How Partnerships Help Banks and FinTechs Win Instant Payments Long Game

Across the ever-changing payments landscape, the demand for faster transactions has become increasingly prominent.

But before organizations can offer, or accept, faster payments, they need to choose the right partner to do so.

“Whether you’re going to build the pieces [for faster payment infrastructure] yourself, or partner with different entities, you have to know that you’re going to receive value back and that you’re delivering something that your customers actually care about,” Kathleen Pierce-Gilmore, senior vice president and global head of issuing solutions at Visa, told PYMNTS.

“A lot of financial institutions and FinTechs have been challenged as they’ve tried to integrate with real-time payments,” she explained. “… Each of these different faster payment networks have different technology requirements.”

Still, that doesn’t mean the benefits are unreachable. On the contrary, with the right assistance, organizations can leverage faster payments to create a resilient bulwark of competitive differentiation.

Today’s multifaceted payments ecosystem increasingly demands strategic planning and innovative solutions, tailored for various use cases and end-user needs.

Legacy systems that are deeply ingrained in financial institutions can often hinder the transition to real-time payments because many core banking platforms don’t operate on the 24/7 basis required for instant payment capabilities.

Additionally, diverse messaging types, such as ISO 20022, add another layer of complexity for institutions looking to plug into multiple payment rails simultaneously.

And, as Pierce-Gilmore noted, that’s where choosing the right partner comes in.

Navigating the Complexities of Faster Payments Integration

With the RTP® Network and FedNow® Service gaining traction, financial institutions and FinTechs are facing an enticing array of options to provide end-users with the speed, convenience and security they have come to expect across all areas of their daily lives.

“If you’re going to plug into RTP and FedNow, they have different requirements, different settlement, different liquidity, literally different technology,” Pierce-Gilmore explained. “But if you’re plugged into a partner that’s plugged into both of those networks, you have one integration, and you’ve already created some simplification.”

“A partner being able to take a one-to-many approach for you is a significant benefit that can really reduce complexity,” she added.

The partnership model is emerging as one of, if not the, most viable solutions available, wherein institutions can collaborate with partners already integrated with multiple networks, streamlining the integration process, overcoming legacy system limitations, and even gaining extra benefits such as real-time fraud protection that might strain their resources if tackled alone.

Pierce-Gilmore highlighted Visa’s expertise in managing real-time fraud on card rails, illustrating how partners can help close the door to the risks associated with faster payments, while opening the gates to its benefits.

Short-Term and Long-Term Strategies for Faster Payments

Payments are used for almost all elements of modern life, and faster payment capabilities are no different.

Still, Pierce-Gilmore emphasized the concept of a multi-rail approach, where transactions may traverse different payment rails based on specific considerations.

“First things first, [it is crucial to] understand what are the use cases that are relevant and compelling and make the business case for all of the investment required,” she explained, noting that this differs from bank to bank, or organization to organization. “The next thing to think about is what your existing capabilities are.”

Pierce-Gilmore provided examples, including business-to-consumer scenarios where immediate disbursements for insurance claims or consumer account-to-account transfers can benefit from faster payments. She emphasized the relevance of considering use cases on a nuanced basis to determine the most suitable payment rails for integration.

By building from simple instant payment propositions, organizations can first gain confidence and know-how, before moving to more complexly structured transactions.

On “simple to complex,” Pierce-Gilmore suggested that most institutions start with the receive capability to allow receiving money on a 24/7 basis, and then shift to send. Next, building on the operational complexities that they solved through the process, they can move into more complex use cases, such as requests for payments, and across an interconnected continuum of services.

Strategies for intelligently integrating faster payments include understanding existing capabilities, planning for 24/7 operations, and considering best-fit partnerships to streamline execution, Pierce-Gilmore said, adding that faster payments will evolve — especially with the right business and execution strategy.

“Whether it’s being able to integrate through one pipe to multiple rails, the ability to add fraud capabilities, or even just thinking about how managing the liquidity [necessary for instant payments] works, a partner can help solve some of those complexities for you,” she explained.

One thing is certain looking ahead: The push for faster payments is reshaping the financial landscape, demanding strategic foresight and innovative solutions.

As Pierce-Gilmore said, the journey toward faster payments involves navigating through complexities such as diverse technology requirements and legacy system constraints. The crucial element lies in choosing the right partner, whether for building in-house capabilities or forming strategic collaborations.