Highly connected consumers are all about speed and efficiency, and they are increasingly drawn to the value of instant payments. In the Real-Time Payments Tracker, KeyBank’s Richard Booth makes the case for why FIs must give consumers immediate access to funds and more control over the payment experience.
The pandemic caused many consumers and businesses to rethink how they conduct business and make payments. One industry that has experienced a rapid evolution in technology and services throughout the pandemic is the banking and financial services sector, which has had to completely rethink how it helps customers manage their transactions and assess what technologies can make it easier.
Physical payment methods such as cash and checks were actively discouraged early in the pandemic because of the potential of spreading the virus. The use of cash and other high-touch methods has been declining as a result, while contactless payments have been on the rise as a safer and more convenient way to pay.
Many consumers switched to digital banking and payments as banks closed branches and limited their hours, and this shift became the new normal as it introduced new conveniences. The ability to make payments using smartphones or wearables emerged well before March 2020, but digital payments were suddenly at the forefront — and, in many cases, became a preferred way for customers to pay.
“When banks closed branches for security reasons, many clients permanently adapted to digitalized banking,” said Richard Booth, senior product manager of real-time payments and core payable check products for KeyBank Enterprise Payments.
New technologies have been a mixed blessing, he said, as the pandemic highlighted that not everyone has the same level of access to the necessary technologies and digital tools.
“Moving away from cash impacts the unbanked disproportionately,” Booth said in a recent interview with PYMNTS. “Merchants without access to digital payments lose out more as remote buying increases. Now is the time to design setups where all merchants and consumers will have access to the tools of the future.”
Real-Time Payments Growing Pains
KeyBank Enterprise Payments provides fully integrated treasury solutions ranging from traditional cash management to innovative payments, including accounts payable (AP) and accounts receivable (AR) automation, push to debit payments, merchant services and consumer payments, including credit and debit cards. The company serves commercial clients of all sizes, from small businesses to institutional and public sector clients.
Booth spoke to PYMNTS about how real-time payments technology is changing the landscape for FIs and their customers.
“One thing is clear now — there will be no return to the norms of 2019,” said Booth. “It is critical for the payments ecosystem and the economy as a whole to develop the payments solutions that will allow economies to emerge from the pandemic efficiently and define the post-COVID-19 future.”
Real-time payments have made it possible for consumers and businesses to instantly transfer money safely and securely within minutes between bank accounts, rather than having to exchange cash or paper checks. Payment apps and digital wallets have proliferated, creating competition between FIs to win over customers.
“Companies that provide viable options for integrated and contactless payments to both customers and merchants will probably have a distinctive edge over competitors,” Booth said.
As for KeyBank, he said the bank’s clients had to make significant adjustments and find new ways to operate securely, and loyal clients have worked with them to think through how to digitize and operate in remote environments.
KeyBank was an early adopter of The Clearing House’s RTP® network and has received RTP network transactions since 2018. Looking ahead, the bank plans to be a key player in the growth of the RTP network and to make RTP network options a priority for its advancement in January 2022. According to Booth, the bank’s RTP network development will be phased in and start with a pilot period. The FI plans to expand capabilities to the broader market in late 2022 and into 2023.
“We see the RTP [network] payment infrastructure as a catalyst for digital transformation,” he said. “The RTP network doesn’t replace the other payment networks, but it does have capabilities that the others don’t, since it’s specifically designed to support digital commerce.”
One of the problems with the payment industry, Booth said, is that banking customers, in general, have been constricted to the operating timeframes provided by the banking industry. With the emergence of the RTP network, he sees exciting opportunities for customers who want to “bank when they want” and conduct cash flows that work best for their business models.
“If a client wants to pay their vendor on delivery at 4 a.m. on a Saturday with an RTP [network] payment that is final, in real time, and provides immediate payment confirmation — that is now an option,” he said. “That scenario is geared around improved cash flow, but the value proposition doesn’t stop there. [The] RTP [network] offers multiple enhancements that streamline operations and improve the customer experience. You have end-to-end payment visibility, no payment reversals, improved exception handling, two-way messaging and the list goes on.”
Looking Forward to the Future of Real-Time Payments
According to Booth, FIs, including KeyBank, will continue to expand to offer payment processing through third-party partnerships, at least until real-time payments become a more widespread technology.
“In terms of remaining competitive within the industry, I don’t believe it will be too long before most banks offer [the] RTP [network] as an option, much like the adoption of ACH throughout the years,” he said. “[The] RTP [network] will become a staple menu item with the other payment types, such as check, ACH and wire. How customers intend to use the new payment type and where the change in payment trends across the legacy products switches from is still to be seen.”
Booth said that in the long term, the RTP network is set to be a dominant force in how payments are transacted and how customers will expect to conduct all business functions. In addition, he said digital commerce will end up demanding the characteristics of an RTP payment. To stay competitive in the short term, FIs should focus on adopting real-time payments to help gain ubiquity within the banking industry.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More