As the rollout and adoption of Same Day ACH in the U.S. begins this year, the tangible changes and benefits across the payments landscape will, in turn, become increasingly apparent. Yet, there continues to be questions about who really benefits and who really wins. The underserved/unbanked, for one, says Joe Proto, a 30-year veteran of the payments industry and current CEO and Chairman of Transactis.
The shift to same-day and faster payments, in general, Proto said, is the most significant endeavor he’s seen in his 30 years in the industry. “Same-day and faster payments will give us a lot of the same benefits that we get by handling card transactions, without using the card rails. That’s revolutionary,” he said.
The reason faster payments is so important, Proto said, is because the four major quadrants of the payments industry – P2P, B2B, B2C and C2B – are all beneficially impacted when it comes to the expedited movement of money and data.
When it comes to P2P payments, Proto pointed to a shifting consumer mindset and, in turn, adoption. For example, he said, Venmo just recently announced that January was its first billion-dollar month, so users are clearly finding and using the service more (and telling their friends). And, he said, that’s powerful. “We’re moving to a user mentality that, if I’m going to send you money, you know you’ve got it pretty much at the same time that we’ve transacted together,” he said. “So whether we’re two friends who went out to dinner and I owe you for your half, or whether I’m buying something from you or I owe you something, being able to have that confidence that the timing is significantly connected to when I initiate, is very powerful. And the surety that you’re going to receive that payment – you extend that now from timing, when I initiate, is very powerful.”
This is the area, Proto said, that’s a “really, really big game changer,” especially for the unbanked and underbanked. He explained: “That single mom, who’s working for near-minimum wage, the only way she’s (now) going to keep insurance or her utility on is to pay an expedited fee to get that payment surety through. That can change now. We can serve that [unbanked] and underbanked community in a way that is so much more efficient and so much less costly, and take away that expense for the part of the bill payer population that, quite frankly, can’t afford it.” So, he said, with faster payments, the customer saves convenience fee expenditures while the industry serves up a better consumer experience. It’s a win-win …
… Win. Proto said he sees the benefit to the bill payer as an industry “opportunity to serve” the unbanked and the underbanked. “I believe that this will help democratize payments in a way that provides for lower costs for everyone. There’s no loser here. The consumer, the business, and the processors in between – banks as well as technology companies – I think everyone wins..”
When it comes to businesses paying other businesses faster, Proto said, with Same Day ACH there should be a noticeable improvement when it comes to supply chains and distribution in general. Less likely will a truck be unable to deliver supplies to a market due to delayed payment, for example. When the supplier has surety of payment, he said, “now faster payments is going to unlock the timing around which those things can happen.” And the obvious ripple effects that lack of payment can have on the supply chain itself will smooth out.
And jobs themselves are less likely to be delayed due to payment. Proto gave an example of a bulldozer sitting at a golf course development site because the supplier doesn’t have surety of payment.
“Now faster payments is going to unlock the timing around which those things can happen,” he said. Faster payments will, in turn, mean faster job completions.
Proto said he sees the biggest impact in B2C faster payments taking place in instances such as insurance disbursements. “God forbid my house burned down,” he said as a worst-case example. “I don’t have anything. And my insurance agent comes and how are they going to help me in that moment? Writing a check is not going to help. Putting something on my card may not help. I might not even have my card. Being able to do a faster disbursement, so that now I’ve got access to those funds and do it in a way that is frictionless,” – that, he said, can make people’s lives better in tumultuous times.
Keeping the dollars and data together
The key to all faster payments transactions, Proto said, is “keeping the data and dollars together.” With the less exception handling created by the straight-through processing of Same Day ACH, he said, there’s less time-consuming, labor intensive manual processing. As a result, he said, “we solve so many customer service issues, [save] so much cost in the system and take advantage of all the good things that the ACH world has represented, and now accentuate and advance the ACH movement of money.”
Another key to the success of faster payments is user demand and expectation. Millennials, Proto said, drive adoption and push innovation. He pointed to millennials being used to “single-button” capabilities. “And when that button is hit,” he explained, “they know their transaction is complete.” Proto said it’s this expectation that will drive the continued evolution of one-touch ability into consumer bill pay, because ease of use drives adoption.
Millennials will also drive change that hasn’t been anticipated yet, Proto said, because they are driving the, ‘‘I-want-content-to-find-me-when-and-how-I-want-it, and-I-don’t-want-to-have-my-day-or-life-disrupted’ mentality.” If it’s easy, he said, millennials will adopt it. If it becomes difficult or cumbersome or time-consuming, he said, then they’ll abandon it.
And it’s not because they don’t care. Millennials, he said, want safety and security like everyone else, but they are simply unwilling to have their day disrupted to ensure it. They know what they need and want. Faster payments, Proto said, gets them there.
To this end, Proto envisions a day where paper itself will be entirely removed from the payments equation and everything, including invoices, bills, and bill payments, will all live in one place. “I think we will see – and I think faster payments will help drive, finally – what everyone’s predicted but nobody’s succeeded at: a digital consumer mailbox, where we will be able to have everything stored in one place, smartly sorted, when and how we need it, essentially forever.”
This means, he said, the days of physical mailboxes and metal file cabinets in basements and attics are numbered. In turn, Proto said he thinks Same Day ACH will benefit the digital consumer mailbox the same way that billers and their customers are going to benefit from Same Day ACH.
Everybody wins again, he said. With one likely exception, he noted: The United States Postal Service.
It’s go-time for faster payments in the U.S.
The U.S., unlike some other places in the world, hasn’t quite gotten there with faster payments yet but, as Proto pointed out, each individual country in the E.U., for example, has very few financial institutions compared to the U.S. “We want to be all-inclusive. We want all the banks to be able to participate and by having that inclusive spirit, things take a little bit longer.”
We’re going to get there, he said. “And, by the way, when we do get there, I think we will come up with improvements that the rest of the world will look to. And I think we’ll start to see international faster payments, at a lower cost, with surety. And that whole part of the financial ecosystem will benefit and be improved as well.”
Proto, overall, said he is feeling buoyed about the future of faster payments.
“[The industry is] doing the right things and we’re going to do this right and I have a tremendous amount of confidence that we’re all ready to make this happen,” Proto said.