Faster Payments, Better Validation

Faster is better when it comes to payments — but only if with speed comes surety. For financial institutions and merchants, validating transactions in real time can be a boon, eliminating returns or declined transactions. In last year’s NACHA Challenge Awards, a team competition that fosters payments innovation, Royal Credit Union earned the Audience Choice Award by proposing an API that lets companies validate consumer accounts in real time.

Jeni Brantner, VP of Payment Operations at Royal Credit Union, told PYMNTS that the API’s genesis came after brainstorming about some of the different areas of friction that the company saw across merchants that offer debit card programs, with loyalty rewards for users. Those programs come with additional risk other than the risk of fraud, said Brantner, that are inherent to the card rail, “so there is no guarantee that the transaction is actually going to clear consumers’ accounts.”

Brantner said her firm sought to eliminate some of the risks for the merchant, while also maintaining an easy payment method for the consumer. “Our idea included leveraging technology and payment system advances that already existed.”

The suggestion, then, was to use tokenization to ascertain account validity and funds availability in consumers’ accounts, using API calls from the merchant.

And beyond this “behind-the-scenes” proposal that allows for faster and safer payments, the firm has been focusing on ease of use for the consumer, directed by a system “where they tell us who, what amount and when to pay an obligation, without worrying about how the payment will travel to the recipient,” and it is left to the financial institution to determine how and which methods of payment will be most efficient to accomplish those requests.

As for the Same Day ACH initiative launched late last year, the executive noted that employers can complete critical deposits, such as payroll, done without errors or delays. All too often, said Brantner, payroll issues cause employers to scurry frantically to facilitate payments, and employees are unable to pay bills or buy groceries. “And, of course, it happens on Friday … What we’ve done,” she continued, “is that [Same Day ACH] has given us the opportunity to contact the employer and discuss whether they can submit the funds via ACH … It used to be that they had to transmit wires, which were a lot more costly than Same Day ACH because of incoming and outgoing fees.”

Looking into the future, Brantner said she expects to see continued demand for real-time payments, adding: “I see payment alliances that are really coming together for faster payments,” and touching again on her own firm’s proposal, she noted the idea that it be hosted by the Federal Reserve. “We dream big here,” she said, adding that “the worst that is going to happen is that someone tells us no.”

Submissions for the 2017 NACHA Challenge Award are now being accepted through February.