The good news for customers — and the challenge for financial services players, both established and emerging as the decade comes to a close — is that when it comes to payments, this is the era of customer choice. Walking around at the Sibos conference in London last week, Vocalink CEO Gregor Dobbie said the big takeaway is that this industry is undergoing not one, but several foundational shifts as a plethora of new ideas and methods are flooding into the market. Bitcoin, Libra, instant payments, Open Banking — these were the big subjects on repeat last week, Dobbie told Webster.
“The questions are about how is this going to work, what are regulators going to do, how are consumers going to react to the emerging field of choices. But the main recurring point was how are we rising [to] this challenge, how will we meet changing expectations, and where are the opportunities to get out ahead and actually innovate,” Dobbie said.
It’s a tall series of orders to deliver on, particularly in light of the fact that the entire journey is taking place without much in the way of a map. For many of these emerging ideas, the map is being drawn as the journey moves forward. However, Dobbie said, even without knowing the exact path forward, they have learned to follow three critical guideposts for navigating the way.
First, if a payment mechanism requires an extensive education and explanation instead of being instantly intuitive, it is likely doomed to failure. Contactless cards have succeeded as well as they have worldwide for many reasons, Dobbie noted — chief among them, watching someone ahead in line use one can be all the explanation of how to use it one will ever need.
Second, whatever one builds must easily and safely live in the payments infrastructure they’ve created that undergirds the system. Today, more than 90 percent of U.K. salaries, more than 70 percent of household bills and 98 percent of state benefits are processed by Vocalink — which means anything done to endanger those rails could have severely negative systemic effects.
Third, innovation is often quite invisible — a consumer doesn’t necessarily have to see it to be benefited by it. Innovation is usually about finding different ways to provide services that “the customer does not see, but absolutely feels the effect of,” Dobbie said.
Those lines guide the billing innovations Vocalink is working to roll out over the next 12 months, the recent improvements it has collaborated on and how it sees the market, particularly the rapidly emerging real-time payments (RTP) market, evolving toward modern consumer needs.
Creating A Billing Dialog
The standard billing process consumers are used to when it comes to paying bills, Dobbie noted, is Direct Debit. They log in to the biller’s site or banking apps, and arrange payment via a direct debit. It is an improvement over mailing a check, but Vocalink believes it can add more to that process in terms of value. That is why the company is currently developing and preparing to launch the beta of a new service called Request to Pay.
“This service is hoping to be able to create a dialog between the payor and the payee when necessary, but layering in a messaging [service that] sits above the payments technology, that gives the [customer sending a payment along] whatever other data is necessary,” he said.
That data might be a request to pay in part, a request for an extension, or even a request or question about paying ahead. The idea, Dobbie noted, is to put more control into the hands of the consumer, and create a more flexible bath of settling bills between businesses and individuals transparently. Ultimately, the service will make it more likely for consumers to pay their bills, even if they hit a snag, because they have an easy method by which to reach out to their creditors — as opposed to merely having an incentive to avoid them.
From a user-experience perspective, the process starts with a Request to Pay push alert, asking the customer if they would like to pay their upcoming bill — a type of notification most consumers are fairly familiar with at this point. If they elect to pay directly, they will likely be directed to their chosen channel for making the payment (mobile banking app, mobile wallet, etc.). They can also decline to pay, or open a messaging dialog with their biller.
Request to Pay is not quite in the market yet, but the goal is to get it there soon. It is currently being piloted, and is expected for launch early next year. The hope, he noted, is to improve billing specifically by putting more control into the payee’s hands, while injecting more certainty into the payor’s business. That control-and-certainty dual offering can be applied to more than bill pay, but to the entire emerging real-time payments world in general.
Securing And Advancing RTP
Real-time payments isn’t nearly as new as it feels, Dobbie noted, because the reality is that it has been up and running in the U.K. for more than 11 years. Yet, there is “up-and-running’ and actively sprinting — in the last year, there has been a good deal more of the latter than the former.
“There are lots of drivers there. There are consumers demanding better digital experiences, gig economy workers looking for faster payments for their labors, B2B players who are saying, ‘Wait a minute. Why can I receive money in real time as a consumer, but as a small business owner, I am waiting around for days, even though cash flow is so critical?’” he said.
The demand is there, and — if anything — it is growing by the day, as more consumers are exposed to the myriad of instant money and wanting to experience it more often. Instant, though, has a particular problem closely tied with its advantages: Once pushed forward, the funds are gone, and extremely difficult to retrieve if something goes wrong.
Things do go wrong, too. Sometimes, consumers mistype an account number — not impossible to do with an 8-digit figure on a smartphone — and send the funds to a valid account, just not the one to which they were hoping to send it. Instant payment fraud is absolutely a real thing. In the last few years, Dobbie noted, fraudsters have become increasingly sophisticated in their methods to trick people into sending money to the wrong accounts.
Vocalink has introduced a new security offering called Confirmation of Payee, which uses AI to match the name of the person on the account to the account number given for a payment. If there is a mismatch, the system sends back a warning before the payment is made.
“We don’t stop anyone from making a transaction, but we can absolutely highlight the concerns as they arise in real time to stop bad transactions from happening,” he said.
It pairs with anti-money laundering services Vocalink offers to give warnings and information about accounts behaving suspiciously so they can be more effectively shut down. That service is not real time yet, Dobbie noted, but that is its future. The plan is to stop these transactions before they can occur by offering up risk parameters that, when tripped, will automatically shut down an instant payment.
“We will be able to see, with a high degree of certainty, when there is something wrong with a transaction, and [that] it needs to be stopped,” Dobbie added.
That, he noted, is not easy work. To stop a bad instant payment, one must literally go faster than instant to get ahead, identify the flaw and step into the transaction. However, it is not an optional challenge.
“The number of people who want to transact this way, [and] the number of businesses that want to transact this way. has increased exponentially in the 10-plus years this has been online in the U.K. And I think we are heading to a world where instant payments will soon just be all of payments, and we have to be able to secure that,” he said.