For real-time payments to truly become ubiquitous across the globe, it’s time for financial institutions to close the gap that exists, where a significant number of accounts simply are not connected to the necessary infrastructure.
Ginny Chappell, senior vice president, digital payments at FIS, told PYMNTS’ Karen Webster that as many as 40 percent of larger accounts at big banks have yet to become enabled to send or receive real-time payments.
The conversation came against the backdrop of FIS unveiling RealNet, its cloud-based software-as-a-service (SaaS) platform that enables account-to-account (A2A) transactions for businesses, consumers and governments over any payment rail and across borders.
That A2A functionality is the glue, Chappell said, toward gaining critical mass for real time commercial and consumer use cases.
And, of course, education of stakeholders, the consumers and businesses making the payments, will be critical. “There is a lot of work to be done,” she told Webster, pointing to “request-for-payment” transactions as one example that has a way to go before being brought more fully into the mainstream and that is more concept than reality. “There’s a lot of technology involved and it’s a huge shift.”
But there also is a significant opportunity to create transparency for individuals and enterprises about different payment types (and, for example, the irrevocable nature of a real-time transaction).
Before simply integrating real-time payments into their operations, firms need to be clear about why they are doing it. In other words, they make the investment in the payments modality — but what do they expect to get in return?
To be sure, banks and other enterprises may be embracing real-time payments because their end customers are demanding that they do so, as they’ve become used to speed in all other aspects in their lives, said Chappell.
Apps abound, of course, and online experiences have become streamlined, but as Chappell noted, these digital-first (and in many cases digital-only) experiences are lackluster without payments embedded into the mix.
Zelle and peer-to-peer (P2P)/wallet interactions have gone a long way toward introducing the public to the benefits of faster payments. The growth of the gig economy and flexible payments has also shaped demand for digital, faster (disbursement) payment options. Platforms, said Chappell, keep drivers and delivery workers loyal, in part, by meeting their expectations to be paid by push payments as work is completed.
“After all, without drivers on the platform, without the delivery workers … well, you don’t have a platform,” she remarked to Webster.
“We’ve entered an era of ‘instant,’” said Chappell, “and this time around, payments do not get a ‘pass’.”
Payments To Play Catch-Up
As a result, she said, a number of FIS clients, in response to the pandemic, have had to shift their product and service development roadmaps, and reprioritize initiatives, as consumers and small businesses more easily grasp the high-value, high-impact use cases that can be enabled with real-time payments.
For instance, she said, allowing a small business to have faster digital access to their proceeds from a sale (with the aid of FIS’s RealNet) can mean the difference between buying inventory and making payroll on time — versus more costly alternatives, like borrowing funds to “bridge” the gap that is tied to delayed settlement periods (due, for example, to weekends or holidays, when ACH payments are not settled). Always-on, always-available real-time settlements can enable firms to pay their employees with flexibility. Elsewhere, RealNet is being used in capital markets to enable FIS to help its clients trade, lend and invest more quickly, across multiple platforms.
On the consumer side of the equation, real-time payments can save the time and money that are invested with creating, printing and mailing checks, and can vastly improve the end user’s experience, particularly within the healthcare and consumer verticals.
Digital payments, she said, are “a modern convenience that consumers want to at least have available.” And as a result, banks — which Chappell said are the ultimate direct senders and recipients on the real-time network — are the ones that need to be enabled, and help their corporate clients be enabled, for real-time transactions.
“We really want to help close that remaining gap of 30-40 percent demand deposit accounts (DDAs) that are not yet active on the [RTP] network with the ultimate goal of being able to say that all consumers and businesses have their bank accounts active and able to receive funds in real time,” she said.
To the extent that banks are able to provide real-time payments to their enterprise clients, they’ll also be able to offer leading-edge payment solutions, embedded in disbursements, apps, or swipe and tap QR codes at the point of sale.
Some Speed Bumps
This is not to say there aren’t speed bumps in the mix, said Chappell.
“We’re still figuring out disbursements,” she said — in particular, getting individuals comfortable with putting their bank credentials online to get paid faster, and the fact that the transactions are irrevocable. She noted, too, that educating individuals about their range of options — where an ACH payment may be just fine for a Monday-through-Friday transaction, for example, depending on urgency — will lead them to pick the solution they need in an informed manner.
Closing the last mile — getting the last 40 percent of accounts onboard for real-time payments, she said, will be a challenge. We’re still a couple of years away from that level of connectivity, she said, and the U.S. market is one where there is no mandate that dictates to financial institutions (FIs) that real-time payments must be high up on their list.
The pandemic will help close the gap, she said, and the will on the part of FIs to satisfy the growing demand from customers that they be able to access money (to send and receive) as quickly as possible. FIs that do not incorporate real-time payments into their near-term and long-term roadmaps will be left behind, she said.
“Financial institutions are saying that they know they have to participate in this,” she told Webster of the shift to real-time payments. “They are saying, ‘This is a new wave. This is a new opportunity for business. It’s a way for us to provide better services — and this is the future.’”