time payments can help to reduce fraudulent activities, as they can be easily verified and monitored.

An article in the American Banker highlights that at this point in time in the evolution of real-time payments, there is a bit of a slowdown in the number of banks and credit unions joining the RTP network. The early adopters have completed their integrations, or at least their ability to receive transactions, and the smaller financial institutions are just trying to figure out how they prioritize the new payment method:

“Many banks, especially smaller ones, tell us, Oh, I can’t add another payment network — I can’t even handle what I’ve got today,” Cheryl Gurz, vice president and real-time payments manager at The Clearing House, said Wednesday at the Electronic Transactions Association’s annual meeting in Las Vegas.

Five years after The Clearing House launched its RTP network, 235 banks are now live with the service, covering about 70% of all checking accounts, according to Gurz. In January the network handled 40 million payments, she said.

Right now, there appears to be more activity from the merchant community to drive the applications and adoption of real-time payments. Bringing instant, non-card payments to the point-of-sale is a hot topic. I can certainly understand merchants wanting to improve cash flow by getting paid right away, but looking at using the irrevocable nature of real-time payments to avoid chargeback protections is asking for trouble:

The latest demand for RTP is coming from merchants, not banks, Gurz said. “We’re seeing a strong surge of interest from companies asking for RTP, and many of them are frustrated their banks don’t support it yet,” she said.

Merchants worry about chargeback risk, which instant settlement avoids. “Real-time payments mean you don’t have to worry about a dispute,” Gurz said.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Merchants Are Now Driving the Real-Time Payments Conversation appeared first on PaymentsJournal.

Real-time payments are here to stay. However, connecting to a real-time payment network can be difficult. Financial institutions need flexible architecture that allows ease of integration through a low-code, drag-and-drop interface.

To learn more about the state of real-time payments and how financial institutions can prepare, PaymentsJournal sat down with Matt Nilles, Senior Director of Global Products and Solutions at Euronet Worldwide, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

RTP at home and abroad

Real-time payment networks have grown in Europe and Asia, and the U.S., along with many other parts of the world, is starting to catch up. “We’ve seen it grow – really, quadruple – from about 15 networks five years ago to approaching 70 today,” said Nilles. Africa and Latin America are also implementing real-time rails, and the U.S. is looking forward to the launch of FedNow in 2023.

Financial institutions have also been investing in faster payments, both among big banks and smaller FIs who see payments as a real differentiator. “A Faster Payments Council report that came out fairly recently said the vast majority – over 80% – of financial institutions in the U.S. have some form of a faster payments solution,” Grotta noted.

Potential pain points

Change is difficult, and the move to RTP is no exception. Nilles pointed out four potential pain points regarding the onset of real-time payments:

1. General hesitancy – With any proposition that involves a learning curve, there is a choice between being an early adopter and waiting to see how others in the field react.
2. Brand new situations – Everyone is trying to get up to speed with an all-new countrywide network, between the clearinghouse or government initiating the network, to the participants, merchants, and consumers.
3. Due diligence – FI or fintech staff will need to learn about ISO 20022, the high-visibility and data-rich messaging standard on which most new networks operate, and they may need to convert or adapt a legacy solution since many currently work on ISO 8583.
4. Future use cases – Real-time payments began as P2P-based, but have since grown to include business and consumer use cases; without knowing exactly how RTP will evolve next, staying competitive means keeping an eye on the future.

Preparation, preparation, preparation

Even if FIs don’t feel ready for RTP implementation right now, or are perhaps saying that their customers aren’t asking for this kind of change, the fact is that real-time payments are just around the corner. “Once it is widely available, that means that [customers are] going to be looking to their financial institution for that capability as well,” Grotta predicted. Therefore, it behooves financial institutions to start preparing now.

Familiarity with ISO 20022 will be the top priority. “We’re seeing it become more prevalent around the world,” Nilles explained, “and most of these networks, well in advance of going live, are releasing the specs around the messaging.” Building requirements for development teams to prepare their tech stack for RTP solutions will be paramount, as well as using APIs or direct access to allow solution providers room to help.

FIs and fintechs can also differentiate themselves with digital overlay services. “What you need to do is find that right mix that’s going to really meld with your customer base and start to separate you from the competition,” clarified Nilles. “At the end of the day, it’s all about customer experience.” Ultimately, a seamless and high-value RTP experience will strengthen the relationship between bank and customer. Even if the transition does not happen in one fell swoop, each new use case is opportunity for new and positive inroads.

How Euronet can address these issues

REN Connect, a product from Euronet, helps FIs and fintechs join real-time payments networks quickly and easily, along with easing the burden of network integration with existing back-office systems. “REN is an enterprise-level payments platform where we can address real-time payments from a number of different directions for our clients,” said Nilles.

REN offers four key services:

1. Establishing connection to the network itself, either via clearing house or government.
2. Offering message translation services, i.e. from ISO 8583 to ISO 20022.
3. Handling the requirements of the network itself, such as stipulations that transactions must occur in X number of seconds with a limit of Y dollars.
4. Identifying overlay services such as request-to-pay proxy services, bulk payments, QR payments, and more.

At bottom, Euronet can help find the best mix for each particular institution looking to join each particular RTP network. “We really handle everything from the connection to the message translation, to the monetization of the real-time payment rails, through those overlay services also,” Nilles concluded. No matter how you slice it, real-time payments are coming, and with the help of Euronet, FIs and fintechs can rest assured that they will be ready.

The post Getting Ready for Real-Time Payments appeared first on PaymentsJournal.

Whether we’re buying a car or a cup of coffee, we expect our payments to go through instantly. But behind the scenes, most payments are still processed using an antiquated system that can take days to settle. This is beginning to change, however, as more and more financial institutions are implementing real-time payments (RTP) systems. With RTP, payments are processed and settled immediately, regardless of the time or day. This offers a number of benefits for both individuals and businesses. For consumers, it means that they no longer have to wait for days or even weeks to receive their money. And for businesses, it enables them to provide a better experience for their customers by offering instant refunds or accepting last-minute payments.

As more financial institutions have integrated real-time and faster payments into their infrastructure, more are turning their attention to the overlay services and specific use cases where they can add value and generate a little revenue. We have seen a couple of reports of real-time payment solutions in the auto industry. The latest is an announcement from Fintech & Finance News highlighting TD Bank. They are now funding their auto dealers in real time for vehicle purchases. That helps to keep deals flowing and helps cashflow too. Here’s an overview from the article:

TD Bank, America’s Most Convenient Bank®, today announced that TD Auto Finance has launched real-time payments for its network of dealers, becoming the first indirect auto lender to roll out the ability to send real-time payments nationwide.

With real-time payments, TD Auto Finance can fund dealers as contracts are booked throughout the day, rather than sending batch payments overnight via ACH. This provides dealers with improved cash flow management and greater visibility into their financial position.

“We understand how important cashflow is to dealers. Our goal with real-time payments is to make life easier for dealers by eliminating the need to wait for payments overnight and giving them maximum confidence in their cash position and ability to operate their business,” said Andrew Stuart, President and CEO of TD Auto Finance. “We’re proud to be the first major auto lender to introduce this capability for dealers and we believe our focus on driving payments innovation is critical to deepening our dealer relationships.”

“We are excited to see TD Auto Finance bringing real-time payments to its dealer customers through the RTP network,” said Steve Ledford, Senior Vice President of Product Development at The Clearing House. “The RTP network is designed to foster innovation so financial institutions can offer their customers value added, faster payment services, such as real-time payments from TD Auto Finance. 

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Real-Time Payments: Funding Car Purchases in an Instant appeared first on PaymentsJournal.

Selling vehicles can be a time-consuming process, as buyers often have to wait for bank approval before they can finalize the purchase. However, with real-time payments, sellers can receive instant access to the funds, making the entire process much faster and simpler. With instant payments, buyers can also be assured that they are getting exactly what they paid for, as the funds are transferred immediately upon purchase.

U.S. Bank and Driveway have announced a new service to utilize the increasing popularity and convenience of real-time payments. Customers selling vehicles on Driveway.com will now be able to have instant access to their funds via U.S. Bank’s RTP network. Shailesh Kotwal of U.S. Bank provides additional detail in Fintech & Finance News:

“We’re proud to deliver a new RTP solution that creates a faster, safer and more convenient payment experience for Driveway and its customers,” said Shailesh Kotwal, vice chair, U.S. Bank Payment Services. “Those selling cars on Driveway.com will benefit from an instant, frictionless payment experience while Driveway will achieve greater customer satisfaction from their innovative payment process.”

Utilizing the RTP solution for a big-ticket item, such as an auto sale, will enable customers to have instant access to those funds instead of the traditional 24-28 hour wait through ACH or longer through physical check. This highlights the ability to use real-time payments as a service differentiator in competitive marketplaces. The process for Driveway is explained in the article:

After a Driveway customer enters details about their car, they receive an instant quote. If the customer wants to proceed, they receive an email invitation to provide their payment and bank details via a Driveway and U.S. Bank co-branded digital payment portal. Following an in-person inspection by a Driveway Valet and finalized sale, the payment is instantly deposited into the car seller’s bank account via the RTP network.

Real-time payments are becoming increasingly popular in a variety of industries, and are likely to continue to grow in popularity in the years to come.

Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group

The post U.S. Bank and Driveway Embrace Real-Time Payments appeared first on PaymentsJournal.

A card network is a payments network that facilitates the transfer of money between financial institutions. Card networks are used by businesses and individuals to make payments for goods and services. Each card network has its own set of rules and regulations that govern how payments are processed. Card networks also charge interchange fees, which are paid by the merchant to the issuer of the consumer’s card. Interchange fees vary depending on the type of card used and the merchant’s processing costs. They play an important role in the payments landscape by providing a reliable and efficient way for businesses and consumers to make payments.

The European Payments Initiative (EPI) set out to create a pan-European payment card network that utilizes the real time payment solution SEPA Instant Credit Transfer (SCT Inst) and “creates an alternative and independent payment system.” What that really means is that they wanted to free Europe of the U.S.-based global card networks. The plans were to create a mobile app and a card that could be used for purchases and P2P transfers.   

The initiative was launched in 2020 with a framework and the buy-in of more than 30 European financial institutions. Finextra reported today that most banks have now dropped out of the project as they found the investment requirements too great. A few banks remain with a new goal of developing a mobile app, presumably one that encompasses existing payment networks.

Here’s what Finextra found:

The European Payments Initiative has given up on its effort to build a rival to Mastercard and Visa in Europe after more than half its members left.

Initially backed by 31 major Eurozone banks and acquirers Worldline and Nets, the EPI set itself the goal of building a unified pan-European payment system, offering a card for consumers and merchants across Europe, a digital wallet and P2P payments.

Backed by the European Central Bank, the scheme was set to enter its operational phase this year, but by last November financing had become a concern for members, prompting a move to seek outside funding.

Now, 20 banks have pulled out, including all Spanish members as well as Germany’s Commerzbank and DZ Bank. French lenders now dominate the group.

In a brief statement on the EPI site, the group says that the 13 remaining shareholders “remain convinced of the strategic value of a unified payment solution ready for commerce leveraging especially instant payments and want to go ahead”.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Turns Out Building an International Card Network is Hard appeared first on PaymentsJournal.

The widespread adoption of bill pay services has made it easier than ever to pay your bills on time. However, there are still a number of people who prefer to pay their bills in person or by check. For these people, real-time payments offer a convenient way to pay their bills without having to go to the bank or post office. Real-time payments are processed immediately, which means that you can be sure your bill will be paid on time. In addition, real-time payments can be made from anywhere in the world, allowing you to pay your bill even if you’re traveling. Whether you’re paying rent, utilities, or another type of bill, real-time payments offer a convenient and reliable way to get the job done.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 U.S. Faster Payments Forecast: A Year to Build On

Importance of Real-Time or Faster Payments for Bill Pay:

• 22.8% of consumers rate real-time or faster payments use as very important.
• 26.5% of consumers rate real-time or faster payments use as important.
• 23.9% of consumers rate real-time or faster payments use as somewhat important.
• 11% of consumers rate real-time or faster payments use as not important.
• 15.8% of consumers rate real-time or faster payments use as not at all important.

About Report

2021 was an important build-out year for real-time and faster payments in the U.S., as explored in Mercator Advisory Group’s annual look at the market; 2022 U.S. Faster Payments Forecast: A Year to Build On. Payment options such as the debit network’s debit push payments, The Clearing House RTP network, Same Day ACH, and Zelle all experienced strong growth dependent on the specific use cases where each predominates and the maturity of their respective solutions. Following through on the pandemic fueled growth in 2020, more financial institutions and technology providers integrated to faster and real-time rails, launched new products, and advanced their strategies.

“We have found in the last year that consumers are becoming much more aware that some payments transact quickly, even instantly, which for transaction types like bill pay, account-to-account transfer and some person-to-person funds movement is beneficial. This leads to a compounding effect that is creating greater demand for faster payments in more use cases,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

The post Importance of Real-Time or Faster Payments for Bill Pay appeared first on PaymentsJournal.

The New Payments Platform (NPP) announced the second quarter 2022 launch of PayTo, a new real-time account-to-account payment process. Available for purchases, bill payment, and recurring subscriptions, PayTo combines the real-time authorization capabilities of a branded debit card network with the cost efficiency of direct debit transactions. PayTo is big news in Australia because it runs on a brand new set of “payment rails” designed specifically to support real-time payment functionality. NPP, the company bringing PayTo to market, is itself an innovative organization owned by 13 leading financial services companies in Australia, including Citi and HSBC.

Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group

The post Real-Time Payments Going Live in Australia appeared first on PaymentsJournal.

This article appears in Express Computer and is penned by a senior director at a firm that provides technology consulting & outsourcing. The gist of the piece is really in the title, which is the steady movement towards faster execution of transactions across systems and solutions that enhance financial operations. We have been detailing these same trends for members, most recently in research around the automation of treasury management systems (TMS). While there are different aspects or key traditional functions within a TMS, including what could be considered separate cash and liquidity management solutions, in the aggregate they are all interconnected for an optimal experience. The author essentially synthesizes it into real-time cash management.

‘The global economy is headed for a radical change, as the evolution of payment services surpasses the old school ecosystem with a newer, instantaneous online model. Encouraged by business requirements and the need for a better customer experience, real-time cash management is a game-changer in the financial services sector. The impact of the prolonged pandemic on the global supply chain has been a catalyst for the rise of more flexible payment options. Real-time cash management has thus become the need of the hour that allows corporations to maintain the necessary liquidity on an adaptive basis…

Real-time liquidity management works best for the new transaction trends that include faster payments, clearing and settlement, increased use of APIs, and open banking. Its impact is clearly outlined by Citibank data, showing an estimated 1.8 million instant payment transactions are being processed daily, and its related schemes now live in 27 countries, including all major markets.’

In order to execute real-time cash management (in the end this is real-time treasury, a growing industry catch phrase), an organization needs some level of real-time payments, either domestic or cross-border, but eventually both. This is in process but will require another few years to become a reality. The author provides an overview of how this cash management trend comes together across various challenges. The use of APIs is also highlighted which is something that we specifically reference in our research as another key to integrating best in class capabilities. He then goes on to highlight one of his firm’s new solutions in the space.

‘Banks and other financial services organizations are now opting for using B2B application programming interfaces (APIs) across business units and enterprises. The financial service-providing companies are helping banks and other financial services institutions to avail new expertise and related support across the payments landscape and solve evolving business challenges through cutting-edge technology…

Different businesses are at different stages in their journey towards real-time liquidity management. While leading banks and digital players have progressed quite far with their upgraded technologies, some institutions continue to operate with their traditional methods, while others are rapidly remodeling their technology to be a part of this change. At the end of the day, payments are at the core of all businesses, and it is only with continuous progress that businesses will stay relevant in the market.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post The Transformative Power of Real-Time Cash Management for PayTech appeared first on PaymentsJournal.

Importance of Real-Time or Faster Payments for Banking A2A Transfers:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 U.S. Faster Payments Forecast: A Year to Build On

Importance of Real-Time or Faster Payments for Banking A2A Transfers:

• 19.9% of consumers rate real-time or faster payments use for banking account-to-account transfers as very important.
• 23.5% of consumers rate real-time or faster payments use for banking account-to-account transfers as important.
• 26.1% of consumers rate real-time or faster payments use for banking account-to-account transfers as somewhat important.
• 11.9% of consumers rate real-time or faster payments use for banking account-to-account transfers as not important.
• 18.6% of consumers rate real-time or faster payments use for banking account-to-account transfers as not at all important.

About Report

2021 was an important build-out year for real-time and faster payments in the U.S., as explored in Mercator Advisory Group’s annual look at the market; 2022 U.S. Faster Payments Forecast: A Year to Build On. Payment options such as the debit network’s debit push payments, The Clearing House RTP network, Same Day ACH, and Zelle all experienced strong growth dependent on the specific use cases where each predominates and the maturity of their respective solutions. Following through on the pandemic fueled growth in 2020, more financial institutions and technology providers integrated to faster and real-time rails, launched new products, and advanced their strategies.

“We have found in the last year that consumers are becoming much more aware that some payments transact quickly, even instantly, which for transaction types like bill pay, account-to-account transfer and some person-to-person funds movement is beneficial. This leads to a compounding effect that is creating greater demand for faster payments in more use cases,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

The post Importance of Real-Time or Faster Payments for Banking A2A Transfers: appeared first on PaymentsJournal.

Importance of Real-Time or Faster Payments for Receiving Funds In a P2P App:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 U.S. Faster Payments Forecast: A Year to Build On

Importance of Real-Time or Faster Payments for Receiving Funds In a P2P App:

• 17.9% of consumers rate real-time or faster payments use for receiving funds in a P2P app as very important.
• 20.5% of consumers rate real-time or faster payments use for receiving funds in a P2P app as important.
• 24.6% of consumers rate real-time or faster payments use for receiving funds in a P2P app as somewhat important.
• 13.7% of consumers rate real-time or faster payments use for receiving funds in a P2P app as not important.
• 23.4% of consumers rate real-time or faster payments use for receiving funds in a P2P app as not at all important.

About Report

2021 was an important build-out year for real-time and faster payments in the U.S., as explored in Mercator Advisory Group’s annual look at the market; 2022 U.S. Faster Payments Forecast: A Year to Build On. Payment options such as the debit network’s debit push payments, The Clearing House RTP network, Same Day ACH, and Zelle all experienced strong growth dependent on the specific use cases where each predominates and the maturity of their respective solutions. Following through on the pandemic fueled growth in 2020, more financial institutions and technology providers integrated to faster and real-time rails, launched new products, and advanced their strategies.

“We have found in the last year that consumers are becoming much more aware that some payments transact quickly, even instantly, which for transaction types like bill pay, account-to-account transfer and some person-to-person funds movement is beneficial. This leads to a compounding effect that is creating greater demand for faster payments in more use cases,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

The post Importance of Faster Payments for Receiving Funds in a P2P App: appeared first on PaymentsJournal.

Importance of Real-Time or Faster Payments for Sending Funds Through a P2P App:

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2022 U.S. Faster Payments Forecast: A Year to Build On

Importance of Real-Time or Faster Payments for Sending Funds Through a P2P App:

• 17.7% of consumers rate real-time or faster payments use for sending funds through a P2P app as very important.
• 17.6% of consumers rate real-time or faster payments use for sending funds through a P2P app as important.
• 25% of consumers rate real-time or faster payments use for sending funds through a P2P app as somewhat important.
• 15.2% of consumers rate real-time or faster payments use for sending funds through a P2P app as not important.
• 24.5% of consumers rate real-time or faster payments use for sending funds through a P2P app as not at all important.

About Report

2021 was an important build-out year for real-time and faster payments in the U.S., as explored in Mercator Advisory Group’s annual look at the market; 2022 U.S. Faster Payments Forecast: A Year to Build On. Payment options such as the debit network’s debit push payments, The Clearing House RTP network, Same Day ACH, and Zelle all experienced strong growth dependent on the specific use cases where each predominates and the maturity of their respective solutions. Following through on the pandemic fueled growth in 2020, more financial institutions and technology providers integrated to faster and real-time rails, launched new products, and advanced their strategies.

“We have found in the last year that consumers are becoming much more aware that some payments transact quickly, even instantly, which for transaction types like bill pay, account-to-account transfer and some person-to-person funds movement is beneficial. This leads to a compounding effect that is creating greater demand for faster payments in more use cases,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.

The post Importance of Faster Payments for Sending Funds Through a P2P App: appeared first on PaymentsJournal.

Verizon Wireless operates over 2,300 retail locations in the US, and in addition to selling devices, many Verizon customers rely on the local stores to make payments on their accounts. When the pandemic forced the stores to close temporarily, Verizon needed to pivot quickly to provide a bill payment solution for those retail customers. Verizon quickly adapted the payments system it used in its call centers to support walk-in customers, and also embarked on an aggressive implementation of Request for Pay (RfP), a system that lets consumers pay bills immediately or at a scheduled time. 

Attie Muse, director of payment strategy and operations for Verizon said:

“We felt we had an opportunity to have an influence and provide feedback to banks and encourage broader participation.”

Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group

The post How Verizon Pivoted to Real-Time Payments appeared first on PaymentsJournal.

As consumers flock to digital and P2P payment methods, the need for more robust messaging has come to the forefront. The top-line messaging standard for electronic data interchange (EDI), ISO 20022, describes and transmits information about financial services and includes both a metadata repository and a maintenance process for the repository content. If the previous sentence dried your eyes up just a little, you might wonder: What is all the fuss around a messaging standard? 

To learn more about what ISO 20022 actually is, what it does, why companies are implementing it, and how it is being used, PaymentsJournal sat down with Jack Baldwin, Chairman of BHMI, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group. 

Powerful design: the exacting detail of data enrichment 

“The primary power of the specification is attributable, at least in part, to how it was designed,” Baldwin began. There are around 21 different domains of business processes specified in the ISO 20022 standard, along with the messaging and data necessary to support the different processes. Not all financial business services have the same profiles, however. Fee collection has a different profile than foreign exchange trade, which has a different profile than securities clearing, or card administration, or ATM management. Moreover, within each of those categories are subsections and each require the transmission of different information.  

The messaging standard manages all aspects of payments messaging at a granular level. “ISO 20022 messaging includes additional detail to help remove ambiguity from the interpretation and processing of these messages,” Baldwin explained. “This is basically referred to as data enrichment.” Whether you are dealing with reconciliation, settlement, money laundering, or fraud detection, the extra attributes included in the ISO 20022 messaging standard improve processing transparency and help to dramatically reduce potential issues with the payment experience.  

This sharply contrasts with the experience of using an older standard such as ISO 8583, a popular transaction protocol that has been used for decades. The operative difference lies in how much information the data field can support. “Because of the [ISO 8583] standard, there will be data that [transaction partners] want to transmit, but there’s not really a data field to support it,” clarified Baldwin. Instead, two parties might work out an arrangement between them and use a different unused data field that can support the amount of information. Skirting the protocol to accommodate extra data leads to a cascading set of problems, such as needing to adjust for every new communication and constantly swapping out data fields as needed. “[ISO 20022] obviates the necessity of trying to override or misuse the protocol,” said Baldwin. 

ISO 20022 – past, present, and future 

The first iteration was published in 2004, and the second edition in 2013, which is the version now seeing widespread use. “The initiatives around ISO 20022 sort of coincide with real-time payment systems,” explained Murphy. “That’s really taken off in the last 6-7 years.” There are approximately 60 real-time payment systems across the globe, including recent implementations in Canada, Peru, Indonesia, Colombia, New Zealand, Singapore, Thailand, and more. ISO 20022 is the de facto standard for all of them. 

Other high-profile use cases include: 

• SWIFT – Conversion to ISO 20022 is expected by 2024 for all cross-border and B2B payment messaging, including partnerships with EBA CLEARING and The Clearing House (TCH). 
• EBA CLEARING – Migration to ISO 20022 is underway with a current deadline of November 2022. 
• The Clearing House (TCH) – Real-Time Payments (RTP) network and CHIPS clearing system are both en route to use ISO 20022 by mid-2022. 
• U.K. Faster Payments Service (FPS) – Moving to ISO 20022 by April 2023.  
• P27 Nordic – Cross-border payments for the Nordic regions already operate on ISO 20022. 

• Bank of International Settlements (BIS) – Project Nexus cross-border payments will operate on ISO 20022 standard. 
• Fedwire – One of two real-time gross settlement (RTGS) or wire systems, along with CHIPS, that plan to convert to ISO 20022 in the next several years. 
• FedNow – Proposed to be operational in 2023, and will also use ISO 20022 specifications. 
• Cuscal – Australian payments solution company uses The New Payments Platform (NPP), which has run on ISO 20022 since 2018, with support from BHMI. 
• PayShop – Portugal-based payments institution has used ISO 20022 since last July with support from BHMI. 

There are obvious benefits for this kind of harmonization in B2B, B2C, and P2P payments. “There really isn’t any recently developed financial services network that is not based on ISO 20022,” Baldwin summarized. The BHMI Concourse financial software suite acts as a comprehensive back-office module that, among other offerings that modernize electronic payment transactions, aligns companies with the ISO 20022 standard. 

Begin the adoption process now! 

The writing is on the wall: everyone is moving towards ISO 20022. This is easier said than done, however. In a perfect world, older financial service networks would have legacy carryover, but this does not necessarily happen. Old protocols have what Baldwin refers to as “logical tentacles” that stretch into other areas of the application set. “There is really no clear separation or delineation between internal and external data,” Baldwin pointed out. “This complicates adopting something like ISO 20022 as a standard.” 

The good news is that it is designed to functionally support old data messaging standards, while still adding the extra attributes that resolve any potential ambiguity lurking in the contents of the data. The only drawback is that while integrating ISO 20022, any older messaging standard in use may not maintain the enriched data offered by the new standard, so until the switch is complete, there may be an interim period with some limitations. “The advice I would give is to implement ISO 20022 from the get-go,” Baldwin concluded. 

The post What’s All the Excitement around ISO 20022?  appeared first on PaymentsJournal.

NEW YORK, March 2, 2022 /PRNewswire/ — Volante Technologies, the global leader in cloud payments and financial messaging, today announced that it is offering U.S. banks and financial institutions a single unified solution for the FedNow℠ Service and TCH RTP® real-time payments. Adopters of the industry-first service will be able to start their real-time payment journeys with TCH RTP® immediately, and seamlessly add the FedNow Service when the new network is ready, gaining a unique advantage in the increasingly competitive U.S. payments landscape.

Since joining the FedNow Pilot Program in early 2021, Volante has been working closely with the Federal Reserve and other pilot participants, including banks, credit unions, and industry bodies, to shape the future of U.S payments. The cloud Payments as a Service (PaaS) provider is a prospective participant in the Federal Reserve’s FedNow Service Provider Showcase, which is designed to highlight service providers’ technical and consultative capabilities related to instant payments.

Volante has an outstanding track record in real-time and instant payments innovation, having processed the first real-time payment in U.S. history. Volante’s ISO 20022-fluent service already incorporates end-to-end processing of TCH RTP real-time payments, including value-added service messages like Request-for-Pay. It features a sandbox for testing, comprehensive training and onboarding, and rapid low-code integration to core and legacy payment systems.

Volante will provide a similar range of capabilities for the FedNow Service across a wide spectrum of use cases, ensuring that institutions can focus on bringing compelling real-time and instant payment products to market, independent of the clearing and settlement network. Volante’s offering through the FedNow Service will draw on Volante’s extensive experience in providing access to other domestic and cross-border clearing and settlement services, and will be easily extensible to wire, ACH, and SWIFT without requiring complex upgrades.

Erika Baumann, Director of Commercial Banking and Payments, Aité-Novarica Group, said, “With participation in The Clearing House RTP® picking up pace, and enthusiasm about instant payments growing in the lead-up to the FedNow launch, U.S. financial institutions will soon have even more options for immediate account-to-account payment clearing and settlement. Multi-network cloud-native PaaS offerings that enable rapid deployment of new real-time and instant customer experiences should be on every FI’s radar.”

Deepak Gupta, Global Head of Payments as a Service, Volante Technologies, said, “RTP and the FedNow Service offer an opportunity for financial institutions to bring compelling new real-time/instant payment services to market and generate lasting customer value. However, many institutions are unsure of which network to prioritize. With Volante, the decision is easy: any bank or credit union, of whatever size, can innovate with RTP today, and maintain their future leadership position by going live with the FedNow Service on its first day of operation.”

Join representatives from the Federal Reserve and Volante on March 8 at 10:00 a.m. ET for a LinkedIn Live conversation: About Time: FedNow and the Future of US Payments.

About Volante Technologies   
Volante Technologies is the leading global provider of cloud payments and financial messaging solutions to accelerate digital transformation. We serve as a trusted partner to over 100 banks, financial institutions, market infrastructures, clearing houses, and corporate treasuries in 35 countries. Our solutions and services process millions of transactions and trillions in value every day, powering four of the top five corporate banks, 40 percent of all U.S. commercial bank deposits, and 70 percent of worldwide card traffic. As a result, our customers can stay ahead of emerging trends, become more competitive, deliver superior client experiences, and grow their businesses through rapid innovation. To learn more, visit www.volantetech.com. Follow us at linkedin.com/company/volante-technologies and twitter.com/volantetech. 

The post Volante Technologies Launches First Unified Service for FedNow℠ and TCH RTP® appeared first on PaymentsJournal.

It is not news to anyone that the pandemic has accelerated digital change in the payments industry. Support for ISO 20022 is growing, real-time payments are gaining traction, and banks are looking toward cloud adoption and APIs to deliver better payment capabilities to their customers.  How can payments migration help?

While traditional financial institutions were once resistant to change, their wariness of shifting away from hosted infrastructure in favor of a cloud approach is beginning to crumble. This is particularly true given their fintech competitors’ eagerness to embrace a platform approach.  

Despite a willingness to migrate payments, only 14% of the 150 banks and payment service providers surveyed in 2021 had deployed any cloud solutions. Across a range of payment capabilities, only around one-third of financial organizations believe their organization is delivering, at best, the minimum expected standards of products and services.  

There is a case for payments migration. Banks need to embrace innovation to provide customers with new ways of interacting with banks and payments. Failing to do so comes with the risk of not meeting consumer expectations for a modern payment experience. “Risks associated with maintaining a legacy or hosted approach to payments include further pressure on operating margins as well as competitive product disadvantages, leading to potential relationship issues,” said Steve Murphy, Director of the Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group. 

However, there are obstacles that come with migration. Knowing this, Diebold Nixdorf compiled a list of key “gotchas” in payments migration–challenges that can impede migration efforts–and advice on how to avoid them.  

Migration Gotcha #1: Not taking proprietary message protocols into consideration 

Legacy payment systems often rely on proprietary message protocols to communicate with external devices and systems. Continued use of these protocols will require permission from both incumbent and new suppliers. A customer code will be necessary to replicate those message protocols.  

Migration Gotcha #2: Not storing transactional data  

Historic payments data must be stored to manage disputes. While transactional data is likely already stored in the incumbent system, migration efforts involve replacing and shutting down that system. To make sure that important data is not lost, organizations should ensure that at least 180 days of transaction data is replicated in any new system before the old system is shut down.    

Migration Gotcha #3: Not checking on security key and certificate expiration dates 

Security keys are crucial to protecting data. Security keys enable secure access to other devices, systems, and applications. Security certificates are data files that establish the authenticity, reliability, and identity of a website. When certifications expire, browsers will display a warning on the webpage informing the entrant that the security certificate has expired. This can chip away at a customer’s trust level and leave financial institutions more vulnerable to security threats. The migration process is an ideal time to refresh security keys and certifications. By doing so, organizations avoid facing an unexpected key expiration mid-migration, which adds to the risk and stress the process.  

Migration Gotcha #4: Not ensuring operational readiness 

Operational readiness means being ready to deploy, operate, and maintain a payments migration project without significant issues. Projects designed without operational readiness in mind are more likely to fail. This includes ensuring compliance with any relevant rules and regulations. By not taking operational readiness into consideration, organizations could find themselves missing something vital as they approach their go-live date.  

Migration Gotcha #5: Not understanding SLAs and OLAs at the onset of the project 

A service level agreement (SLA) is an external contract between a vendor and its customers that outlines the services a contractor will provide and at what level. An Operational Level Agreement (OLA) is an internal agreement outlining the roles and responsibilities of a service provider’s team. Both agreement types are crucial during migration, especially when external vendors are involved. By clearly establishing expectations and terms, organizations can have more success in meeting critical business controls and, eventually, deploying an operational system.  

Migration Gotcha #6: Not remembering RTO and RPO objectives 

Recovery Point Objectives (RPOs) measure how frequently data is backed up, helping to avoid data loss. Recovery Time Objectives (RTOs) define how long it takes to recover IT infrastructure following an incident. Ideally, organizations will have a short RTO and RPO to minimize productivity losses, recovery costs, reputational damage, and other detrimental effects of going offline.  

Migration Gotcha #7: Not keeping non-functional items in view  

When financial institutions choose to migrate their payments software, they are primarily focused on the core capabilities. However, there is more to migration than those big cost items. There is an entire ecosystem surrounding core payment infrastructure, including monitoring and automation tools. During migration, these peripheral systems cannot be ignored. If non-functional items are not in view and replaced, organizations will not maximize the benefits that come with a holistic payments approach.  

Migration Gotcha #8: Not involving all parties in transition planning 

Chances are that the list of departments that interact with your new payments solution is longer than you initially think. Leaving out any of these parties can significantly delay the ability to go live if they are not prepared for a change. Transition planning needs to involve all these parties for a seamless migration to occur. 

Migration Gotcha #9: Not establishing clear and concise transitional criteria 

For each transition to the next stage of the migration progression, all stakeholders should agree on a well-defined set of entry and exit criteria. This means ensuring there is sufficient governance around moving on to the next phase of the process.  

Migration Gotcha #10: Not planning for pilots and shadow processing  

Pilot projects and shadow processing are ways to identify any potential problems with the system. Pilot projects are initial, small-scale implementations designed to prove that a project is viable. They rely on real-time data processing that responds immediately to commands or the entry of data. Shadow processing, or batch processing, involves the execution of a workflow with little to no human interaction. 

Migration Gotcha #11: Not booking certification slots in advance  

When financial institutions change a core banking system, that system must go through significant compliance control and auditing. Large auditing organizations such as Visa and Mastercard are incredibly busy, and it can take months to obtain the certification slot needed before a new system can go live. Financial institutions need to book these certification slots well in advance–at least six months out–or risk facing significant delays in their system’s launch date.  

Migration Gotcha #12: Not allowing enough time  

Migration should not be rushed; no detail can be overlooked. Pilots and shadow processing, transition planning, certification slots, and the other important components of migration take time, and understanding that can help organizations develop a realistic timeline.  

The takeaway  

Banks need to embrace a platform approach to payments to meet the demands of the modern consumer. Migrating away from legacy systems is no simple task, but it is necessary to remain competitive in today’s world.  

“It is time to encourage core solution providers to openly partner with a wide range of service providers to enable the processing efficiencies that trickle down to an improved customer experience. Cloud-native solutions providers know they become stronger as more third-party service providers add value to their core offerings and welcome valid third-parties that wish to integrate to their solution,” said Tim Sloane, VP of Payments Innovation at Mercator Advisory Group. 

The best bet for banks is to migrate to a modern platform that supports scalability, flexibility, and automation. Choosing an experienced partner can help organizations avoid falling victim to the many ‘gotchas’ that can come with a poorly planned payments migration strategy.  

The post A Guide to Avoiding ‘Gotchas’ During Payments Migration  appeared first on PaymentsJournal.

PITTSBURGH, Feb. 23, 2022 – PNC Treasury Management today announced a groundbreaking new on-demand pay solution, PNC EarnedIt. Powered by DailyPay Marketplace, PNC EarnedIt offers pay on-demand – a highly sought-after employee-benefit – to its clients allowing them to provide their employees access to earned pay – throughout any point in the pay cycle – prior to payday.

PNC EarnedIt leverages companies’ existing payroll and time management systems to convert their employees’ time worked into net earnings. This available balance is accessible to employees via a mobile application 24/7, 365 days a year, where they can select the speed at which – either immediate or next business day – they would like to receive a portion of their earned pay. This solution is both bank and card agnostic, so all transfers through PNC EarnedIt will be delivered to employees’ existing bank accounts or the card of their choosing.

“Consumers increasingly want access to their pay in real-time to make informed financial decisions,” said Chris Ward, executive vice president and head of Data, Digital & Innovation for PNC Treasury Management. “At PNC, we understand that the financial landscape has changed and continues to evolve to be more immediate and interconnected. Therefore, we are focused on delivering financial products and solutions – such as PNC EarnedIt – that enhance the customer experience and provide consumers with financial options.”

Amid one of the toughest labor markets in decades, companies are evaluating several new employee benefits to attract and retain talent, including on-demand pay. While on-demand pay is a relatively new employee benefit, it is quickly gaining popularity for the flexibility it gives employees – many of whom are trying their best to manage cash flow – to be able to use their pay when they need it most. PNC EarnedIt does exactly that, allowing employers to provide their employees with unparalleled visibility and access to their pay.

“We are incredibly excited to deepen our relationship with PNC, an institution that has a strong customer-centric and forward-thinking legacy,” said Jason Lee, CEO and Founder, DailyPay. “The DailyPay Marketplace provides banks, fintechs and merchants, among others, with the opportunity to participate in the on-demand pay movement, providing a highly sought-after benefit to their clients. The impact of our technology on both businesses and workers has been extraordinary and drives a trickle-up economy, at a time when we need it most.”

PNC Treasury Management offers a platform of innovative, end-to-end technologies and experienced teams that help clients architect and implement a cohesive cash management system for their business. PNC is committed to investing in leading technology and will continue to support its clients as they work to optimize working capital; achieve faster, more secure transactions; and drive their business forward.

DailyPay, powered by its industry-leading technology platform, is on a mission to build a new financial system. Partnering with America’s best-in-class employers, including Dollar Tree, Berkshire Hathaway and Adecco, DailyPay is the recognized gold standard in on-demand pay. Through its massive data network, proprietary funding model and connections into over 6,000 endpoints in the banking system, DailyPay works to ensure that money is always in the right place at the right time for employers, merchants and financial institutions. DailyPay is building technology and the mindset to reimagine the way money moves, from the moment work starts. DailyPay is headquartered in New York City, with operations based in Minneapolis. For more information, visit www.dailypay.com/press.

PNC Bank, National Association, is a member of The PNC Financial Services Group, Inc. (NYSE: PNC). PNC is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.        

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London, February 2022 – Unlimint, the award-winning global fintech company, announced that it has added Brazil’s real-time payment system, Pix, to its local payment methods portfolio, enabling merchants access to 107.5 million Brazilian customers.

Brazil is the fifth country in the world with the largest online population. Around seven out of 10 Brazilians are online and nine out of 10 access the web on a daily basis. It is predicted that in 2022, around 77.87% of the Brazilian population will have access to the web with the internet penetration rate in the region reaching 83% in just 3 years’ time.

Statista predicts that by 2025 digital payments will account for over 95% of the almost 147 million fintech users in the South American country, and PIX is the start of this revolution. In October 2021, the system processed 72% of all of Brazil’s transactions – a total of 1.2 billion operations. Today it has 107.5 million registered accounts, accounting for more than half of the country’s population, and its payments volume is already equivalent to 80% of debit and credit card transactions.

“At Unlimint, we are constantly monitoring global trends to guarantee that our customers are prepared for tomorrow and are able to take advantage of it. This is why we are glad to expand our merchants’ payments toolkit with PIX and strengthen their positions in one the world’s biggest eCommerce markets – Brazil. Pix opens the door to instantaneous payment for e-commerce purchases and we are certain that it will help boost Brazil’s already dynamic eCommerce growth even further,” said Unlimint’s Chief Customer Officer, Irene Skrynova. “This addition also strengthens our local offering even further, allowing us to provide our customers with all available payment methods in the region today.” 

Pix is a payment method for instant direct bank transfers, which is built and owned by the Central Bank in Brazil and operated by the Brazilian banks, digital accounts and wallets, and is one of the recent additions to the constantly growing portfolio of local payment methods offered by Unlimint.  

About Unlimint 
Founded in 2009, Unlimint provides fast-growing innovative businesses with a constantly evolving financial interface, made by innovators for innovators, and designed to make the financial world of tomorrow closer to businesses here and now. From London to Singapore and from San Francisco to São Paulo, we help local clients enter new markets, and global businesses to explore new industries and reach new milestones. Following the highest banking industry standards, we are dissolving the borders that have previously limited international expansion. For more information, visit https://www.unlimint.com  

The post Unlimint Adds Pix to Its Acquiring Offering Globally appeared first on PaymentsJournal.

Bank of America announced that it is rolling out a solution that will allow buyers to make e-commerce purchases in the UK directly from their bank account in real time. Here’s how the solution is described to work:

1. A customer adds an item to their online shopping cart and proceeds to the checkout page.

2. They select the “Pay by Bank” payment option and then their own personal bank from the menu.

3. To authenticate payment, they simply validate using their existing login credentials through their online banking platform.

4. Once authenticated, the payment is sent directly from the customer’s bank to the company’s account.

5. The customer is returned to the checkout page and the transaction is complete.

Pay by Bank capabilities are fairly common in Europe and typical in Asia. Merchants enjoy the instant recognition of the purchase amount though the real time network behind these transactions. Since interchange on card transactions is regulated in the UK and EU, merchants aren’t saving much money from avoiding card processing fees, but they do avoid pesky consumer chargeback transactions.

Also announced today in the Wall Street Journal is an announcement that Discover, through a partnership with BIM, will be offering a pay with your bank account here in the U.S. Consumers in the U.S. may be less inclined to use this solution if they are fans of credit card rewards, but debit card users may adopt the solution, particularly if the merchant will offer an incentive. 

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post New Options to Pay Merchants with a Checking Account appeared first on PaymentsJournal.

This piece is posted in Banker and Tradesman and speaks to summary results for a recent survey conducted by Citizens, the Providence-based regional FI, which centers upon corporate reasons for seeking and retaining bank relationships.  One of the key findings, at least from the constituency of responders to this survey, is that real-time payments is a catalyst for corporate relationships with their banks.  This is something that would not have been true 2-3 years ago, but given that TCH has been adding a substantial number of connected banks to the RTP network during the pandemic timeframe, it makes sense that use cases are growing.

‘Citizens’ nationwide survey of 260 corporate decision-makers found that 85 percent of respondents cited a bank’s real-time payments capabilities as the most important factor when deciding on a banking partner. This was the first time that real-time payments was the top factor in the annual survey, Citizens said in a statement. Other factors included the ability to provide the lowest-cost financing and a bank’s expertise in the firm’s industry….Providence-based Citizens is among the U.S. banks and credit unions that have joined the RTP network, created by The Clearing House. The network allows customers to make payments electronically and have the funds move instantaneously from one account to another. The transaction includes information about the payment, so recipients know where the money came from and the reason for the payment. The Federal Reserve expects to launch its own real-time payments network, Fed Now, in 2023.’

In general, it seems that corporates are expecting their banks to keep them at the forefront of the rapidly advancing technology gains in financial operations. This may be somewhat counter-intuitive given the growth of non-traditional services, but also supports the FSI movement to the cloud, which we have summarized in recent member research.  Corporates are interested in more self service capabilities and there is also a key finding around the desire for greater mobility as it relates to treasury management platforms.

‘Business leaders expect banks to continue to upgrade technology, with 83 percent of respondents saying they expect their bank to leverage the latest technological tools to help their business compete. And 83 percent expect their bank to provide their business with more self-service capabilities where needed….The survey also found that 73 percent of respondents were interested in having a secure mobile-optimized treasury management platform. Of those who use treasury management platforms as part of their day-to-day work, nearly nearly 40 percent expressed frustration with their current technology solution, according to the statement, saying that the majority of their time spent working with their treasury management platform could be more productive….Respondents most often cited security as the feature that should be improved or added to their current treasury management platform.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Real-Time Payments Drive Business Leaders to Seek Bank Relationships appeared first on PaymentsJournal.

PROVIDENCE, R.I.–(BUSINESS WIRE)–Eighty-five percent of business leaders say the most important factor when choosing a banking partner is whether the financial institution offers real-time payments (RTP) capabilities, according to Citizens’ annual payments and treasury survey.

In the nationwide survey of 260 corporate decision-makers, the ability to offer RTP, the new standard in U.S. billing and payment processing, topped the list of requirements for the first time and was considered more important than the ability to provide the lowest-cost financing. A bank’s expertise in the business’ industry also ranked highly.

RTP is the biggest upgrade to the U.S. payments system since the Automated Clearing House (ACH) in 1974. Customers using the RTP network can make payments electronically and the funds instantaneously move from one account to another. Information about the transaction also travels with the funds, so recipients know where the money is coming from and why.

When respondents were asked to name the ways in which they anticipated using RTP, the two most commonly cited applications were to manage cash flow more accurately and to handle payments requiring immediate attention.

“I continue to be encouraged by the growing interest in real-time payments because it offers such enormous benefits to businesses in terms of speed and certainty of payments,” said Matt Richardson, head of treasury product solutions at Citizens. “As businesses bounce back from the pandemic, they are adopting digital solutions that they may have tried out of necessity for the first time during the lockdowns.”

Seventy-three percent of survey respondents also expressed interest in having a secure mobile-optimized treasury management platform. Of those who use treasury management platforms as part of their day-to-day work, nearly four in 10 expressed frustration with their current technology solution and felt that the majority of their time spent working with their treasury management platform could be more productive.

Fifty-nine percent added that if they could get back any “wasted” time during the week, they would spend it focusing on business strategy or leveraging that time to enjoy a better work-life balance.

Other key survey findings include:

• When asked about the benefits of RTP generally, 81% said they believe RTP would be very or somewhat transformative to their firm’s payments process, if adopted.
• Eighty-three percent of respondents expect their bank to leverage the latest technological tools to help their business compete.
• The same percentage of respondents also expect their bank to provide their business with more self-service capabilities where needed.
• Security continues to be the most-noted area that respondents felt should be improved or added to their current treasury management platform.

“The survey findings validate our decision to be one of the first banks to offer RTP to clients,” Richardson continued. “We have also added intelligent automaton solutions such as Receivables Automation and Invoice Automation so clients have more time to focus on business strategy. We will continue to bring innovative solutions to our clients, many of whom are embracing the move to digital.”

The survey of corporate decision-makers sampled a range of businesses in different sectors with annual revenue of $1 million to $25 million (37%); $25 million to $100 million (17%); and more than $100 million (46%). It was conducted between Oct. 22 and Nov. 4, 2021.

Citizens is a trusted strategic and financial adviser, consistently delivering clear and objective advice. The Citizens approach puts clients first by offering great ideas combined with thorough market knowledge and excellent execution, to help our clients enhance their business and reach their potential. For more information about Citizens or the accessOPTIMA® treasury management platform, please visit the Citizens website.

About Citizens Financial Group, Inc.
Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $188.4 billion in assets as of December 31, 2021. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a 24/7 customer contact center and the convenience of approximately 3,000 ATMs and approximately 940 branches in 11 states in the New England, Mid-Atlantic and Midwest regions. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com or visit us on Twitter, LinkedIn or Facebook.

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Real-time payments have been the subject of extensive research over the past several years. New real-time payment options have emerged as consumer expectations and demand are driving real-time payment growth across multiple channels.

To learn more about the paradigm shift towards real-time payments and unpack how the NOW® Gateway from Fiserv can provide connections to a range of real-time payment capabilities, PaymentsJournal sat down with Tim Ruhe, Vice President of Real-Time Payments at Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

Top priorities for financial institutions

Financial institutions have been investing time, energy, and money into real-time payments for one all-encompassing reason: to meet customer expectations. Fiserv recently commissioned Javelin Strategy & Research to look at today’s real-time payments landscape.  The research shows 75% of polled consumers feel it is important to receive payments and have access to funds instantly. This expectation is particularly strong among the youngest generations, with 90% of Gen Z respondents and 93% of Gen Y (Millennial) respondents highlighting real-time activity as essential.

There are plenty of reasons why consumers want faster payments, according to Ruhe. “It’s a social obligation, or it’s an urgent payment, or they don’t want to be late,” he said. “There are many, many ways that consumers want to be able to take advantage of this.” Moreover, according to Grotta, Mercator research forecasts that the rate of real-time payments growth is only going to speed up.

Beyond that, real-time payments have the potential to impact every type of payment interaction that financial institutions support today. “It’s going to touch how we transfer money between accounts, how we get paid, how we pay bills, how businesses pay each other, and might even affect how you buy goods and services from a merchant,” Ruhe explained. “Financial institutions are starting to think about that journey.”

What is driving real-time transformation

As previously mentioned, customer expectations play a significant role in determining where FIs choose to make investments in their business offerings. Currently, consumers don’t want to put their lives on hold when payments aren’t processed over the weekend – they expect 24/7 service. For FIs, this is an opportunity to stand out from the pack. “You want to be able to differentiate yourself now, because over time, this will become table stakes,” said Ruhe, meaning real-time will soon be viewed as a baseline offering. “Then you will need to be at competitive parity.”

Additionally, real-time payments lead to deeper digital engagement. For example, early data has demonstrated that users of the Zelle® person-to-person payment service are more heavily engaged with their financial institution and exhibit greater loyalty than non-users. “Customers who use Zelle have higher balances, they have more product holdings, they are more profitable, and they don’t leave the financial institution as frequently,” Ruhe explained. And that is just in the P2P payments space. “What’s going to be that next application that really drives the adoption and use of faster and real-time payments?” Grotta wondered.

The network perspective and what comes next

Both the RTP® Network from The Clearing House and the Zelle Network® are being adopted at a rapid clip. $34B was processed through RTP in Q3, which represents an 18% growth from Q2. Meanwhile, the Zelle Network processed 828M transactions totaling $226B over the first six months of 2021. “We’re seeing a lot of uses of Zelle, and RTP works on all bank accounts for any financial institution that support RTP, so that opens up a whole other set of capabilities and use cases,” Ruhe noted. “And we are starting to see them interoperate, so that’s creating a lot of innovation as well.”

One of the next big steps in the real-time payments industry will be the addition of the Federal Reserve’s FedNow network, which should launch late next year. However, there is still an open question of whether or not FedNow and RTP will have interoperability issues. “It’s not a new thing for us to have more than one payment network,” Ruhe clarified. “There’s a couple different ACH networks and multiple card networks. This is kind of how we roll here in the U.S.” The intention behind this diversity is not to cause complications, but rather to drive ubiquity. Competition spurs continuous innovation, and with cross-border payments enablement as one of the next big hurdles to cross, who knows if that will be on an existing or future network?

Bringing everything together with the NOW Gateway

The NOW Network from Fiserv, which was introduced in 2014, enables financial institutions to deploy multiple payments use cases across multiple networks with one single connection. NOW is an acronym for “Network for Our World,” and Fiserv recently introduced the NOW Gateway: RTP Network, which can receive credit transfers from RTP. “NOW Gateway simplifies the task of implementing real-time payments,” explained Ruhe.

Support of RTP is applicable to plenty of use cases, including paying gig economy and temp workers, plus any emergency payroll situations. If one of the nearly 1,300 financial institutions that have implemented Zelle decides they want to support RTP, Fiserv can add that capability simply through the NOW Gateway. Furthermore, Fiserv can bring real-time capability to electronic transactions that currently take two or three days. “In summary, NOW future proofs the implementation of real-time payments at financial institutions,” Ruhe concluded. 

The post The World Wants Real-Time Payments, And They Want Them NOW appeared first on PaymentsJournal.

The UK has been operational with real-time payments for over a decade, so it is valuable to consider how instant payments are evolving. The U.S. market is very different in its complexity and its market-driven rather than government-driven approach, but there are still lessons to be learned. An opinion column in Finextra looks at the use of real-time payments to complete variable recurring payments, which apparently needs to be turned into the acronym VRP. It has not launched in the UK yet, as some of the details still need to be finalized, such as who takes liability when a transaction goes bad. It is an interesting topic, however, as it does offer a more secure transaction and reduces some of the complexities of card-on-file. Here is an excerpt from the article:

VRPs is a real game-changer, as it allows long-lived consent to licensed third parties to initiate payments on the customer’s behalf with a specific instruction set. Moreover, moving funds from one account to another happens instantly, with no human intervention.

VRPs are offering a much more flexible way of subscribing to a service directly from your bank account via an instant payment. It is easier to set up both by the merchant and by the end-customer. Once set-up, VRPs can be used for any kind of services, like:

• Moving funds from your current account to a savings or investment third-party application (sweeping – a specific VRP use case enabling transfers between your own accounts);

• Subscribing for a service using VRPs for several months to try it out, ensuring you do not end up in a subscription trap;

• Instructing the car parking vendor to automatically withdraw for the parking slot an amount of no more than 20 GBP at all times;

• Paying for utility expenses, delivery services;

• And so many more cases that are easy to apply in daily lives, including B2B and B2G payments!

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Implementing Real-Time Payments for Recurring Transactions appeared first on PaymentsJournal.

Faster payments are the future of payments, full stop. The world operates at light-speed these days, and convenience and efficiency always win the day. Real-time payments (RTP) have seen steady growth since the technology was first introduced, and while RTP has seemed poised to explode for several years, it has not yet seen widespread adoption. Is the promise of faster payments finally coming to fruition? 

To learn more about how collaboration across all industry stakeholders will be key to the success and implementation of real-time payments, PaymentsJournal sat down with Will Graylin, Founder and CEO of OV Loop; Peter Davey, Senior Vice President and Head of Product Innovation at The Clearing House (TCH); and Tim Sloane, VP of Payments Innovation at Mercator Advisory Group. 

Real-time payments for a real-time economy 

According to a recent PaymentsJournal article, people have very high expectations for real-time payments: 

• 80% of merchants, retail banks, and billing organizations favor real-time payments and open banking. 
• 84% of regional merchants, retail banks, and billing organizations anticipate customer service improvements from real-time payments. 
• 92% of merchants and 82% of billing organizations with revenues of at least $5 billion expect to see customer service improvements as a result of real-time payments. 

“The stats really highlight that we’ve already moved into a real-time economy,” said Davey. “The reality around all of this is that folks desire real time-attributes… to know where everything stands at any one point in time.” 

When real-time systems are built on top of legacy rails like Zelle, users benefit from a response mechanism that gives people transaction status. According to Davey, many people call their banks simply to ensure that somebody received their payments. RTP takes the pressure off of call centers and alleviates “pay and pray,” where users cross their fingers and hope their money went to the right place. “The assured delivery and response capabilities that have been built into a lot of the real-time payment networks really do allow for you to do customer self-service,” Davey continued. “This creates a much more delightful end-user experience.” 

Open banking has already started to drive faster payments in Europe, according to Sloane. “As the use cases were defined, adoption followed in a really big way,” he said, adding that between PayIt, TrueLayer, and a new solution called Kevin., “there’s a lot of innovation going on.” Foundationally, payment rails are required to bring RTP to life, and TCH has provided the first rail capabilities of this kind in the U.S. Simultaneously, OV Loop can run the user interface and develop APIs to connect payments to people and businesses all over. “The possibilities are tremendous for RTP to take off,” said Graylin. 

Why the U.S. is behind the curve… 

Considering the success real-time payments have found in Europe, it begs the question, Why has the U.S. – an innovator in so many other spaces – lagged in incorporating RTP? One reason is simply that change takes time. “The reality of any situation when you have new technology coming into play,” explained Davey, “is that it takes a while for people to actually build out their capabilities to leverage the new technology.” The majority of the five to six thousand financial institutions in the U.S. are over a hundred years old, which means a lot of legacy investments have been made, and many of those FIs are also reliant on their core providers to provide new technological capabilities.  

Another reason is that Europe operates under PSD2 mandates, which codify open-banking regulations in the EU, whereas U.S. RTP solutions are commercially driven. “Financial institutions, merchants, the networks—everybody has some solution that has some commercial implications to them relative to where they make revenue and where they have to expend costs,” Sloane pointed out.  

However, bill pay represents a great opportunity for the U.S. to apply real-time payments in a way that is beneficial to everyone. “Despite the lack of a mandate, it will make commercial sense,” Sloane explained. “How you then expand that into more traditional user payments becomes a bit of a challenge.” 

…and how the U.S. can catch up 

That is where The Clearing House and OV Loop come into play. The TCH real-time payments network is just over four years old, and Davey summarized: “We’ve got over 62% of the entire U.S. deposit base now eligible to receive an RTP transaction… we’ve got at least eight of the top ten banks that are originating payments every single day on the network… and we’re growing by at least 10% per month in terms of volume.”  

Meanwhile, OV Loop focuses on creating the best possible user experience by creating applications that enhance the bill pay experience with interactive bills and offers that merchants/billers can easily send out and field questions as they arise. “That kind of messaging could be sent across many different kinds of channels,” said Graylin, perhaps by enabling a “super wallet” that sends tokenized payments through RTP rails, or even by email or text. 

“It’s really about creating an omnipresent experience,” Davey clarified. “I don’t want to necessarily be strangleheld by a traditional online banking experience—I want to be able to pay bills and interact with my finances wherever I want to be,” whether from the car, browser, or mobile phone. Other fintechs, such as Jack Henry, Fiserv, and FIS, are continuing to drive the market forward. “The ones who will succeed in this industry are the ones who realize that open [banking] is actually a benefit for them,” added Davey. “I’d say 2022 will be the year of real-time payments in the U.S.” 

The future of RTP innovation 

The U.S. has a complex ecosystem of billers, payers, and FIs in the middle, all of whom will need to experience tangible benefits in order to fully embrace real-time payments. Organizations like The Clearing House are actively working to make real-time payments look attractive. TCH is currently driving progress with Akoya, a data access network co-owned by TCH, through which they can securely access and share financial data. TCH will also offer document services, allowing digital documents to be attached to any transaction, which will help with billing, invoicing, and data remittance.  

“Gone are the days of having to format things into an 80-byte file and then having them decoded by your financial institution,” said Davey. “Now, I can actually directly exchange a PDF or XML file with my partner as part of the payment record, therefore alleviating the financial institution from having to do all of that complexity and work.” 

Innovators like OV Loop are more focused on the “above-the-glass” experience that can then be paired with “below-the-glass” APIs and payment rails from companies like TCH Akoya. “It’s really about building that front-end experience for consumers on one side, but also the back-end experience that makes it easier for billers to create these interactive offers,” said Graylin.  

Davey paraphrased his TCH colleague Steve Ledford: “What we do at The Clearing House – we’re all plumbers, which means that we’re the ones laying all the pipes so that things can move from place to place.” Sloane added that by that same metaphor, OV Loop manufactures the faucets, sinks, and dishwashers, aka the user interface.  

Above all, it is vital that everybody can leverage the infrastructure of real-time payments. The disparate payments ecosystem can benefit across the board from a unified solution to systemic issues. “Hopefully [we will] be able to drive standardization in a much faster way than having to do this one-off over and over again across multiple financial institutions,” concluded Davey. “The more that we can do as a network that enables all parties to succeed, the better off we’re going to be.” 

This upcoming year, we at PaymentsJournal are excited to see the promises of real time payments come to fruition. Hopefully, we will look back at 2022 as a watershed year for the industry with respect to adoption, innovation and collaboration. Happy New Year! 

The post How Innovation and Collaboration Support Real-Time Payments appeared first on PaymentsJournal.

BROOKFIELD, Wis., December 20, 2021 – Fiserv, Inc. (NASDAQ: FISV), a leading global provider of payments and financial services technology solutions, announced today that one of the San Francisco Bay Area’s most innovative and growing banks, Community Bank of the Bay, is furthering its digital transformation strategy with the implementation of real-time payments technology from Fiserv.

As California’s first Community Development Financial Institution (CDFI), Community Bank of the Bay is committed to providing affordable financial solutions and supporting sustainable environmental practices. The bank serves an expanding commercial customer base of businesses in industries including manufacturing, construction, restaurants, professional services and real estate.

By implementing the award-winning Payments Exchange: RTP^® solution from Fiserv, Community Bank of the Bay can now rapidly onboard new customers while providing existing customers an expanded suite of payment options, including real time payments. Payments Exchange: RTP integrates out-of-box with the bank’s existing core and builds on the success of their existing partnership with Fiserv.

“As the region’s leading community bank, we take pride in providing our customers exceptional and innovative services,” said Chaula Pandya, SVP, Chief Technology Officer at Community Bank of the Bay. “With real-time payments from Fiserv, our customers benefit from rapid, 24/7 access to funds, and are no longer restricted by traditional business hours or payment rails.”

The payments industry has seen significant growth in instant payments, reflecting changes in the way consumers and businesses move funds. According to the most recent annual Fiserv payments survey of financial institutions, 82% said there is a shift in customer expectations for more contactless and real-time payment options. Importantly, real-time payments enable financial institutions to support time sensitive and critical commercial use cases such as escrow payments, real estate and title transfers, and insurance claims.

With this initial deployment, retail and business customers of Community Bank of the Bay can now receive payments in real time. Soon, businesses will have the capability to make last-minute payments for goods purchased while corporate treasurers can reconcile funds and accounts in real time.

“Community banks are the backbone of regional money movement and are in the best position to support niche business needs,” said Dudley White, senior vice president and general manager of Enterprise Payments Solutions at Fiserv. “Payments Exchange: RTP and our suite of Fiserv payments solutions provide Community Bank of the Bay the flexibility to offer differentiated customer products and services aligned to market progression.”

Payments Exchange: RTP from Fiserv is a flexible, web‑based, multi-tenant solution for completing end-to-end, real‑time payments 24/7/365 through the RTP^® Network operated by The Clearing House (TCH). With immediate funds availability and payment certainty for commercial and retail customers, financial institutions benefit from the full power of real-time payments at an affordable price point. The solution was recently awarded Highly Commended by the PayTech Awards.

In a world moving faster than ever before, Fiserv helps clients deliver solutions in step with the way people live and work today – financial services at the speed of life. Learn more at fiserv.com.

About Community Bank of the Bay / Bay Community Bancorp
Bay Community Bancorp (OTCPink: CBOBA) is the parent company of Community Bank of the Bay, a San Francisco Bay Area commercial bank with full-service offices in Oakland, Danville and San Mateo. Community Bank of the Bay serves the financial needs of closely held businesses and professional service firms, as well as their owner-operators and non-profit organizations throughout the San Francisco Bay Area. Community Bank of the Bay is a member of the FDIC, an SBA Preferred Lender, and a CDARS depository institution, headquartered in Oakland, with full-service branches in Danville and San Mateo. It is also California’s first FDIC-insured certified Community Development Financial Institution and one of only three operating in the Bay Area. The bank is recognized for establishing the Bay Area Green Fund to provide financing to sustainable businesses and projects and supports environmentally responsible values. Additional information on the bank is available online at www.BankCBB.com.

About Fiserv
Fiserv, Inc. (NASDAQ: FISV) aspires to move money and information in a way that moves the world. As a global leader in payments and financial technology, the company helps clients achieve best-in-class results through a commitment to innovation and excellence in areas including account processing and digital banking solutions; card issuer processing and network services; payments; e-commerce; merchant acquiring and processing; and the Clover^® cloud-based point-of-sale solution. Fiserv is a member of the S&P 500^® Index and the FORTUNE^® 500, and is among FORTUNE World’s Most Admired Companies^®. Visit fiserv.com and follow on social media for more information and the latest company news.

The post Community Bank of the Bay and Fiserv Bring Real-Time Payments to the Bay Area appeared first on PaymentsJournal.

As those in the U.S. hear so often, Europe is far more advanced in the development of a modern payments infrastructure that better meets the needs and opportunities of a digital marketplace. While the U.S. market is very different, it is beneficial to note how new payment types and form factors are progressing in other countries, particularly those deemed more advanced, to look for trends, issues, and areas of success that bear repeating or should be avoided if possible. An article posted to Market Research Telecast looks at the state of real-time payments, specifically “SCT Inst fast transfers,” (SEPA Instant Credit Transfers) that have been operational since November 2017. The article finds that in Germany, consumers are selective in how they take advantage of real-time account to account transfers, suggesting that real-time payments is more of a niche product. Here’s more from the article that outlines some of the reasons why, focusing on fees for real-time transfers and differences in the way they have been implemented:

Time is money – but real-time payments are still the exception in Germany. “From our point of view, instant payment has not yet arrived in people’s everyday lives. Banks tend to place it as a niche product and are therefore still a long way off from the political will and the requirements of retailers to be considered the “New Normal,”” summarized Ulrich Binnebößel, Payment transaction expert at the German Trade Association (HDE).

In Europe, the “SCT Inst” called “SCT Inst” fast transfers have been possible since November 21, 2017. On the same day, Hypovereinsbank (HVB), part of the Italian Unicredit Group, tested the system; since November 27, 2017, HVB customers have been able to order transfers in real time via online banking. In mid-July 2018, the savings banks followed suit, and Deutsche Bank and Commerzbank as well as various cooperative banks also offer the service.

According to the Deutsche Kreditwirtschaft (DK), “real-time transfers have established themselves as a new standard alongside conventional transfers”. Nevertheless, “the switch to real-time transfers (…) does not make sense for all applications for customers,” said the umbrella organization of the five major banking associations in Germany. “Depending on their needs, customers clearly differentiate between which transactions they are using which transfer method.”

We can hear from the industry: Most private customers only resort to real-time transfers, which are usually chargeable, in exceptional cases. For companies, collective transfers via instant payment are now technically possible, but the company’s IT systems must be upgraded accordingly, for example in order to process pay slips for the workforce in this way.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Checking in on the Progress of Real-Time Payments in Europe appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Prepaid Mobile Phone Market 2021: Key Trends and Use Cases

The Current International Real-Time Payments Landscape:

• The ecosystem enabling and supporting real-time payments systems has undergone significant growth at the global level.
• Both the number of countries and total volume of transacted value have increased rapidly over the course of 2020.
• Approximately USD 70 billion in real-time payments transaction value was processed globally during 2020.
• This marks an increase of 41% from 2019.
• The majority of transactions were conducted in India and China, the global leaders in the sovereign market faster-payments ecosystem.

About Viewpoint

The prepaid mobile phone market is marked by intense competition and gradual, sustained growth. Prepaid mobile plans have evolved to incorporate a broad array of compelling features, while remaining more flexible and affordable than postpaid alternatives.

This viewpoint describes the history of the U.S. prepaid mobile phone market, examines key trends within the market, and highlights opportunities within the space.

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Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: International Faster Payments: A Growing Real-Time Presence

Mobile Wallet Adoption for Real-Time Payments:

• Mobile wallet adoption across the globe increased by 46% in 2020.
• This represents a significant rise from the growth rate of 18.9% in 2018.
• ACI Worldwide estimates the total number of mobile wallet transactions to be 102.7 billion for 2020.
• By 2025, there will be a forecast of 2,582.8 billion mobile wallet transactions.
• Implemented and planned real-time payments systems in rails outside of North America are prioritizing integration with mobile/digital wallets. 

About Report

Real-time payments continue on a path to prominence in world markets, with these systems currently a domestic phenomenon but increasingly expected to fill cross-border demand as well. The only question is time, as these global payments rails are now available in almost 60 markets with more systems poised for launch during the next year. We have been tracking developments and faster value transfers in the United States since same day ACH was initially launched for credit transfers in 2016. With our latest research report, International Faster Payments: A Growing Real-Time Presence, we now expand into developments across the globe in various key markets with data and estimated growth in the use of these systems, as well as discussions on upcoming rails and other important initiatives underway.

Mercator Advisory Group’s latest report provides a review of ten specific markets outside of the United States, with actual and forecasted value growth data through 2026. We also provide details on various initiatives underway for the eventual delivery of instant cross-border payments, something that until recently seemed to only be possible many years into the future.

“Real-time payments systems are becoming more common across the globe, with new domestic rails operating in dozens of developed and developing markets with a growing ubiquity of access to bank accounts within those markets,” commented Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service, co-author of the report. “Substantial adoption has already been achieved in various markets and instant payment growth rates in selected countries outside the United States are expected to be near double digit between 2020 and 2026.”

The post Mobile Wallet Adoption for Real-Time Payments: appeared first on PaymentsJournal.

Consumers and businesses count on financial institutions to help them move money quickly and securely. To keep pace with changing customer expectations, banks and credit unions need to be ready with a range of payment options, including ACH, wires, foreign exchange (FX) services and real-time payments.

While management of compliance and risk are top of mind for financial institutions, there is an increasing focus on customer experience. To learn how technology providers are supporting financial institutions with cutting edge innovative solutions and value-added propositions,  PaymentsJournal sat down with Bailey Nelson, Vice President of Enterprise Payments Solutions at Fiserv, and  Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

Wire transfers play a crucial role in the payments ecosystem

Even with the availability of newer digital payment channels, wire transfers remain an essential component of the payments landscape. “Wire payments can reach every account in the United States, meet the requirements of high value and corporate payments, and enable cross-border cross-regional exchanges,” said Nelson. A critical part of banks’ revenue streams, wires contribute significant fee income to financial institutions small and large by moving money, managing liquidity, and more.

The sheer volume of wire transfers in the United States underscores their significance. “When you take the full spectrum of the value that runs through wire transfer systems just in the United States, it’s rather staggering. When you think about wires used for goods and services it’s between about $25 to $30 trillion annually. But if you look at the entire value of [what] goes through the system for liquidity, Fed funds, and everything else, it’s more than a quadrillion [dollars] during the course of a year,” explained Murphy.

The challenges of wire transfers

Despite the indisputable value of wire transfers in the payments ecosystem, financial institutions and their corporate customers face challenges when it comes to managing them. “Some of those challenges include [that] many financial institutions use multiple systems to perform wires, fraud checking, and international wires. Clients seek efficiency, better service, stronger compliance and reduced risk. Clients also desire more robust reporting,” explained Nelson.

Wires are also subject to more review and security controls such as dual controls, security procedures, and service level agreements. Additionally, some businesses rely on wire services for cross-border or cross-regional exchanges. Fortunately, this is where Fiserv can help. Financial institutions, large and small, are using Payments Exchange: Fedwire, formerly known as WireXchange, to take advantage of a complete end-to-end solution that streamlines wire processes and reduces operational costs.

Payments Exchange addresses wire challenges

Payments Exchange from Fiserv is a market leader in wire transfers and provides value for financial institutions of all sizes. This rings true whether they do 50 wire transfers per month or 100,000. “With our affordable and feature-rich product, clients have access to full end-to-end domestic and international wire processing capabilities. We essentially make wire processing efficient, flexible, simple, secure, and compliant–a fact testified by over 1,000 financial institutions that use this platform today,’’ said Nelson.

Banks and credit unions using Payments Exchange can monitor and manage payments from a single web-based application service provider (ASP) platform. Fiserv also provides real-time integration to all its bank and credit union core systems as well as many non-Fiserv account processing core systems.

Creating an ecosystem of partners for best-in-class solutions and features

Independent of size and location, financial institutions want to be competitive, innovative, and retain customers. Payments Exchange offers that value proposition so financial institutions can go to market with the solutions their customers need quickly, securely, and in the most optimized way. Fiserv strategic partners have had a key role in making this possible.

“We have always recognized the key benefits our partners play to help support a complete payment solution, providing access to a wider customer segment and solve some of their biggest challenges,” said Nelson.

With this recognition in mind, Fiserv is leveraging its Payments Exchange integration and partnership strategy to expand its foreign exchange, correspondent banking, core integrations, and fraud partnerships. With this approach, Fiserv clients will have access to options that help enhance their domestic, instant, and international payment services.

For example, correspondent bank partnerships enable financial institutions to take advantage of the Payments Exchange platform without maintaining an account with the Federal Reserve. Foreign exchange partners allow them to originate foreign wires with real-time quotes. Corporate treasury integration means their consumers can originate their own payments. Fraud partners make real-time fraud screening with industry leading providers a reality.

Getting Financial Institutions Real-time Ready

There are also exciting recent and upcoming developments in store for Payments Exchange. “We’ve had a very busy year designing, developing, and implementing new features [and] we have a lot of new and exciting features on our roadmap,” explained Nelson.

For starters, Fiserv has expanded the capabilities of Payments Exchange to support The Clearing House RTP^® network for the receive and send personas. “Payments Exchange: RTP^® is affordable, quick to implement, and easy to connect to The Clearing House. It’s a flexible web-based solution for completing end-to-end real time payments 24/7/365 through the RTP network… with immediate funds availability and payment certainty for commercial and retail customers,” Nelson added. Clients have the full power of RTP^® with less financial investment and time commitment.

There are also two new subscription services for Payments Exchange. The first, Mobile Access, is an annual subscription services where users can approve wire transfers from their mobile device. The second subscription is a reporting module that enhances reporting capabilities using Tableau.

“We’re really excited about the many possibilities of how Payments Exchange can help our clients,” concluded Nelson.

The post Simplify and Streamline Payments with Payments Exchange from Fiserv appeared first on PaymentsJournal.

PISCATAWAY, N.J.–(BUSINESS WIRE)–Veridian Credit Union, a full-service financial cooperative with $5.5 billion in assets and more than 260,000 members, along with their third-party service provider Alacriti, announced that they are now live on The Clearing House’s (TCH) RTP^® network. Veridian’s members can now receive payments in real-time from any person or business transacting on the RTP network.

Veridian deployed Alacriti’s cloud-native, ISO 20022-based end-to-end solution for payments processing and settlement—Cosmos Payment Services. The successful launch marks the first milestone in Veridian’s payments transformation journey with Alacriti, with the financial institution live on the system just ten weeks after project kick-off. Veridian’s members can now receive funds up to three days earlier than some traditional payment types.

“Our members rely on Veridian to rapidly deploy technology solutions to improve their digital experiences,” said Brett Engstrom, Veridian’s CIO. “Our partnership with Alacriti helped us quickly realize the first, of what promises to be many, benefits of real-time payments.”

“The RTP network continues to grow and expand, and this project is another win for real-time payments as a whole,” said Keith Gray, VP Strategic Partnerships, The Clearing House (TCH). “The speed of this project is a great proof point for other financial institutions exploring faster payments as to just how quickly they too can start realizing the benefits faster payments brings to the table—it’s not months or years, but weeks.”

“Every journey starts with the first step, and we congratulate our partners and friends at Veridian on this important accomplishment. At the same time, we are equally excited about what lies ahead on this payments transformation journey. The future of payments is being shaped by the market today, and our two organizations are now on the cutting edge of that change. We are proud to be one of Veridian’s trusted technology partners and look forward to what we can achieve together.” said Carl Robinson, SVP, Alacriti.

About Alacriti
Alacriti is a leading financial technology company with a comprehensive money movement and payments services platform, dedicated to helping our clients accelerate their digital transformation. Built on a flexible, cloud-native framework, our array of solutions allow clients to deliver the money movement experiences and payments innovation that today’s users demand, while seamlessly integrating with their internal infrastructures. Learn more about Alacriti.

About Veridian Credit Union
Veridian Credit Union, founded in 1934 in Waterloo, Iowa, is a not-for-profit financial cooperative owned by its members. The credit union offers a full range of business and consumer financial services with approximately 1,000 employees and 30 branches across Iowa and eastern Nebraska. For more information, visit veridiancu.org or call (800) 235-3228.

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Monett, Mo. – Nov. 23, 2021 – Jack Henry & Associates, Inc. (NASDAQ: JKHY), a leading provider of technology solutions and payment processing services primarily for the financial services industry, announced today that its clients represent the majority of financial institutions live on The Clearing House’s RTP^® network. There are currently 119 of the 177 banks and credit union live through Jack Henry’s faster payments hub, JHA PayCenter™, plus Jack Henry has an additional 87 clients in various stages of the implementation process.

Through JHA PayCenter, financial institutions enable their consumer and commercial account holders to send and receive real-time payments. Financial institutions connected to JHA PayCenter have been involved in the movement of $325 million on the RTP network, equating to approximately 700,000 transactions since the first Jack Henry financial institution joined in December 2019. Adoption and transaction volume are quickly growing, demonstrating the demand for real-time payments. Based on a Jack Henry webinar, 37% of participating bankers plan to implement RTP Send and Request for Payment in the next 6 to 12 months.

American National Bank & Trust recently joined the RTP network through its collaboration with Jack Henry, enjoying the seamless integration of JHA PayCenter and the Banno Digital Platform™. Carolyn Kiser, director of marketing and community affairs at the $3.3 billion-asset bank, said, “We’re strategically focused on simplifying our operations and the customer experience, which is why we adopt tools and technology that make it easy to do business with us. Real-time payments support this strategy and have become a necessary product on our digital roadmap. Offering a faster and integrated payment option that is part of our digital banking app makes moving money simple for our customers and brings us a step closer to being the first app they look to for all their financial needs.”

Steve Ledford, senior vice president of product development at The Clearing House, commented, “The RTP network continues to grow, seeing 33 million transactions on the network in the third quarter of 2021, and working with Jack Henry has been integral in making the RTP network, and therefore real-time payments, more accessible to diverse financial institutions nationwide. In the digital era, consumers and businesses expect real-time interactions and transactions, and the RTP network clearly positions Jack Henry’s bank and credit union clients to meet those expectations.”

Rusiru Gunasena, managing director of JHA PayCenter, added, “This is a great milestone for the RTP network, Jack Henry, and our clients. We’re continuing to see the increased demand for this service as new use cases emerge, and consumers and businesses expect to move money in their exact moment of need. We anticipate real-time payments will continue to generate vigorous adoption and growth as more convenience-driven businesses and consumers want to improve cash flow with faster access to their money.”

About The Clearing House
The Clearing House operates U.S-based payments networks that clear and settle more than $2 trillion each day through wire, ACH, check image, and real-time payments. It is the nation’s most experienced payments company, with a long track record of providing secure and reliable systems, payments innovation, and strategic thought leadership to financial institutions. Most recently, The Clearing House has revolutionized U.S. payments infrastructure with the RTP network, which supports the immediate clearing and settlement of payments, along with the ability to exchange related payment information across the same secure channel. These RTP capabilities enable all financial institutions to offer safer, faster, and smarter digital transaction services for their corporate and retail customers.  Learn more at www.theclearinghouse.org.

About Jack Henry & Associates, Inc.
Jack Henry (NASDAQ: JKHY) is a leading SaaS provider primarily for the financial services industry. We are a S&P 500 company that serves approximately 8,500 clients nationwide through three divisions: Jack Henry Banking^® provides innovative solutions to community and regional banks. Symitar^® provides industry-leading solutions to credit unions of all sizes; and ProfitStars^® offers highly specialized solutions to financial institutions of every asset size, as well as diverse corporate entities outside of the financial services industry. With a heritage that has been dedicated to openness, partnership, and user centricity for more than 40 years, we are well-positioned as a driving market force in cloud-based digital solutions and payment processing services. We empower our clients and consumers with the human-centered, tech-forward, and insights-driven solutions that will get them where they want to go. Are you future ready? Additional information is available at www.jackhenry.com.

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With many developing use cases and businesses increasingly demanding access to real-time payments, financial institutions risk losing loyal customers if they do not offer real-time payments as soon as possible. This sentiment is reflected in the rapid adoption and connectivity to The Clearing House’s (TCH) RTP^® network and interest in the Federal Reserve’s upcoming FedNow^TM Service.

However, when it comes to the when and how of real-time payments implementation, there is no standard template or approach. Each financial institution must consider several factors, including their organizational strategy and customer base, when developing an implementation plan.

To offer insight into recent developments in the real-time payments market and what a successful real-time payments implementation strategy looks like, PaymentsJournal recently hosted a webinar panel discussion titled “Real Time Payments: A Practical Guide to Implementation.”

The panel consisted of expert speakers Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group; Keith Gray, VP of RTP Strategic Partnerships at The Clearing House; Carrie Blankenship, Director of Product Management, Instant and Emerging Payments at Fiserv; and Chaula Pandya, SVP and CTO at Community Bank of the Bay.

The U.S. real-time payments market

Real-time, near real-time, and faster payments have been gaining traction in the United States in recent years. Faster payment examples include debit networks’ push payments, which have real-time clearing and next day settlement, as well as Same Day ACH. An example of near real-time payments is Early Warning’s Zelle. While Zelle does have the option for real-time clearing through The Clearing House’s RTP® network, the majority of settlement today is delayed and completed via debit card rails or ACH. 

The two main real-time payment rails in the U.S. are The Clearing House RTP^® network, which launched in 2017, and the Federal Reserve’s anticipated FedNow^TM Service , which is slated to go live in 2023. “Both of these rails are real-time clearing and settlement systems, meaning that within seconds, payments can be sent and received with finality, and the systems are always on 24 hours a day, 365 days a year,” explained Murphy.

Real-time payments deliver real value to banks

According to Gray, the promise of the RTP^® network from the beginning has not only been to make payments faster, but also to make them smarter and safer. “A lot of the capabilities of the RTP^® network are not only around the immediate part of it, but also those enhanced capabilities that have to do with smarter and safer payments,” he said.

One of the main differentiators of the network is that it is a push-payment model. This means that the sender needs to push money into the recipient’s account, rather than the recipient being able to pull money out of the sender’s account. This creates complete visibility on both sides of the payment transaction. “The payment is certain and those funds are available immediately. Those capabilities—the immediacy, the certainty, the immediate clearing and settlement—are what I call the base level components of the network,” said Gray.

Enhanced RTP network capabilities include use cases such as account to account (A2A) transfers, loan funding, gig economy, B2B payments, payroll, merchant funding, title companies, wallets, insurance claims, and cash concentration. Additional use cases and applications are added regularly, exemplifying why financial institutions are keen to connect  to the RTP network.

“We add banks and credit unions every week onto the network. That number is actually accelerating as we move forward. Companies like Fiserv have different programs and products in place that really make it easy to have them join the RTP network, especially on the receiving side… We’ve really done what we can from a network standpoint to make onboarding onto the RTP network a very straightforward process,” explained Gray.

The importance of implementing real-time payments

Financial institutions of all sizes need to make real-time payments a priority. “The mission that we have at Fiserv is that we enable banks and credit unions  to be able to deliver instant payments across their enterprise for all use cases and all networks,” said Carrie Blankenship.

Of course, each financial institution has its own unique set of customers and needs. Recognizing this, Fiserv offers more than one way for financial institutions to incorporate real time payments into their product offerings. For starters, its  Enterprise Payments Platform is a full scale and traditional payments hub that delivers high performance, real-time payments processing multiple payment rails, including RTP. For organizations that do not have a strategic intent of  deploying a full-fledged payments hub, Fiserv Payments Exchange offers a direct gateway to the RTP® network with faster and more affordable onboarding. Payments Exchange will also connect to the FedNow Service when ready. “Our advice to financial institutions is to start with Receive now on RTP®, familiarize internal resources with solution while volumes are low and get ready for future phases”, said Blankenship.

The California-based Community Bank of the Bay learned the importance of real-time payment capabilities firsthand during the pandemic. “During the COVID-19 pandemic, U.S. banks offered the SBA Paycheck Protection Program [PPP] to businesses in our community, and banks could have used after hours and over the weekend loan funding options. But we were not part of The Clearing House, and we had not joined the RTP network at the time,” said Pandya.

This translated to the bank being unable to fund PPP loans outside of traditional wire transfer hours. “We also learned another lesson during the PPP era, and that was when the state of California decided to fund grants to small businesses. We did not have partnerships with the right fintech company, and what that did is [prevent] our clients from receiving their grants to their accounts here at Community Bank of the Bay,” she added. 

This lack of functionality meant that customers had to go through their accounts at other banks that had already chosen the right fintech partners. The takeaway? “It is important to stay on top of what fintechs are innovating, and financial institutions partnering with the right technology partner to stay compatible with product offerings is going to become the standard. Integration with fintechs  is totally unavoidable for banks,” concluded Pandya.

To learn more about how banks and credit unions can implement real-time payments functionality, please fill out the form below to access the complimentary PaymentsJournal webinar, “Real Time Payments: A Practical Guide to Implementation.”

The post On-demand Webinar – Real Time Payments: A Practical Guide to Implementation appeared first on PaymentsJournal.

In an interview with PaymentsJournal at the 2021 Money20/20 event, Matt Nilles, Director of Client Solutions & Products at Euronet, spoke about how banks can approach their real-time payment roadmap. The following transcript was edited and condensed for clarity.  

What does the adoption rate of real-time payments look like from your perspective? 

We’re seeing the exact same thing where we know that real-time payments are coming, but the struggle is that it’s a new trend for all of us. We all know Venmo, we all know PayPal, and we think it’s real-time payments but it’s not truly real-time payments. The fact that real-time payments are coming to the U.S., right now, is primarily thought of as peer-to-peer. We as consumers know it, but banks really need to jump on the trend, and they see that it’s going to take over the payments landscape for the foreseeable future.  

Now there’s a difference between seeing a trend coming and being ready for it. We found that a lot of the small to mid-tier banks know real-time payments are coming, but they aren’t technologically set up for it yet. They’re getting into the research or getting into the due diligence of getting their tech stack ready for real-time payments, and that has become a bit of a problem for them because they see that it’s going to be an ISO 20022 message type. A lot of these banks are dealing in an ISO 8583 message type, which can be a disconnect between the bank and The Clearing House, whether it be TCH or FedNow in a couple of years. While it’s a trend that’s coming, the small to mid-tier banks are really trying to prepare and get ready from a technology standpoint, and that’s what we help them with. 

Are small and mid-tier banks having issues with implementation due to legacy systems? 

When we look at the banks that we talk to on a day-to-day basis, and even prospects that come down the road, we have found that they have a legacy system in place. And the great thing about a legacy system is it’s been up and running for years and going very well.  

The problem with the legacy system is it can be viewed as a monolithic codebase, so it’s very hard to turn the steering wheel to real-time payments because it’s very stagnant, it’s held together by bug fixes and duct tape years over time. What we have found is that a lot of these small to mid-tier banks are noticing that with each and every new payment trend that comes up, they are starting to feel the burden and the problems that are tied to a legacy system and starting to make a pivot to more of a microservice based architecture where they can take small chunks of code [and] start to introduce that to the legacy system. Over time, you eventually replace the monolithic code base, you get to a nimbler architecture behind the scenes in your tech stack. That’s what many of the small and mid-tier banks are preparing for is to become that more agile, nimble solution instead of a monolithic codebase that is hard to dictate and move around.  

What we have done with Euronet is we have developed our solution in a microservices-based architecture, which we feel will better prepare not only us as a solutions provider, but these banks to meet the upcoming payment trends that seem to come every six months or so. 

What does a real-time payment roadmap look like? 

What we’ve seen is that change is hard no matter how big the bank is, [but] especially for small to mid-tier banks where maybe the capital isn’t there that you would run into a tier one. So that two to five-year roadmap is really all hinging on the nimbler technology stack because you need to have the ability to try something out and pivot if it doesn’t work. It’s more of an incremental innovation strategy as opposed to a Big Bang, rip and replace, disruptive strategy. Through this nimbler tech stack, you can try something out and pivot if it doesn’t work. 

We’ve seen a lot of the recent opportunities move to a cloud-based infrastructure. Certainly, there are a lot of pros to that [when] you don’t have the technology to rely on in your office… It’s in the cloud and it can be more reliable. You’re able to replicate data centers easily. We’re seeing over the next two to five years a lot of the opportunities shifting to a cloud-based architecture deployment, and we’re also seeing a lot of [banks] try something out with an incremental innovation, as opposed to investing a lot of capital into starting over.  

How can banks drive revenue from their investment in real-time payments?  

We really look at the ISO 20022 messaging from two standpoints. One is we always think about the customer first and their experience. With real-time payments, most of the networks popping up around the world—we’re up to 56 networks around the world—are on ISO 20022 message type. What that brings is a wealth of data that you don’t get from the legacy message types that we’ve all been working with over the past 20-30 years.  

When we look at the customer experience, knowing where real-time payment stands with every leg throughout the transaction, just the knowledge and the comfort that brings, the security that brings to the consumer… boosts their comfort level with the transaction itself, with the trend, and adopting all the solutions that you might tack onto the rails of real-time payment. We always look to the customer experience first, and the visibility that the ISO 20022 message type brings is really going to enhance everyone’s experience and comfort in real-time payments.  

Then you get into the marketing side of things, you’re going to see is this an invoice, how much is the invoice amount for, where’s the invoice coming from, and you can start to personalize and, looking again at the customer experience, bring an experience that feels more one-to-one instead of one-to-many. They feel more comfortable working with you as a Banking as a Solution (BaaS) provider and want to use other products as well. We all want to increase our stickiness…at least with the customer relationship that we have with our account holders. The ISO 20022 message type bringing that wealth and data that we haven’t seen in previous message types will boost that customer experience and that relationship. 

Is there an advantage to being an early adopter of real-time payments?  

When we look at real-time payments, it’s really two components. One is the connection, the rails, and that is going to be commoditized quickly. Everyone’s going to connect, everyone’s going to have that. Where you really start to differentiate yourself from your competition, whether it’s within your region or multinational, is through the digital overlay services that you then tack onto the rails. The early adopters are going to have first say and really define the market.  

When you look at the U.S., you really do need to start preparing for FedNow today. We know it’s going to be out in 2023. Now is the time to get involved, now is the time to really have an impact on what that network looks like and talk to your peers that are in the industry with you to start to define those digital overlay services that will become prominent in the U.S. 

We’ve seen a handful rise to the top around the globe, things like Request to Pay bill payment, we’re seeing more B2B digital overlay services come to fruition and start to take over. We really all think of real-time payments as peer-to-peer—you go out to eat pizza with your buddy and you want to split the check. It’s become so much more than that, and the business use cases are really starting to drive adoption of the networks [and] the activity within [them.] As an early adopter, you really push yourself to the front of the crowd and start to define those use cases and capture market share within your region as well. So, start now. 

The post Unlocking the Value of Real-Time Payments appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Request for Pay: Opportunities Await, but It’s a Long Road to Mainstream Adoption

Emerging Use Cases for Request-for-Pay:

• Request-for-Pay (RfP) is in its early stages, but there is great potential in the industry.
• In September 2021, Verizon announced that customers could pay their bills instantly through The Clearing House’s RfP service if they have an account with Citi.
• This is a narrow use case, but represents a starting point for what will likely be a long road to the common use of this technology.
• JPMorgan Chase recently announced a B2B solution that uses The Clearing House’s RfP capabilities.
• The new product will allow corporate clients to send payment requests to the bank’s 57 million digital banking clients.
• As with Verizon, the Chase product is a narrow use case—but new products on new rails need to begin somewhere.

About Viewpoint

The U.S. payments market is beginning to see the launch of Request-for-Pay (RfP) products using the messaging system developed by The Clearing House and tied to the RTP network. RfP solutions currently being deployed have limited audiences, but the potential to expand is promising and a host of viable use cases are being identified.

In this Viewpoint, Mercator highlights the views of several industry experts who have a front-row seat to the advancement of RfP.

The post Emerging Use Cases for Request-for-Pay: appeared first on PaymentsJournal.

As the number of channels available for payments is dramatically increasing, so too is the need for the payments back office to support true omnichannel capabilities and provide the ability to readily support new payment methods such as real-time payments.  

To learn more about how a leading payments processing company met this challenge by “future-proofing” its back office, PaymentsJournal sat down with Kate Knudsen, Senior Project Manager at BHMI, Rui Margato, Head of Information Technology at Payshop, and Sarah Grotta, Director, Debit and Alternative Products Advisory Service for Mercator Advisory Group.  

Faster, easier, more options 

Although the payments industry was already rapidly changing pre-pandemic, the onset of COVID-19 triggered a veritable explosion of mobile payment usage. Consumers have more choices than ever when deciding how to pay for things. Payments can be initiated through universal payment apps such as Apple Pay, Google Pay, and Samsung Pay, or through apps that use QR codes. Consumers can also use direct debit, which in the U.S. is primarily used for bill payment. Old-fashioned payment types, such as paying by check or cash, are still in use, even among those who might consider themselves “tech-forward.”  

Each consumer’s preferred method will invariably boil down to which is the most convenient. “It’s a great time to be a consumer because you have an incredible amount of choice,” said Grotta. But beneath every surface layer of user interface, there are potentially multiple payment networks necessary to make a payment happen. “That choice certainly creates a great deal of complexity beneath that user interface layer,” continued Grotta. 

Back-office challenges 

Whenever a payment is made, it flows into a front-end system for authorization. Once the payment is authorized, the back-office system takes over. Back office refers to functions which customers never see, such as transaction reconciliation, settlement processing, and dispute management. “Ideally,” said Knudsen, “back-office systems should provide access to current, or rather timely, transaction data. What we are seeing in the industry is that payments are being authorized in real time, and that’s a significant advancement in the industry, but back-office systems are not keeping up with those real-time front ends. 

“The problem is that most back-office systems are batch-oriented and cannot match the real-time capabilities of front ends,” Knudsen explained. Most legacy systems were designed for card-based payments. If back-office systems only process payments in large batches at certain times of the day, certain payment positions will be left hanging, unprocessed and inaccessible, sometimes until after end-of-day settlement. Modifying these systems to support newer digital and account-to-account payments requires massive and expensive re-engineering. 

ISO 20022 represents a particular challenge for adopting new payments systems, according to Knudsen. “For decades, we’ve used ISO 8583 for card-based transactions. However, ISO 20022 is an emerging standard being used by faster payment networks around the world. The U.S. has been slower to adopt this standard, primarily because of the costs and complexity of implementing it in these legacy systems.” 

Payshop found a solution in BHMI and Concourse 

Payshop, a Portugal-based payments institution with a retail footprint of more than 7,000 locations, has been “aggressively expanding [its] omnichannel capabilities to adapt to the needs of e-commerce, digital payment gateways, and to keep up with the ever-growing demand for digital payment solutions,” said Margato. He continued: “Having more than 20 years of history, we found that our biggest challenge was our highly fragmented back-office landscape, with disparate systems handling different payment services, and a lack of a unified solution to manage all payments regardless of the originating channel, scheme, or authorization type.” 

Payshop’s main goal, therefore, was to integrate all payment services managed by its legacy vertical application stacks into a single unified back-office solution. In addition to retail, internet, mobile, and partner acquisition channels, Payshop wanted to expand into new markets such as B2C, microbusinesses, and the emerging API economy, as well as card payments.  

To meet those needs, Payshop selected BHMI and its Concourse Financial Software Suite as the impetus for their new payments back office. Concourse is a powerful and flexible back-office software solution for the processing of electronic payments such as credit card, debit card, ATM, POS, and mobile transactions. Payshop can load payment transactions into Concourse from a variety of sources, and from there, Concourse offers real-time views of payment transaction data and settlement positions. “Transaction research, fee and commission assessment, settlement, and dispute processing are all unified in Concourse,” Knudsen said. “Payshop is seeing their back-office transformation vision come alive.” 

“Concourse is our central back-office solution for all transactions,” agreed Margato. “Regardless of the underlying attributes—channel, payment service, payment method, etc.—all transactions are fed into Concourse once they have been authorized, in near real time when necessary. Concourse then manages all post-authorization processing: validation rules, fees and commissions processing, settlement and clearing, as well all post-settlement events: disputes [and] corrections.” 

Payshop specifically outfitted Concourse with a SEPA ISO 20020 loader, a loader for domestic SIBS card transactions, and UMTF (Unified Meta Transaction Format) transactions. As a result, Concourse is now the unified back-office solution that Payshop was looking for. 

Future-proofing to meet all foreseeable outcomes 

Setting up a back-office system that will satisfy the most complex use cases foreseen by marketing/product stakeholders is no easy task. However, Margato argued that it is better to do the mental exercise of “future proofing” up front rather than postponing the effort until later. “It engages everybody on design decisions,” said Margato, and “a bad design decision in this phase can have serious adverse consequences for the project.” Margato urged companies to aim, whenever possible, “for rules-based processing and/or parameter-based configurations.” 

“Concourse is highly configurable,” Knudsen confirmed. “With that powerful feature comes the responsibility of ensuring the immediate need is met and that you’re not painting yourself into a corner.” 

Back-office projects can face a myriad of challenges. As important as it is for companies to ensure their back office can support omnichannel capabilities, BHMI has found that its customers rarely use net new resources for their back-office implementations. “Customer team members must do their ‘day job’ as well as work on the new implementation,” said Knudsen. The Payshop team successfully faced this challenge and many others by combining 1) a clear vision of their desired business outcomes, 2) a solid knowledge base, and 3) engaged and empowered decision-making. “It takes time, energy, engagement, and smarts,” Knudsen concluded, “That’s Payshop.” 

The post Success Story: How a Leading Payments Company Unified and Future-Proofed Its Payments Back Office appeared first on PaymentsJournal.

NEW YORK, Sept. 30, 2021 /PRNewswire/ — Volante Technologies, the global leader in cloud payments and financial messaging, announced that they have been named to The IDC FinTech Rankings 2021 for the first time, entering at #67. The recognition follows numerous 2021 industry accolades, including topping the IBS Intelligence Sales League Table (SLT) in wholesale banking payments and winning the Best Real-Time Payments Solution at the 2021 PayTech Awards, and a banner 2020 during which the company doubled new customer signings.

The annual vendor ranking represents the leading hardware, software, and service providers to the financial services industry from around the world. Vendors are ranked based on 2020 calendar year revenues attributed to financial institutions. They also supply the technological backbone of the financial services industry, an industry in which IDC Financial Insights forecasts worldwide spending on IT across the globe to be $590 billion (USD) by 2025.

According to Aaron Press, Research Director at IDC Financial Insights, “Volante’s inclusion in The IDC Fintech Rankings 2021 Top 100 is a significant accomplishment that places them in the top tier of financial technology companies. With a clear focus on payments, Volante has earned their position by creating a compelling offering and demonstrating a commitment to the success of their clients. The IDC Fintech Rankings, now in its 18th year, is the global standard list of fintech providers to the industry, and we congratulate Volante for their placement among the 2021 winners.”

Volante is a pioneer in instant/real-time payments (RTP). Its collaboration with BNY Mellon provided the bank with the core technology to enable the first real-time payment in the U.S in 2017, and Volante powered the first end to end instant payment in the Kingdom of Saudi Arabia in 2020.

Within the past year, organizations ranging from global banks like Citi and Goldman Sachs to regional leaders like Banorte and TAB Bank have selected Volante as their payments modernization partner for real-time/instant payments, cross-border payments, ISO 20022 migration and cloud Payments as a Service.

Most recently, the PaaS fintech launched The Volante Experience, an important step in the democratization of payments processing, helping clients evolve to the cloud with full pricing transparency and at a fraction of the cost and time of legacy payments onboarding approaches.

“As an innovator in fintech, we’re setting a high bar for excellence, and that improves and elevates the entire industry. It’s telling that our customers, some of whom are the largest banks in the world, are also investors in Volante. You can’t get a better customer recommendation than that,” said Vijay Oddiraju, CEO, Volante Technologies.

“However, it’s not just about technology,” he continued. “There are the ethical imperatives of an industry that manages access to capital in an age of great global inequality. A huge percentage of the global population are unbanked. Even where there is no physical bank presence, the distributed services in our cloud-native solutions can serve all of these individuals in the most remote places.”

For more information about the rankings, visit here and follow Volante on Twitter and look for #IDCFinTechRankings.

About Volante Technologies
Volante Technologies is the leading global provider of cloud payments and financial messaging solutions to accelerate digital transformation. We serve as a trusted partner to over 100 banks, financial institutions, market infrastructures, clearing houses, and corporate treasuries in 35 countries. Our solutions and services process millions of transactions and trillions in value every day, powering four of the top five corporate banks, 40 percent of all U.S. commercial bank deposits, and 70 percent of worldwide card traffic. As a result, our customers can stay ahead of emerging trends, become more competitive, deliver superior client experiences, and grow their businesses through rapid innovation. To learn more, visit volantetech.com. Follow us at linkedin.com/company/volante-technologies and twitter.com/volantetech.

The post Volante Technologies Named to the IDC FinTech Rankings 2021 appeared first on PaymentsJournal.

Square has announced the debut of the Square Card in Canada, giving merchants real-time access to funds processed through the Square platform. In a typical merchant services account used by businesses to accept credit and debit cards from shoppers, transactions are processed overnight and the funds deposited into the merchant’s bank account the following day. In a traditional, stable, supply chain environment where steady suppliers are invoicing merchants for inventory purchased, merchants have adequate cash flow from daily sales to pay for supplies and inventory as invoices become due. 

As the COVID-19 global pandemic continues to interrupt almost every link in the supply chain in new and unexpected ways, merchants frequently find themselves shopping online to source inventory and supplies that are unavailable through their regular supplier. In this scenario, merchant must wait for funds to be fully available in their business account before using their debit card to make these purchases, effectively creating delays in their cash flow.

The Square Card funds are available in real time to the merchant, just like accepting cash enables the merchant to immediately make cash payments to others. For merchants using external bank accounts, Square offers the option of linking that bank’s debit card for real-time payments, much the way the Square cash App facilitates real time P2P payments.

While this new feature gives unparalleled utility to merchants using Square to process their card transactions, it also creates a very tight risk tightrope for Square to manage. Merchant processors use the traditional overnight clearing window to run risk algorithms that flag transactions that might be fraud or otherwise prone to being charged back. Funding to the merchant for those transactions is suspended until further due diligence can be completed to ascertain the legitimacy of the charge. Paying merchants for sales in real time means that Square is sacrificing most if not all of its margin for error here. 

In this context, the more disciplined Canadian market is a good pilot region for this program. Merchant processors and acquirers continue to battle growing merchant fraud in the US region, so it will be interesting to see if Square technology can make a real-time funding product viable in the US market.

Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group

The post Square Card Debut Gives Canadian Merchants Real-Time Fund Access appeared first on PaymentsJournal.

To keep up with customer expectations, institutions must modernize their payments strategy and ensure security, speed and ubiquity. Real-time payments (RTP) meet all three of these expectations as a critical facet of a modern payment hub model.

Naturally, banking executives named real-time payments as their second-highest payments priority in CSI’s 2021 Banking Priorities Executive Report, after P2P, a related technology. And as the FedNow pilot program continues, the future looks bright for RTP and the often-overlooked possibilities it will open.

Modernizing with Real-Time Payments

Real-time payments go by various names, including instant payments, immediate payments and real-time gross settlements. They operate on a separate network from ACH and wire to enable consumers and businesses to conveniently send and receive immediate fund transfers, 24×7.

Real-time payments follow ISO 20022, an international standard for financial business process communications. These data-rich payments process on an open-loop system, with an inter-bank or account-to-account payment posted and confirmed in moments. And unlike PayPal, Venmo and other platforms, RTP immediately moves money from Bank A to Bank B.

“Financial institutions have real-time and faster payments as a key element to their payment modernization roadmap. It’s about staying competitive and retaining key clients, but it’s also about creating money movement efficiencies and driving new revenue streams,” said Sarah Grotta, director of Debit and Alternative Products Advisory Service at Mercator Advisory Group. “Currently, most activity is centered around person-to-person transactions, payroll and gig economy disbursements and account-to-account transfers. Bill payments and business-to-business activity are just beginning to see traction.”

Looking Ahead to the FedNow Service

In 2019, the Federal Reserve announced that it would enter the payments arena to ensure a nationwide infrastructure for instant payments that encourages competition and innovation and avoids a single point of failure. Its FedNow Service aims to provide secure, fast and ubiquitous payments that all financial institutions can easily access 24×7.

The FedNow pilot program kicked off in Jan. 2021, with many institutions and stakeholders like CSI joining the effort to support the development, testing and adoption of the service. As proposed, FedNow will offer uninterrupted, immediate payments with enhanced security features by 2023.

At launch, FedNow will only process domestic credit transfers and require adequate funds or credit to settle accounts. However, the Federal Reserve has also made clear that banks can leverage the FedNow Liquidity Management Tool (LMT) as needed.

The request, approval and settlement of payments should all occur within moments. To the consumer, it will seem as simple as initiating payment that either processes or doesn’t. As a result, real-time will simplify B2B transactions, P2P, payroll, AR/AP processes and more.

The Federal Reserve’s FAQ states that the initial release will also offer “fraud prevention tools, the ability to join initially as a receive-only participant, request for payment capability, and tools to support participants in their handling of payment inquiries.”

Managing Risk with the FedNow Service

But as with other forms of payment, there are some caveats. Due to the instant nature of these payments, they are irrevocable. Once the settlement message goes out, the transaction is final.

Institutions must therefore stay vigilant and leverage either FedNow’s optional fraud prevention features or other fraud mitigation tools and techniques. Only a good faith request can resolve an error, but even with that request, institutions risk damaging both their credibility and the user experience.

Since funds move in real time, institutions must stop fraud beforehand by authorizing only the right ones, because once a fraudulent transaction is processed, it’s already too late. An enterprise fraud approach with a complete picture of customers and their behaviors can help guide this screening process.

The silver lining to this risk is that real-time payments can find system weaknesses more quickly. Fraud will often become evident faster, which will illuminate when to shore up defenses.

Transforming Real-Time Payments with Directories

Although the Fed will first focus on the service’s core functionality for a speedy and efficient rollout, the Federal Reserve is phasing in features and functionality over time. FedNow’s phased approach opens the door to exciting possibilities, like alias-based payments that list consumers by more approachable “lookup criteria.”

With directories, customers don’t need to know specific account information to search for someone and securely process payments. Directories leverage APIs to enable customers to self-enroll and identify recipients by searching for their user IDs, email, phone number, alias and picture.

The process is old hat to consumers who have used closed-loop directories through third-party P2P apps. However, these new directories would revolutionize the user experience with their financial institution’s digital banking platform, and offer the convenience that many expect.

The Federal Reserve must first weigh a host of legal and operational considerations regarding alias-based transactions. But its statements on their possibility are promising. In fact, the Fed has gone so far as to express interest in connecting one or more existing directories or building its own directory to facilitate nationwide reach.

Directories will likely be a primary focus for future releases and serve as a driver of an improved user experience. Until then, the Federal Reserve will not preclude participants from “using alias-based payment services that are unaffiliated with the FedNow Service.”

Continuing the Real-Time Payments Journey

Effective implementation and incorporation of real-time payments into institutions’ payments portfolios will require a careful watch of the industry. Upon the FedNow’s launch and beyond, real-time payments will symbiotically grow alongside innovations in core banking, digital technologies and security. Institutions that haven’t already should plan for how they will exist alongside their existing payment portfolios.

For a deeper dive into real-time payments and CSI’s take on a modern payments model, refer to this on-demand webinar.

The post Preparing for the Future of Real-Time Payments appeared first on PaymentsJournal.

The American Bankers Association recently asked the Federal Reserve to achieve a state of interoperability with The Clearing House RTP network. They are asking for technical interoperability which will not happen in my mind, at least not at the network level. Large banks and processors will have to do the dirty work to make this happen. They are also asking for a common set of rules and applicable regulation which I believe must happen to achieve a reach that gets close to ubiquity.  A short but important article ran in the American Banker with further explanation:

In a comment letter to the Federal Reserve today, the American Bankers Association offered feedback on a recent proposal to revise Regulation J to accommodate the new FedNow Service, which is expected to go live in 2023.

The proposal would create a new subjection in Regulation J that will apply solely to FedNow Service transactions.

In the letter, ABA called on the Fed to strive towards interoperability with the TCH Real Time Payments Network and, at a minimum, to adopt policies and procedures that are consistent with existing industry practices. ABA also recommended that the definition of “immediately” in Reg J remain undefined, at least until the FedNow Service conducts a technical assessment of what would be reasonable.

ABA also recommended that the Fed change its intended plans to apply Electronic Funds Transfer Act and Uniform Commercial Code Article 4A to consumer transactions with any inconsistencies to be governed by the EFTA, emphasizing that EFTA should apply only to consumer transactions. The proposed method would create legal gaps in the areas of finality, acceptance, and allocation of liability among participating banks, ABA said. The association added that any gaps created by removing the application of UCC 4A to these transactions can be better addressed in FedNow Service Operating Circulars, which ABA also urged the Fed to make subject to public notice and comment.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post A Call for Real Time Payments Interoperability in the U.S. appeared first on PaymentsJournal.

This American Banker posting discusses a new instant payments development in Canada, whereby a number of banks are rolling out a more robust e-Transfer system service (e-Transfer for Business) that includes ISO 20022 messaging and added security features that allow for real-time settlement. The new product is targeting additional volume from businesses that continue to use paper checks and more expensive wire transfers, but who have not found the existing e-Transfer system to be a compelling tool. This new system is rolling out one year ahead of the expected Canadian Real Time Rail instant payments system. We had no previous knowledge of this development.

‘Thirteen of the country’s financial institutions are launching an instant business-to-business payments service more than a year ahead of the rollout of the country’s fast payments system, the Real-Time Rail….The companies will run the service on the existing Interac e-Transfer platform, but they’ve added features such as fraud vetting and the global ISO 20022 payments messaging standard in an effort to wean more companies off paper checks and wire transfers. The new features are meant to address the limitations of e-Transfer, a next-day settlement system which is popular with consumers but hasn’t achieved significant business adoption.’

The new system service increases the transaction limit from the current C$10,000 to a new limit of C$25,000.  Apparently, this is deemed to be sufficient to attract the expected volume jump that they seek. We can say that the original $25,000 transaction limit on The Clearing House’s RTP did not stimulate great payables volume, so that was increased to $100,000 last year. We now expect that limit to be increased even further, so this contrasts a bit with the e-Transfer for Business expectation.  Nonetheless, this provides another option in Canada, and once we get a briefing will know a bit more about settlement and so forth.

‘“The new service enables real-time reconciliation and automation of account payables and receivables and working capital as well as enhanced payment tracking from end to end,” Siromani said….Another important aspect of the new service is the automation of risk assessment to speed up payments. Although traditional Interac e-Transfer transactions are near-real-time, sending financial institutions may delay e-Transfer payments depending on the risk profile of a transaction….“Interac and participating [financial institutions] use a risk-detection model to analyze real-time payments fraud risks before e-Transfer for Business transactions are sent,” Siromani said. This enables all e-Transfer for Business transactions to be processed in real-time with funds arriving in recipients’ accounts within seconds….RBC is running an educational campaign about the service, targeting markets such as insurance firms that need to optimize their claims payments, with documents and payments being sent together. “Over time, as suppliers and buyers get to know e-Transfer for Business, there will be a network effect in terms of adoption, with users bringing in new users,” Siromani said.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post New Canadian B2B Payments Network Offers Test Case for U.S. appeared first on PaymentsJournal.

This yahoo!finance posting discusses a recently conducted phone survey of payment operations specialists in mid-tier US banks and credit unions, in which findings suggest that payment volumes executed through The Clearing House’s RTP system are poised to substantially increase during the coming year. We have been tracking developments around RTP since its launch in late 2017 as the first new U.S. payments rail in 40 years. In our most recent member research covering all faster payments and real-time use cases, we projected about 55% CAGR in general faster payments from 2020-2024, with an even higher rate of growth for RTP.  This referenced survey, which was commissioned by Volante Technologies, an enterprise payments technology company based in New Jersey, indicates that many of the smaller and mid-sized institutions are finally freeing up resources to connect to RTP. 

‘Volante Technologies, the global leader in cloud payments and financial messaging, today revealed findings from its payments modernization survey aimed at mid-tier banks and credit unions in the U.S. with assets between USD 2.5B and USD 25B. The results show that real-time payments connections are expected to triple within the year, and that cloud Payments as a Service (PaaS) is a growing industry priority….The study, conducted in Q1 of 2021, samples a sizeable portion of the mid-tier market segment. It highlights the dire need for improved productivity to support rising payment volumes and the complexity of maintaining multiple payment platforms. The challenges span all payment types, from domestic wire, real-time, and ACH to cross-border payments.’

The full survey can be downloaded from the referenced article through a provided link. There are a number of findings besides the RTP data that interested readers can review. One perhaps surprising finding is that the upcoming ISO 20022 conversion for Fedwire and CHIPS is only mentioned as a challenge by only 10% of respondents, which seems rather low to us. This could mean that it is not yet top of mind since the conversion dates have been delayed by COVID. It is also interesting that although 15% of respondents are already connected to RTP and 45% expect to do so within the next year, fully 40% of respondents had no plans to connect. This could mean that many are waiting on the FedNow launch in 2023 or that they can’t currently justify a business case for real-time payments. The survey also indicates a high interest in the PaaS delivery model, which again reinforces an increasing bank movement towards cloud-based operations. Worth a look see.

“Financial institutions are seeking to streamline their operations to prepare for the eventual prevalence of real-time 24×7 payments and the increased operational complexity this will bring,” said John Farrell, SVP Global Product Management, Volante Technologies. “There is a strong desire for capabilities related to digital transformation, ranging from increased automation to improved reporting and lower operating costs.”

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Volante Technologies Finds U.S. RTP Connections Poised to Triple Within the Year appeared first on PaymentsJournal.

This brief piece in Vietnam+ is a follow-on to several other previous announcements about citizens across the ASEAN region having the ability to make cross-border payments more easily.  In this case, Indonesia and Thailand are launching a cross-border pilot that allows the use of a QR code to have a real-time payment made between a merchant in Thailand and a consumer in Indonesia, and vice versa.

There have been several of these categorical initiatives over the past year or two, which are part of a planned effort to improve commerce between ASEAN nations.

‘In a statement released on August 17, the BI said under this linkage, consumers and merchants in both countries will be able to make and accept instant cross-border QR payments for goods and services.…It highlighted that this connection is the first that links the retail payment system operators in both countries, and also marks a key milestone in the ASEAN Payment Connectivity initiative, aiming to promote financial integration in the region.’

The use of mobile devices for payments and QR codes has really been pioneered in the Asia Pacific region, most specifically in China but also spreading across ASEAN as well (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam). 

We have written about this in member reports and continue to track developments, which are generally tepid in North America.

‘At this stage, users from Indonesia are now able to use their mobile payment applications to scan Thai QR Codes to make payments to merchants all over Thailand. Likewise, users from Thailand are now able to use their mobile payment applications to scan QRIS (Quick Response Code Indonesian Standard) to pay for goods and services at merchants in Indonesia and also use this service for their cross-border e-commerce transactions….The full commercial phase will be launched in the first quarter of 2022.  During this phase, more participating banks/non-banks are expected to join.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Indonesia, Thailand Introduce QR Codes for Cross-Border Payments appeared first on PaymentsJournal.

The U.S. has worked hard to make advances in the real-time payments (RTPs) marketplace, with access to Zelle and TCH, as well as FedNow arriving in the near future. However, only a small number of financial institutions (FIs) are currently enrolled in a RTPs system.

In a recent Banking Exchange hosted webinar, Real-Time Payments in the U.S. Market: Speeding Up or Slowing Down, experts discussed RTPs in the U.S. and how they can catch up to other wealthy countries globally.

What are RTPs

According to Gareth Lodge at Celent, an RTP is “an inter-bank, account-to-account payment posted and confirmed to the originating bank within one minute.” It operates on an open loop system, with the funds clearing and settling in the customer’s bank account.

Processors like Cash App, Venmo, and PayPal are not examples of RTPs because they operate on closed loop systems. They are often more limited in reaching to the end account, though lesser now that new, technology-driven trends have come to market. People often confuse these apps for real-time, but they actually settle to the demand deposit account (DDA) through the ACH rails. It often appears to the consumer that the funds are settled immediately, but the concrete dollars are not moved right away.

RTPs break the barriers of systems like B2B and P2P because payments can be sent from anyone to anyone, regardless of the FI where the account resides. When processing any payments, FIs should consider the backend money movement, customer service, and liability.

RTPs in the U.S.

While closed loop services like push-to-card and ACH Same Day offer many convenient services, RTPs have expanded capabilities that are not limited to particular rails or use cases. Out of the largest 20 countries in the world, the U.S. is behind in the market in terms of RTPs and is the only country without widespread adoption of it.

Although many U.S. banks have started on their RTP journey, a large number still risk falling behind. Those who have already adopted RTPs into their banking systems have seen a significant increase in its usage due, in part, to the ongoing COVID-19 pandemic.

FIs and RTP success

Lodge also offered five tips for banks and credit unions (CUs) to ensure RTP success:

1. Don’t wait! When FIs come across products and solutions that seem promising for their companies, it might be best to take what is being offered. For example, waiting for FedNow instead of using TCH might not be the better choice if clients can benefit from those use cases now.
2. Manage it as a product RTPs are different from other payments and will likely be foundational to businesses for the foreseeable future. It is not ACH; it is a product, and the focus should be on use cases. Good funds, 24/7 availability, and single message are components of RTPs that add value for clients.
3. Think holistically If a bank does not offer RTPs, that business might be diverted to another FI. Many business clients go beyond the money movement, and for them, it is not just about making faster payments. It is also about the data that travels with the payment. ISO 20022 has created a realm of possibilities for FIs to take advantage of.
4. New normals RTPs happen 24/7, so systems need to operate in the same fashion. Also, RTPs do not increase fraudulent activity, but they do expose the faults in the system more quickly.
5. New business models real-time can help create new product innovations. The most successful banks globally are those who are transparent with their customers, breaking down the meaning of RTPs and then figuring out the best use cases for them.

Takeaway

Rather than focusing on slight reduction in the sales volume and revenue or market share of existing products that could come as a result of RTP implementation, FIs should allow their payments platforms to grow in multiple directions. Commercial enterprises and consumers are expected to start conducting transactions more frequently using RTP rails. This growth in volume makes FIs more attractive to commercial entities looking to leverage RTPs for a plethora of use cases including gig economy or contract employees and real-time traditional payroll.

While the U.S. was late to the starting line, there is still a chance for them to take the lead. Fintech partnerships can provide FIs with the tools needed to develop and move the process along faster. The interest is undoubtedly out there, and some lucky institutions are going to be amongst the first to get it right.

The post Does the U.S. Have What It Takes to Excel in Real-Time Payments? appeared first on PaymentsJournal.

JP Morgan Chase announced today that they are launching a request-for-pay (RfP) solution with real-time payments. This solution allows a recipient to send a message to a payer and request payment for an invoice or other obligation. The payer can respond and upon that response, authorize funds to be transferred immediately. 

The consumer bill pay market is where many in the industry suspect RfP will take off, but the product Chase is rolling out is focused on the corporate market. Likely because corporates will pay for these transactions where fees are limited in consumer use cases.  Here’s an excerpt from the bank’s announcement:  

Global payments giant JPMorgan Chase & Co has launched a real-time payments option that it hopes will increase its edge in the financial industry’s battle to handle more of the surging volumes of global digital payments.

“Our job is to give multiple different payment types so corporates and merchants can provide the right options to their customers,” Bhathawalla said.

The service went live last month and began a pilot phase with its first corporate client, a fintech company, last week. Executives declined to name the company.

JPMorgan envisions clients like a gas distributing company using the service to get paid faster for filling up a gas station’s supply tanks, Bhathawalla said.

Currently, that kind of company may have to wait a week to get paid. A digital payment could happen in less than 30 seconds, he said.

One of the first banks to participate in The Clearing House real-time payments network in 2017, JPMorgan processes about 12 million transactions a month. The business is part of the wholesale payments division, which contributes roughly 10% of JPMorgan’s revenue.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Chase Launches a Request for Pay Service. Will Others Soon Follow? appeared first on PaymentsJournal.

CUNA, the Credit Union National Association, is urging the Federal Reserve to throw more resources toward speeding up the development and launch of the FedNow real-time network. Many credit unions object to joining The Clearing House’s RTP network, not because of its capabilities but because its ownership is comprised of large banks.  As RTP, launched in 2017, continues to expand in transactions processed and clients, credit unions eager to join the real-time payments bandwagon want to start catching up. 

Here’s the letter that CUNA sent to the Fed.

This is what CUNA had to say about the matter on their website, CUNA.org:

CUNA supports the Federal Reserve’s ongoing development of the FedNow service, a 24x7x365 real-time payments network, it wrote the agency this week. CUNA filed its comments in response to potential modifications to Federal Reserve policy on payment system risk to expand access to collateralized intraday credit, clarify access to uncollateralized credit, and support the deployment of he FedNow service.

“Credit unions look forward to working with Board staff as the network is developed. We encourage the Board to use all the resources at its disposal to speed up development of FedNow so that new products and services can be brought to the market,” the letter reads. “We also look forward to continuing to work with the Board as it proposes changes to regulations and operating procedures to implement FedNow and the FedNow Liquidity Management Tool (LMT).”

CUNA also encourages the Fed to:

Continue to work with credit unions and other financial institutions as adjustments may be necessary as FedNow becomes operational.

Revise the daylight overdraft and the penalty fee calculations for all institutions in order to reflect the 24-hour business day in a manner that results in no overall increase in fees.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post FedNow, the Faster Payment Network Can’t Come Fast Enough appeared first on PaymentsJournal.

The demand for real-time payments is on the rise. With that increase in demand comes an inevitable rise in disputes. While managing disputes is relatively straightforward for card-based transactions, that is not the case for real-time payments. As consumers continue to flock towards real-time platforms, the need for better dispute processing is becoming more apparent.

To learn more about the need for real-time payment dispute management, PaymentsJournal sat down with Cheryl Fitzgarrald, Senior Project Manager at BHMI, Nathan Churchward, Head of Product – Emerging Services at Cuscal, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

Real-time payments are gaining traction in the U.S.

In the United States, there are a few networks that can be used to facilitate real-time or near real-time payments, including The Clearing House’s RTP Network, Mastercard and Visa push payments, and the Zelle network.

There are several use cases seeing widespread adoption by consumers and experiencing rapid growth: B2C activity for emergency payrolls, payroll adjustments, gig worker payments, account-to-account transfers, and P2P real-time transactions.

“From what we’re hearing regarding adoption rates and learning about what’s happening in those various segments that do provide some [transaction] reporting, we believe that the growth rates for real-time payments in total are somewhere in the range of 40% to 50% year-over-year, and we’re certainly seeing some pockets that are growing faster,” said Grotta. Looking into the future, even more real-time payment growth and new use cases should be expected.

Real-time payment vs. traditional card-based transaction disputes

P2P payments represent a real-time option for transferring funds between parties but settling or moving funds between parties in P2P transactions differs greatly from settling historic payment transactions using credit, debit, and checks.

With historic payment methods, the payer’s financial institution sends money to a card network or other FI via a settlement method that may take multiple days to complete. While this does result in a longer wait time before being able to access funds, the disputes process is more well-established.

“Traditional payment methods have been available for decades. As a result, the disputed transactions for these programs are very well-defined, and updates to the programs are released at set intervals. Most people using these payment methods understand the risk and financial liability involved and have a high degree of trust that disputes will be resolved,” explained Fitzgarrald.

With P2P payments, transferring funds between the payer and payee is much faster—nearly instantaneous. The challenge here is that it may take longer for a consumer to recognize a transaction as fraudulent, which increases the risk of not being able to settle a dispute.

“P2P is relatively new in the marketplace, and the dispute regulations and procedures being created by the different P2P networks are in the early stages of development. Their update cycles are not well-defined. People using these payment methods may not be aware of who has the financial liability for the dispute until they are involved in one,” Fitzgarrald added.

In the U.S., the total time required to research and return P2P funds is similar to that of traditional methods, even though P2P money transfers occur in near real-time. Fortunately, this does not have to be the case. For example, certain payment providers in Australia are successfully resolving disputed New Payments Platform (NPP) transactions close to the time the actual payment occurred.

Australia’s Cuscal: A real life success story for real-time dispute management

One organization that has stepped up to the challenge of real-time payment dispute management is the Australia-based payments provider Cuscal. Cuscal provides processing and settlement services to more than 50 banks in Australia, from small credit unions to some of the largest banks in the country.

Launched in 2018, Australia’s NPP, is a faster payments system that makes near real-time funds availability a reality. NPP is owned by 13 Australian banks, including Cuscal, and is a distributed model with the payment clearing and settlement infrastructure operated by those participants. Cuscal has established itself as a leading enabler of real-time payments, processing almost 20% of all NPP payments.

As one of Australia’s top payment-solution providers, Cuscal has successfully faced the challenges of transforming its back office to address dispute management for real-time payments. When establishing the rules for NPP, committee members made the decision that all dispute investigations and payment returns must be handled using the ISO messaging standard as close to real time as possible.

“This was a bold move, as this level of integration and high-bar expectation hadn’t been attempted in other payment systems. The rules include having a system that can accept an investigation request in real time, in line with the principles of being able to accept a payment in real time,” said Churchward. Beyond messaging, Cuscal needed to have the ability to enable its clients to meet the obligations for responding and actioning.

“The way we provide a self-service managed process for disputes is now one of our competitive advantages and has saved our clients from considerable development and operational overheads compared to others who have not delivered the same level of servicing or integration to meet their real-time obligation,” he added.

Improving dispute management flows with Concourse – Disputes

Companies like Cuscal have selected BHMI’s Concourse Financial Software Suite to transform their back offices and meet the demand for real-time payments. One of the modules within Concourse, Concourse – Disputes, can be used specifically to manage real-time payment disputes.

“Concourse – Disputes is a workflow management system that manages the dispute’s lifecycle from the initial claim entry to final resolution. The system can manage disputes from both an issuer and an acquirer perspective. For example, it provides real-time loading and viewing of transaction history and disputes related to any type of electronic payment. This makes it easy for companies to quickly research transactions, manage disputes, and track all dispute activity in real time,” explained Fitzgarrald.

BHMI goes above and beyond by configuring NPP-specific dispute plans as new updates come out, ensuring Cuscal can handle all disputes in a compliant manner. But that’s not all. “One other reason I want to mention that makes Concourse so well suited for real-time payments is that it provides direct connectivity with the payment networks’ dispute systems,” added Fitzgarrald.

Concourse also allows Cuscal to systematically send and receive information directly from Visa VROL, dramatically speeding up and automating the communication process between Cuscal and the payment networks. 

The time to modernize legacy dispute systems is now

Despite the rising demands of the modern world, many companies still rely on back-office dispute systems that were built decades ago and not designed to handle newer payment methods like P2P. “For these companies, an option is to transform their outdated systems with a nimble and flexible solution,” advised Fitzgarrald.

Another suggestion is to increase the use of intelligent workflows to process disputes and reduce manual processing as much as possible. “When you consider the negative impact that disputes have on the customer experience, implementing processes that give control to clients to understand the status [of their dispute] and take action themselves has a huge payback in customer satisfaction and retention,” concluded Churchward.  

The post Indisputably Different: Disputes Processing for Real-Time Payments appeared first on PaymentsJournal.

BHMI, a leading provider of payments software and creator of the Concourse Financial Software Suite®, announced that Cuscal Limited, Australia’s leading independent provider of payment solutions, will be utilizing BHMI’s Concourse solution to support the needs and requirements for Australia’s New Payments Platform (NPP) upcoming PayTo initiative, which provides customers with enhanced visibility and control over their payment options.

Launched in 2018, NPP is Australia’s real-time payments system that allows money to move between different financial institutions NPP-connected accounts in seconds. Currently, the system supports credit or “push” payments that customers initiate themselves from their accounts. However, with PayTo, users will now also be able to authorize third parties that can initiate payments on their behalf at the NPP network level.

Cuscal enables NPP payment processing and settlement services for more than 50 banks and payment service providers. As part of its current, ongoing back office support for Cuscal’s NPP settlement and disputes processing, BHMI’s Concourse will help extend these functions to the new PayTo capabilities. This will include new, enhanced reporting functions and support for disputes related to PayTo investigations and claims that pass through Cuscal’s API connection with the NPP system. Like current NPP transactions, PayTo functions must align to ISO 20022 standards that provides a common messaging language for end-to-end payments from an individual to a business. Concourse will also continue to support this messaging between the authorized third parties and financial institutions under the new capabilities.

“When it comes to real-time disputes resolutions, it’s not just about being fast – you have to be certain,” said Nathan Churchward, Head of Product, Emerging Services for Cuscal Limited. “BHMI’s Concourse helps ensure that certainty and provides the flexibility necessary to support the evolving needs and functionality of the NPP platform and its users, like the developing PayTo initiative.”

“We are very pleased to continue our partnership and support of Cuscal and the NPP Australia platform,” said Lynne Baldwin, President of BHMI. “Concourse is a vital solution for our global clients like Cuscal, offering the configurability and flexibility to scale to their needs as they evolve. We look forward to helping them continue to deliver the best user experience for their clients through the NPP.”

About Cuscal

For more than 50 years, Cuscal has championed competition in banking and payments in Australia by leveraging its scale, banking knowledge, technical background, and regulatory expertise. Cuscal specializes in delivering reliable and secure solutions that support the flow of transactional data between customers and enterprises, ensuring fair access to the Australian payments and banking ecosystem. To learn more about Cuscal, please visit www.cuscalpayments.com.au.

About BHMI

BHMI is a leading provider of product-based software solutions focused on the back office processing of electronic payment transactions. The company is best known as the creator of the Concourse Financial Software Suite® – a unique integrated collection of back office products that allow companies to adapt to the rapidly changing world of payments quickly and easily. Concourse is a cohesive and integrated package, including settlement, reconciliation, fees processing, and disputes workflow management, that reduces the cost and complexity of back office processing. Concourse’s continuous processing, near real time architecture and powerful rules engine is ideally suited for new payment initiatives like P2P and enables companies to perform back office processing for any type of payment transaction. To learn more about BHMI, please visit www.bhmi.com.

The post BHMI and Cuscal appeared first on PaymentsJournal.

Instant’s technology empowers millions of working Americans to receive pay immediately for hours worked, promoting financial flexibility and well-being

ATLANTA, July 20, 2021 /PRNewswire/ — InComm Payments, a leading payments technology company, today announced that it has made an undisclosed investment in Instant Financial, a leading provider of fee-free earned wage access (EWA) solutions. Established in 2015, Instant is a financial wellness company that helps employees bridge the gap between workday and payday by allowing them to access a portion of their wages immediately after their shift, simply with the tap of their smartphone.

The employment landscape remains uncertain for a large portion of the population, with upwards of 70% of millennials living paycheck to paycheck* – leaving them unsure if they’ll get paid before bills are due, or whether they’ll have to resort to high-interest payday lenders. With Instant’s EWA solution, employees have the option to access some of their own money after each shift, bypassing the wait for biweekly pay periods.

For employers, Instant is a proven solution to help organizations attract and retain talent by offering immediate access to wages and allowing staff to assume complete control over their finances. By reducing financial stress and empowering financial freedom, Instant’s solution can positively impact key organizational HR performance metrics. In fact, Instant’s clients have seen turnover and absenteeism decrease by 20-30%.

“In today’s new economic climate, organizations seeking to staff up their workforce are faced with changing employee expectations,” says Tal Clark, CEO of Instant Financial. “Workers are seeking ways to get quicker and easier access to their hard-earned wages, and Instant Pay offers this at no-fee to both employers and employees, without disrupting their existing payroll processes.”

“We’re excited to invest in a company that is transforming the modern economy by making resources available for employees when they need it the most,” said Adam Brault, Senior Vice President of Financial Services at InComm Payments. “Instant helps businesses attract and retain the best talent.”

To learn more about the financial wellness solutions that Instant provides, visit www.instant.co.

*PYMNTS.com | The Paycheck-to-Paycheck Report: The Impacts Of A Changing Economy, June 2021

About InComm Payments
InComm Payments is a global leader in innovative payments technology. Leveraging dynamic technology and proven expertise, InComm Payments delivers enhanced end-to-end payment platforms and emerging financial technology solutions that help businesses grow across a wide range of industries including retail, healthcare, tolling & transit, incentives, mobile payments and financial services. By enabling omnichannel connections to an ever-expanding consumer base in an increasingly digital ecosystem, InComm Payments creates seamless and valuable commerce experiences across the globe. With more than 29 years of experience, over 500,000 points of distribution, 402 global patents and a presence in more than 30 countries, InComm Payments leads the payments industry from its headquarters in Atlanta, Ga. Learn more at www.InCommPayments.com.

About Instant Financial

Instant Financial is leading the charge to provide financial freedom and wellness to millions of workers in the United States through its earned wage access solutions. By enabling employers to allow employees to access their daily wages immediately after their shift, Instant Financial helps organizations improve retention and reduce absenteeism while helping employees take control of their financial freedom by bridging the gap between work day and payday. Learn more about Instant Financial at www.instant.co.

The post InComm Payments Invests in Instant Financial, Establishes Strategic Partnership Supporting Earned Wage Access appeared first on PaymentsJournal.

Institutions not offering a person-to-person (P2P) app today know that P2P transactions are now mainstream and a growing segment of consumers’ financial activity. But some have stayed away from offering Early Warning’s Zelle due to the implementation and transaction expense, instead having their customers and members use fintech solutions like Square’s Cash App and PayPal’s Venmo. They aren’t crazy about turning over an important transaction like this to a fintech, but the financials are tough for them to ignore.

We are starting to see more solution providers in the market offering an alternative including Payveris that today announced the addition of real time payments to their  P2P solution on their MoveMoney Platform. They offer a solution that can reach all consumers and at a lower cost.  Financial institutions also can brand the P2P white-label service. 

When P2P apps first launched more than 10 years ago, they weren’t adopted as quickly in part because consumers weren’t sure who they could send and receive funds to and from. The common Zelle brand that Early Warning developed was central to P2P’s growth. Now, with most individuals having multiple P2P apps loaded on their mobile phones, the brand might just be less important to consumers. 

You can read Payveris’ press release here, and below is an excerpt:

Payveris, the fastest growing money movement provider in fintech, announced today that its MoveMoney Platform now delivers a real-time P2P solution that rivals Zelle, Venmo, PayPal, and Cash App. The new service enables financial institutions’ customers to instantly send money to anyone with a U.S. bank or credit union account using the recipient’s mobile phone number or email address—no special app required. The platform offers financial institutions a truly frictionless solution that supports their customers’ journeys to financial freedom.

Available via API, SDK widget or SSO integration, Payveris’ real-time P2P service uses the debit card rails

for real-time funding and crediting transactions, enabling Recipients to receive money directly to their

bank or credit union account instantly. Payveris‘ multi-layered approach to fraud management has been

instrumental to helping financial institutions mitigate fraudulent transfers.

Financial institutions can deploy the service as a stand-alone solution, integrate it into a unified money

movement hub experience, or incorporate the service into a bill pay experience as an alternative to

sending checks to consumer and small business customers.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post More P2P Options for Financial Institutions Emerge appeared first on PaymentsJournal.

If you need an indication that the global card networks are relying less and less on cards for future growth, this announcement posted in ThePaypers certainly cements that idea. Mastercard and their tech partner Form3 now offer services to provide connectivity to the Faster Payments network in the UK. This service is being offered to financial institutions as well as Payment Service Providers (PSPs). 

I doubt that this will be offered in the U.S. as Mastercard would be stepping on too many partners’ toes including the large core processors and a growing number of fintechs. But expansion elsewhere around the globe seems probable.

Here’s the announcement:

Mastercard has partnered with Form3 to launch a real-time payments gateway service PayPort+, according to the official press release.

The solution which provides flexible access into the UK-based real-time payments infrastructure for Financial Institutions and Payment Service Providers. PayPort+, powered by Vocalink, a Mastercard company, and Form3, a technology partner, combines the benefits of cloud native technology with the high levels of security, availability, and operational services standards. Mastercard has selected Form3 as the technology partner for the implementation of its new PayPort+ platform.

PayPort was launched in 2016 to offer financial institutions, large and small, connectivity into the UK Faster Payments network. Through this next generation of PayPort+ these institutions will benefit from flexible connectivity options, including MQ, Restful APIs, and Microservices. PayPort+ is now live with two UK financial institutions, including Nationwide Building Society, processing real-time payments into the UK Faster Payment service.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Mastercard Launches a Service to Integrate Clients to Real-Time Payment Networks appeared first on PaymentsJournal.

Payment products are the connective tissue of financial institutions, serving as a major source of core revenue. But what are the business and technology priorities and market dynamics that drive this array of payment services? To answer that question and more, Alacriti sponsored a Mercator Advisory Report titled Payments Infrastructure Outlook: Real-Time Payments take the Lead.

For the report, Mercator Advisory Group surveyed 100 senior-level bankers using an online executive questionnaire designed in collaboration with Alacriti; 19% of respondents represented community banks or credit unions. The report provided insight into the opinions toward payments modernization held by senior leadership at banks and credit unions.

Some of the key points are highlighted below.

FIs recognize payments as a valuable revenue stream

Most executives surveyed for the report agree that consumer, small business, and commercial payments are important revenue streams for their businesses. Most also agree that their FI is working to be a leader in payments products and technology. A breakdown of the data around how executives view their institution’s payments products and services can be seen in the chart below:

The pandemic environment for the past year has been particularly favorable to payments modernization, with 79% of surveyed executives indicating that payments technology modernization efforts have been boosted by the pandemic. Additionally, the advent of real-time and faster payments is similarly turning up the urgency of infrastructure modernization.

This urgency corresponds with rising consumer expectations for new services, which will translate into new revenue streams for financial institutions. For example, most executives (87%) agree that real-time payments will drive new revenue streams and that they are already receiving client requests for this service. 

But how are these modernization efforts being accomplished?

The role of the cloud in IT strategy modernization

As financial institutions update payments processes, rapidly evolving business products and business lines add complexity to IT infrastructure. Even as executives are acknowledging the importance of payments modernization,, payment operation simplification is a dominant approach at 66% of financial institutions.

Cloud-based infrastructure is the overwhelming preference for achieving this simplification due to advantages including a superior end-user experience, quicker speed to market, pay-as-we-go, and implement-as-we-go possibilities. Overall, 90% of executives agreed or strongly agreed that cloud-based infrastructure is their current preference for payments IT infrastructure; 91% agreed that cloud-based infrastructure is their current preference for overall IT infrastructure.

Even so, previous sunk costs in proprietary and licensed IT can reduce interest in cloud implementation. Ultimately, cloud implementation will mainly lie in the hands of outsourcing partners.

Meeting the real-time need for real-time payments

Moving forward, real-time payments will be fundamental in payments technology modernization efforts. When asked about the future of real-time payments at their institution, the top two major use cases for real-time payments listed by executives are immediate payroll payment or gig economy payments (73%) and account-to-account transfers (71%).

As for how they anticipate real-time payments solutions to integrate at their institutions, executives overwhelmingly anticipate doing so through core providers and other third-party providers, building upon the key role of outsourcers in payments modernization. Ultimately, real-time payments are on the horizon and are a  compelling reason for financial institutions to modernize their infrastructure now.

The takeaway

The Mercator Advisory Group report sponsored by Alacriti digs significantly deeper into the trends and strategic implications regarding payments modernization, including:

• Banking executive attitudes toward the centrality of payments businesses and technological modernization efforts. 
• Perceptions toward simplifying payment operations and utilizing a cloud-based IT approach.
• Institutional outlooks and priorities on real-time and faster payments.
• The future of real-time payments and anticipated use cases across financial institutions.
• The critical role third parties will play in real-time payments integration.

Interested in learning more? Fill out the form below to access the Mercator Advisory Group research brief sponsored by Alacriti, Payments Infrastructure Outlook: Real-Time Payments Take the Lead.

The post Report: Modernizing Payments Infrastructure in the Era of Real-Time Payments appeared first on PaymentsJournal.

As the U.S. continues to adopt real time and faster payments, the question often is asked about how much to charge for the value that instant payments deliver. The current thinking is that consumers won’t pay for real time, meaning that most of the time they don’t see the value. The opportunity for suppliers of faster and real time payments to recoup the expenses of maintaining their services is through transaction fees charged to business users.

It is interesting then, that Venmo has just announced fee changes for their money movement services. In a disclosure update I received, Venmo announced that they are increasing the fee for instant transactions. This is the activity where a Venmo user wants to move money out of their Venmo account to another account through a debit push payment or the Clearing House RTP network:

Effective August 2, 2021, the fee for instant transfers will be 1.5% per instant transfer ($0.25 minimum fee, $15 maximum fee).

That’s an increase, up from 1% and a $10.00 maximum.

There was another fee introduced that is interesting.  Here’s the description:

Effective July 20, 2021, users who receive payments that are identified by senders as for goods and services will be charged a seller transaction fee of 1.9% + $0.10.

I wonder what “identified by senders as for goods and services” entails and how it will be applied equitably. That part was not disclosed. Does that mean that Venmo will employ AI to sift through the transaction descriptions that senders create? So, if I send my roommate money for my half of the rent and comment, “here’s my rent payment”, will Venmo think that is a payment to a landlord and charge my roommate? If I buy a lawnmower from my neighbor and say, “thanks for selling me your lawnmower”, will they too be changed what amounts to merchant fees?

There is still more work to be done before market pricing settles in.

Overview provided by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post The Monetization of Real Time Payments appeared first on PaymentsJournal.

COVID-19 hit every corner of the world, and people around the globe had to alter their everyday behavior in some way. The most noticeable change was limited day-to-day in-person interactions. As a result, people turned to technology for things like grocery shopping, cinematic experiences, and even banking.

With this sudden surge in an already tech-saturated society, the on-demand mentality of everyday consumers grew stronger. This way of thinking reached the world of payments, with apps such as Venmo and PayPal leading the charge. People began to expect immediacy when sending and receiving money.

To further discuss payments technology modernization and the importance of implementing real-time payments for banks and credit unions, PaymentsJournal sat down with Mark Ranta, Payment Practice Leader at Alacriti, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

Payments technology modernization

In late March 2021, Mercator Advisory Group worked with Alacriti on a survey of about 100 senior level bankers—19% of whom were from community banks and credit unions— focusing on their latest approach to payments technology, including real-time payments. One of the first questions asked is shown in the graph below.

The results of the survey show that nearly 80% of bank and credit union executives found that the pace of payments technology modernization picked up significantly as a direct response to the pandemic, while only 8% believe the pace has slowed down. This could be due to a number of factors, including the necessity to serve customers when branches were closed and a need for more automation in the back office to compensate for absent workers.

“For some financial institutions, this meant that they really focused their resources on modernization plans that they had already had in place, but were speeding up their efforts,” said Grotta. “And some took the opportunity to reprioritize payments modernization, maybe over some of the other activities they thought they were going to accomplish.”

With COVID-19 pushing payments technology years into the future, banks are seeing the importance of faster and real-time payments. To avoid being left behind, the majority of them are looking to accelerate their initial plans.

A market leader for real-time payments

There are over fifty real-time payments systems live globally, including those in the APAC, European, and Latin markets. Many of these systems have been around for over ten years, but the U.S. system is lagging behind. So, where are we in the market, and who can we look to for guidance?

“I would [suggest] all the financial institutions in the U.S. to look abroad, looking into the APAC region, and looking at what use cases their ecosystems are using is a good place to start,” recommended Ranta. “I mean, from where we sit, we know that the U.S. market is more complex and [has] significantly more financial institutions and more pieces to the puzzle than anyone else.”

The Asian market has a lot of experience and best practices to draw from, and understanding how they have transformed their business—not just technologically, but internally—into a digital-first experience will help underdeveloped markets catch up to speed.

The U.S. is only four years into its real-time payments journey, but the infrastructure being used within the industry is nearly forty years old, with the ACH Network and Fedwire systems having been introduced in the 1970s. It’s no surprise then that many financial institutions feel discouraged by new technologies when their back-office systems are still running on COBOL.

“These digital experiences are demanding and we’re seeing more and more fintechs, and more and more technology vendors, really come in and start to enter into the space that was once peripheral to the bank, and [are] now directly targeting bank-like products,” added Ranta.

Banks must take caution and consider the consequences of failing to act now, and move forward with an eye toward innovation.

Legacy systems vs. a cloud-based approach

Not too long ago, many financial institutions believed they would never put their infrastructure on the cloud. But as technology evolved, the stigma around public and private clouds has dissipated. Now, even the largest financial institutions around the globe are running applications on the cloud. 

“Now, not to say they’re going to move their core to the cloud right away,” explained Ranta, “but realistically, I think that argument of on-premises built/deployed versus cloud really is kind of in the rearview. I think even up to the largest institutions, they’ve realized the value that the cloud brings, and the idea of not having to think about these large investments that have to be made.”

When considering infrastructure, one must consider technical debt that comes along with legacy systems. Tech debt is an inhibitor of advancement and innovation because the cost of an on-premises deployment system is significantly higher than one that is cloud-based.

Ranta believes that cloud offerings are the way to go because the cloud can scale as demand on the infrastructure begins to grow. With the cloud, financial institutions can pinpoint specific customer segments that they want to target and execute the deployment of the software for a low-level investment.

“When you don’t have to go through these massive business cases and all the things that we as bankers look at in the industry…that old model of thinking about projects and thinking about how to do things [can be] put into a box and moved to the side [so that banks can] move forward to innovate,” concluded Ranta.

A real-time payments road map

A major hesitance of real-time implementation for financial institutions is the idea that their infrastructure has to be ripped out and replaced, but the ‘digital bank within a bank’ isn’t an uncommon trend. Ranta advised bankers to innovate first, then adapt their processors, and lastly, migrate their systems.

The process of migration is not a single project, and financial institutions can expect to be on a real-time payments journey for the next five to ten years. More importantly, however, banks should not hesitate to begin to incorporate these new technologies. “Most banks have sped up their transformation plans, and that’s a good thing,” assured Ranta.

Mass adoption is expected to occur at a rapid pace, with all of these services and real-time payments starting to hit their stride. Anyone looking to educate themselves on the services offered can go online, download an app, and begin to interact with it.

“There’s plenty of closed loop systems and applications that sit on top of our banks today that you can play with to understand these [services] better,” insisted Ranta. “Roll up your sleeves and try them out internally. Think about these as being able to look at individual use cases you could innovate in and around and then expand within the FI.”

The post Real-Time Payments Are a Speeding Train in the Payments Industry appeared first on PaymentsJournal.

We have been keeping track of faster payment developments in the U.S. and across the globe now for several years, and one of the things we have been expecting is the eventual combination of real-time and cross-border.  Things like the P27 initiative for Nordic countries (expected live in 2022),  potential experiments with CBDCs between two markets, the blockchain networks and other stablecoins/cryptos, as well as SWIFT gpi ambition to get into the real-time flows. 

In this announcement posted at Reuters, Thailand and Malaysia have launched an instant payment cross-border payment linkage using QR codes.  We pointed out a similar launch effort between Thailand and Vietnam just a couple of months ago. 

‘The central banks of Thailand and Malaysia launched on Friday a cross-border QR (Quick Response) payment linkage to enable consumers and merchants in both countries to make and receive instant cross-border QR code payments….The move is the first phase in linking the real-time retail payment systems of Malaysia’s RPP/DuitNow and Thailand’s PromptPay, they said in a statement.’

So this is a continuation of the collaborative effort between ASEAN nations and we should expect to see more.  The use cases seem to be retail oriented, but at some point these should be expandable between businesses to utilize in B2B cases as well.  So the advancements continue and southeast Asia seems to be a hub of progressive activity.

‘Users in Thailand are now able to use mobile payment applications to scan DuitNow QR codes to make payments to merchants in Malaysia….Under phase two, expected in the fourth quarter of 2021, users in Malaysia will be able to do the same with Thailand….The final phase will enable both countries to make real-time fund transfers and is due to be in place in the fourth quarter of 2022, the statement said.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Thailand, Malaysia C.Banks Launch Cross-Border QR Payment Linkage appeared first on PaymentsJournal.

As companies prepare their plans (and employees) for return-to-office and resumption of business travel (which we discuss in a recent blog post), two keys to good traveler experiences are stronger ‘duty of care’ infrastructure, as well as making the experience friction-free, to the extent possible. That experience is made much easier with automated expense management, tied directly to mobile phones and using virtual instead of physical cards where possible. 

This announcement in American Banker has Teampay, a 2016 New York-based startup that has a spend management platform that enables companies to request, approve, and track expenditures in real-time, collaborating with Mastercard to offer a digital-first commercial card for corporate use. 

‘The New York-based company’s newest product is inspired by Mastercard’s Digital First Card Program, developed in 2019 for the Apple Card. Teampay’s approach enables debit cards to be issued virtually without the need for a physical card (though a metal card is also included)….Teampay’s new card is the first use case of a commercial card built on Mastercard’s digital-driven platform, said Sherri Haymond, Mastercard’s executive vice president of digital partnerships….”As consumers become more and more comfortable with digital payments, we’re committed to delivering technology and infrastructure that connects all types of payments and information,” Haymond said in an emailed statement.’

As was pointed out in a recent survey of frequent business travelers, 84% are itching to get back on the road but want some specific safety measures in place beforehand.  The same survey  shows another area of employee friction needing improvement; which is the expense management process.

The survey indicates that employees spend way too much time on the expense reimbursement process and often lose money in the filing due to lost receipts. Products like the Teampay offer help to eliminate such dissatisfying travel issues, paving the way to get back to normal.

‘The digital-driven product, called Catalyst by Teampay, makes a card number immediately available within the user’s digital wallet for spending. This is meant to help with onboarding, as companies hire more remote workers who quickly rack up travel and office-equipment expenses….“Right now we’re in this strange environment where most workers are still remote but we’re beginning to see travel and other work-related expenses ramping up again,” said Andrew Hoag, Teampay’s CEO….Catalyst by Teampay also gives card users access to World Elite Mastercard benefits — concierge services, car rental and travel insurance — through the app, Hoag said.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Startup Launches Digital-First Expense Management Mastercard appeared first on PaymentsJournal.

The need for workers to sometimes access their pay before payday to make ends meet has led to a new category of third-party payment providers. They offer what is called on-demand earned wage access as an employee benefit through employers. When an employee needs to tap into their pay early, often it’s for a specific event or reason and often that need is immediate.