Beyond peer-to-peer (P2P) payments, the shift to real-time payments spurred by the pandemic is poised to change the way we keep the lights on, the Netflix account paid, the doctor visit payment plans squared away.
Russ Waterhouse, executive vice president of Product Development and Strategy at The Clearing House (TCH), said new bill payment experiences, aided by a commitment from the heavyweights in banking and services provider arenas, are on the near-term horizon.
Bill presentment and payment is a fragmented landscape, to put it mildly. As many as 65 percent of the 15 billion bills consumers pay annually are not recurring payments — they’re one-time in nature.
Roughly 75 percent of those non-recurring bill payments are done through biller websites, which means individuals juggle usernames and passwords, log in, go through the motions of inputting their details, and when encountering friction in the process, may wind up contacting a call center for help.
“There’s a huge number that will miss a payment at some point during the year,” said Waterhouse. “And then they end up in this cycle with late fees on their utility bill and maybe an overdraft in the bank, and all of that costs them money.”
Real-time payments can make such tackling of daily minutiae not only faster, he said, but also more secure — and we’re moving toward some real traction among providers and financial institutions (FIs).
At a high level, getting nearly two dozen CEOs from competing banks, such as Bank of America and Santander (and the CEOs from Jack Henry and Fiserv), to agree and recognize the necessity of providing a reimagined bill pay experience with request for payment (RfP) capabilities is no easy feat.
To date, noted Waterhouse, TCH and its member banks have invested $320 million to expand RTP network coverage (now at 60 percent of accounts) and spur new use cases, including paying employees on demand, speeding insurance claims payouts and helping merchants settle over the network, which boosts an individual’s or business’s cash flow.
In terms of mechanics, through the new intelligent bill pay capability on the RTP network, billers will be able to present bills securely through FI digital channels through RfPmessages over the RTP network, and customers in turn can review the bill, pay immediately or schedule payments to occur at a later date. That functionality, TCH has said, will be available to 40 percent of digitally enabled U.S. consumer accounts in 2021 in a staggered rollout.
Waterhouse told Webster that the CEO statement is, on the one hand, directed to the billers.
“As we talked to a many of the corporate billers, the concern they had was, ‘Is there enough reach to make this worthwhile?’” he said.
Another concern was whether that reach would be enough to change the overall customer bill pay experience.
“This is a statement to the billers to say we [TCH and the FIs] are committed, so they can have the confidence to make their own investments,” he told Webster.
On the FI side of the equation, the progress of getting banks on board has been step by step. As Waterhouse recounted to Webster, wholesale banks had to believe in RfP because they’ve had to build capability to service the biller. Additionally, it’s been necessary to get the retail banks committed as well, competing for space on the digital platform.
“And then you’ve needed to get the banks together because one bank alone does not have critical mass,” said Waterhouse.
That coordination comes through the CEO commitments outlined last week.
Detailing next steps, he said that at least one national biller is in pilot tests right now, in the midst of “friends and family” trials, and will begin to scale and ramp up beginning in June. Major banks will probably “light up” in the third quarter. And larger billers will be quick to move first, as they have the financial resources, the tech resources and incentive to bring consumers into the RfP fold, driving paper and costly back-office reconciliations procedures out of the system.
“I think you’ll also see some of what we might think of as the ‘non-traditional’ [demand deposit account (DDA)] billers with the emergence of subscription models, like Disney+, Netflix or Peloton,” Waterhouse predicted, noting that about 10 percent of the streaming payments are coming out of consumers’ DDAs.
The Consumer Benefits
The push toward expanding the reach of bill pay and RfP capabilities on the RTP network will remove the frictions inherent in online payment, he said. For one thing, presentation itself is aggregated to a customer’s online banking portal (in the mobile app or on the website), so the payor does not need to go to six different places to pay their monthly bills — and does not have to grapple with email or SMS reminders, which leave consumers open to fraudsters’ attacks.
Bill presentment, he said, “comes through a secure channel, which is your bank — in effect it’s been ‘warrantied’ through that process. You can see the whole bill detail.”
Beyond the heightened detail, consumers can exercise more control over the payment itself — choosing whether to pay it immediately or schedule it for a future date. But no matter the timing, they know the payment will be instant, and they will receive a confirmation immediately, Waterhouse explained. Eventually, when more stakeholders are integrated into the RTP network, beyond the confirmation with the bank, billers will have the billing and confirmations integrated into their receivables and call centers — with a continuum of real-time information in place.
“The whole system links,” he said, eliminating the guesswork of whether payments have been received.
Syncing and linking will make it possible to innovate the user experience right at the beginning — at the point of enrollment. That would eliminate the interactions with call centers where consumers have to find account information (routing numbers and account numbers) and hunt down other details. Waterhouse said that a Zelle alias can be enough to work with the RTP network and RfP.
“There’ll be a lot of innovation around consumer authentication,” he said, adding application programming interfaces (APIs) can enable authentication and tokenization, including those that can be limited on a biller-by-biller basis.
All of this ties into a sea change for the billers and the banks, as they’ve traditionally made money on late fees, Waterhouse said. But in the age of digital banking and payments, good customer relationships matter more than those revenue streams. Billers gain an advantage, too, in that the payments that come through the RTP network are “good funds” (confirmation of funds is immediate), and there will not be breakage with non-sufficient funds (NSF) or bad account information.
Fraud goes down, too, as the payment request, under RTP operating rules, must be made for a legitimate purpose. The payments are irrevocable (although consumers can request a return of funds sent in error from the request-to-pay bank). Waterhouse said if TCH sees relatively high fraud instances from an originator, it can work with FIs to flag or suspend the originator, or even kick that entity off the network.
The stars align for the stakeholders amid RfP, said Waterhouse. And, especially, the banks win because they provide value to individuals and corporate customers, incentivizing them to adopt digital processes while lowering back-office costs.
The FIs’ backing of this new intelligent bill pay capability, he said, signals an all-in approach to digital and to billers, in his words, a “come along for the ride, and we’ll do that collectively” philosophy.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More