Is it prime time for real time, especially for B2B?
The rise of Zelle, and any number of peer-to-peer (P2P) payment options, has increasingly brought consumers on board with the need for speed in payments — where settlement is marked by seconds and minutes, not hours or days. It’s a well-known fact, too, that corporate payments (the B2B kind) are ripe for digitization, and for a wholesale move away from the paper chase, where checks are still stubbornly tied to 50 percent of corporate transactions.
In recent months, though, real-time payments (RTP) have garnered more interest and no shortage of headlines in the U.S. — where, for example, the Federal Reserve is mulling the development of its own real-time system. (The Clearing House [TCH] launched its own RTP network at the end of 2017.)
The U.S. initiatives, of course, follow the plans or deployments seen in more than 40 countries around the globe to bring faster payments or RTP into the fold. To that end, Bottomline Technologies Vice President of Product Management and Strategic Solutions Jessica Cheney said in a recent interview with PYMNTS, “The stage is set for the U.S. to fully embrace real-time payments for both B2B and B2C activity.”
Where We Stand In The US
Cheney told PYMNTS that several factors underpin the readiness for that shift toward RTP. The U.S. payments ecosystem, she said, “has been ripe for something innovative to come along — and RTP has been the most innovative advancement to happen in this space in decades.”
She added, “The regulatory environment is different in the U.S. than elsewhere around the globe, but the pace of innovation and regulatory change (in terms of mindset) has accelerated here. The rollout of Same Day ACH several years ago served to kick-start the process.”
The collaborative mindset that comes in tandem with, say, the aforementioned Fed initiative can help fix flaws in existing systems. She pointed to the high costs and inefficiencies tied to reliance on check payments.
Cheney said, too, that consumer expectations (akin to what she called a “grass roots movement” for RTP) have evolved, as evidenced by the uptake of P2P payment services, such as Zelle and Venmo. Banks that roll out the same type of functionality to their corporate clients will have a clear competitive advantage in the corporate realm.
“The Clearing House’s RTP offering has also solved for other payment inefficiencies, as well as for decreased transaction times,” noted the executive.
In short, the ability to send more information along with payments is a value-add for companies of all sizes and verticals, and addresses a key flaw, defined as a lack of transparency.
“The value that’s been incorporated into the solutions is a lot more than just the speed of the payment, and that’s driving people to get excited,” she said.
Among the value-added features lies the ability to have immediate and automated payment status updates.
RTP And RFP
Cheney maintained that “the sky is the limit with RTP. … It has the ability to replace not only checks, but cash, wire and ACH.”
When asked what other use cases might be considered low-hanging fruit for RTP, she said instant insurance claims payments and retail returns are within the immediate grasp of business payment adoption. There’s an economic shift afoot, too, as the growth of the gig economy will likely spur Requests for Payment (RFPs) directly to companies that engage gig workers on projects.
As part of RTP, said Cheney, Request for Payment “has the potential to change the way we think about bill payments in the United States today.”
Bill payment is a fractured process, where some firms are able to present bills to consumers online, and, in some cases, consumers may have to enlist the offerings of a separate bill payment service. When payment is made, she noted, billers have to find ways to match the payment to the actual invoice. However, RFP is directly linked to payments made as a result of the request — an advantage that can streamline the whole process for a range of companies, from the smallest firms to the largest mortgage services and telecom giants like Verizon.
RTP, Cheney told PYMNTS, “fits in with the fundamental change we are seeing with banks, where they are trying to transition toward systems of engagement. The formerly transactional mindset of banks serving corporate clients has been shifting toward building and cementing relationships, and increasing their trusted, strategic partner status. RTP isn’t just another payment type a bank can offer.”
Cheney continued, “RTP supports secure, real-time conversations between trading parties, customers and employees with detailed, standardized messages. These ‘conversational payments’ are traceable conversations for both parties, aiding in increased [accounts receivable] reconcilement. They also remove the need for disconnected, unstructured and inefficient follow-up being conducted by email or telephone today. And all of these enhanced conversations are now happening on the bank’s channels, putting the bank squarely in the middle of this critical communication.”
“That’s the true hidden value of the RTP offering today,” she told PYMNTS. “It is a new interaction model for banks, with worth that goes far beyond the faster payment.”