Real-time payments schemes are proliferating around the globe.
Getting them to work in sync and breaking down the silos that exist between countries will be key to helping faster payments scale across a variety of commercial and consumer-facing use cases, a trio of payments experts told PYMNTS.
Panelists included Dave Scola, CEO for the U.S. at Form3; Sarah Billings, senior vice president, head of payments and international product operations and transformation at PNC; and Dan Williams, senior vice president, head of embedded banking at KeyBank.
As Williams noted, “the numbers around international trade are pretty staggering.” Trillions of dollars flow across the globe as enterprises pay one another, as buyers pay suppliers. And yet, he noted, traditional payment systems are “not that friendly when it comes to delivery of funds, predictability of funds and reconciliation.” Financial institutions (FIs), he added, need to help those client firms deliver money more efficiently in order to improve the performance of supply chains, and to improve consumer payments, too.
Billings added that scores of countries around the globe have invested in their own immediate payments infrastructure. As those countries have perfected the real-time movement of funds, and have removed friction from the process, she said, “why wouldn’t we take what we’ve done in each of our sandboxes and link them together to get an even bigger global benefit?”
As payments become more immediate, she said, they no longer can be thought of as a back-end function, sent from an ERP system in a file. Payments can now be pushed to the front end, and used as something new — in her words, “a satisfaction tool.”
That global benefit, added Scola, can finally become a reality. At least as far as the technical aspects of instant payments are concerned.
“We wouldn’t have even had a consideration of this topic 15 years ago,” said Scola. But the harmonization of data standards, around ISO 20022, he said, have changed the conversation about faster cross border payments, and fostered “a heightened interest in seeing what we can do in that space.”
But the panelists agreed that beyond the technical routing of the payments themselves, complexity is still in the mix, as there is as of yet no overarching set of rules governing security, know your customer (KYC) and regulations in general.
The U.S. is a bit different, as the discussion among panelists covered, because now there are two real-time payments rails (the FedNow service and The Clearing House’s RTP network), but there can be some lessons learned in the states from other parts of the globe where instant payments have more firmly taken root. Ubiquity will be key, as RTP and the FedNow service must in turn, become interoperable, too.
Said Scola, “The industry will need to coalesce around this a common framework, a common set of expectations around how the technical and integral components” will work in concert. But in the meantime, there are still, in Billings’ words, “enormous swaths” of transactions that can be more efficiently handled across the globe as banks help corporates focus on the best payment options available and the attributes of the transactions that are most pressing, such as irrevocability, final confirmation and traceability. Ideally, there should be the ability to mix and match a range of payments, across real time and legacy rails, depending on the use case.
As Williams noted, “you’ve got to think about the enablement ecosystem around these payment rails. It’s not just about a bank-to-bank transfer, it’s about a customer’s experience.”
In order to get to payments ubiquity and that full-fledged ability of FIs to serve clients according to differing payments needs, banks must be connected to the rails themselves.
From Form3’s point of view, as Scola said, “there’s no proprietary value in banks establishing their own connectivity to FedNow or to any scheme. It’s a utility.” Form3, he added, leverages its platform model and APIs to connect firms to the FedNow and TCH services, and to Fedwire as well.
“APIs,” said Billings, “can add value … and enable a process within a software workflow in ways that we have not been able to do with prior technology.” Scola echoed that sentiment, stating that the service level agreements (SLAs) that are mandated by most of the instant payment schemes, required that — in a span of seconds — FIs conduct a funds availability check, must identify whether or not the beneficiary is even “addressable” via the scheme being used and check for sanctions screening. This is almost impossible to do without an API type of environment, said Scola.
“You cannot do this through processes built for batch and next day,” said Williams.
In the months and years ahead, said the panel, there’ll be a natural evolution of real-time payments, including earned wage access, and emergency disbursements. Billings predicted we’ll see the continued consumerization of corporate payments, transforming industries such as real estate and health care; Williams added that trade finance will see a similar transformation.
As Billings said, “there’s nothing that’s impossible, it just is going to take work … there’s a foundational level around the globe where real-time payments, immediate payments, are now a ‘real’ thing.”