Democratizing Payments: How Payment Hubs Fuel Innovation for Smaller Banks

Keeping pace with innovation can be daunting.

For small- to mid-sized banks, credit unions and FinTechs, implementing the latest money movement integrations like real-time payments and more can be a steady drain on at least three fronts: time, resources and money.

That’s where the concept of a payment hub comes in, i2c Global Head of Product Seth Perlman told PYMNTS.

“Through a payments hub, you have access to a wide range of real-time and batch money movement networks,” he said. “You can originate and receive payments without having to build separate integrations to each of those.”

While the concept of a payment hub may sound familiar to industry executives, its full potential is often underestimated.

At its core, a payment hub simplifies access to various money movement networks through a unified set of APIs. This integration allows banks, credit unions and FinTechs to send and receive payments in real-time and batch modes without the need for multiple, complex integrations.

“Instead, they can leverage the payment hub for seamless access,” Perlman said.

For example, i2c’s offering enables banks, credit unions and FinTechs to offer access to the FedNow® Service, Visa Direct, ACH and other networks to follow with the same relative cost and effort as integrating with one network.

This consolidated approach streamlines the payment process and enables smaller financial institutions, often constrained by legacy systems, to modernize their offerings without undergoing a costly overhaul requiring complex infrastructure updates, financial investment and ongoing maintenance.

Revolutionizing Money Movement for Financial Institutions and FinTechs

The efficiency of a payment hub lies in its ability to consolidate “money in, money out and money at rest” operations into one platform, providing financial institutions with a comprehensive solution for all their payment needs, Perlman said.

“You don’t need to be shackled to your current provider,” he said. “You have the opportunity to add a payment hub as an add-on capability.”

This modular approach allows financial institutions to modernize incrementally, adding new capabilities like real-time payments without disrupting their existing infrastructure. According to Perlman, three main categories of organizations stand to benefit most from payment hubs, including smaller banks and credit unions; FinTech companies and banking-as-a-service (BaaS) providers; and aggregators that want to sponsor smaller financial institutions or neobanks.

“FinTechs appreciate our API-centric approach because it allows them to integrate quickly and expand their services through our platform,” Perlman said.

The flexibility and ease of integration make the payment hub a valuable tool for FinTechs looking to enhance their payment offerings without incurring high development costs.

Many smaller banks and credit unions are still operating on legacy systems that limit their ability to access advanced payment networks.

“FedNow, for instance, has around 1,000 institutions onboard, leaving 9,000 others without access,” Perlman said, adding that payment hubs like i2c’s can offer these institutions a way to connect to various networks without requiring an expensive overhaul of their core infrastructure.

One of the biggest challenges for small- and mid-sized financial institutions is overcoming legacy technology that limits their ability to offer modern payment solutions, he said.

Addressing Legacy Technology: A Path to Modernization

For institutions operating on tight budgets or legacy platforms, many existing barriers to embracing innovation can be insurmountable. Payment hubs like i2c’s, however, change the equation by providing an all-in-one solution that reduces complexity and cost, making it possible for these organizations to offer cutting-edge payment services on par with larger banks.

“The ability to originate real-time payments is table stakes for any institution today,” Perlman said.

The rise of FinTech disruptors and the rapid adoption of digital wallets, mobile payments and peer-to-peer (P2P) services have transformed customer expectations. Consumers increasingly prefer the speed and ease of these options, leading to greater demand for real-time capabilities across all financial products and services. For businesses looking to stay competitive, a payment hub offers a streamlined way to enable these capabilities without requiring multiple, time-consuming integrations.

This democratization of access has profound implications for financial inclusion, as smaller institutions can offer the same level of service and convenience as their larger counterparts, ensuring they remain relevant and competitive.

Perlman said i2c embeds industry-standard security and fraud management solutions into its payment hub, as well.

“Security is paramount in our payment hub design,” he said. “We’ve wrapped our platform with fraud management capabilities that ensure our clients can move money safely.”

This built-in security infrastructure gives financial institutions the confidence to transact without compromising safety.

While i2c offers processing solutions, the payment hub is not restricted to its processing services.

“We allow clients to originate payments even if they are not processing cards through us,” Perlman said. “This flexibility makes our solution accessible to a broader range of businesses and institutions.”

This processor-agnostic approach opens the platform’s real-time payments capabilities to companies that might be using other processors, ultimately expanding their options.

This approach makes it a versatile solution capable of scaling with the evolving needs of the global financial ecosystem, he said.