Show Your Commercial Clients What’s Possible with Instant Payments
“The check is in the mail.”
There aren’t many phrases in the English language that manage to be as falsely reassuring as that one. Perhaps hearing your teenage child call you urgently at 2am and claim profusely, “I’m fine!” is worse, but not by a lot. Today, money moves through the economy faster than ever, and instant payment networks like RTP Network and the FedNow Service are ushering in the next era of faster payments in the U.S.
But waiting for money to arrive via USPS or ACH is a problem that virtually every business must endure. Wire transfers may offer same-day settlement, but they’re costly, cumbersome, and lack transparency. Card transactions may authorize quickly, but settlement speed and transaction fees are a thorn in the side of business owners everywhere (not to mention issues with merchant gateways).
The possibility of moving money instantly is going to transform the way businesses handle payments. For banks and credit unions that offer instant payment products, there is a unique opportunity to expand their commercial portfolios. It Can’t Happen Fast Enough Even though most businesses are accustomed to the existing payment ecosystem, they’re desperate for the advantages that faster payments offer, such as: - Better treasury management - Fewer payment reconciliation issues - Improved customer and back-office payment experience - The possibility of new business models that rely on faster money movement - Reduced risk of non-payment and associated fees - Significant reduction in float
While the fundamentals of faster payments don’t change across clients or industries, the particulars will matter tremendously. Ask Your Clients What They Want For institutions with existing commercial portfolios, the best way to learn what commercial clients want from a real-time payment experience is to ask them.
That can happen in several ways: 1. Ask your relationship managers to reach out to your best clients and investigate how faster payments could affect their business. 2. Consider inviting your best clients to be part of an exclusive “product advisory group” where you can gather their feedback on the types of instant payment tools and features they’d like to see. 3. Look at hiring a third party to help you conduct research and evaluate the instant payment product landscape. 4. You may even be able to purchase instant payment tools off the shelf and invite your “product advisory group” to function as beta testers so that you can work out the bugs before doing a release to your entire commercial portfolio.
Your goal is to discover as much as you can about the specific ways that businesses would like to use faster payments. Armed with that information, you can begin developing products and services that meet those needs. Building on a Strong (Fast-Moving) Foundation The Federal Reserve and The Clearing House have created instant payment rails, but they aren’t developing the products or user interfaces that your commercial and retail clients will use. That’s up to you.
Thankfully, the ISO 20022 standard makes the product development process much simpler than it would be otherwise. Even if there will be lots of variety in the ways institutions and businesses implement faster payments, the underlying structure allows for easier integration and interoperability.
Real-time payment offers institutions and businesses clear advantages over conventional money movement: - Instant confirmation and settlement - A flat fee structure for transactions - 24/7/365 payment availability
Despite concerns about faster payments leading to faster fraud, the ISO 20022 standard allows for much richer transaction data and communication between institutions, which should help mitigate fraud before it happens.
An Invisible Upgrade with Visible Results The majority of commercial and retail clients never see or touch the payment rails that power commerce and our lives. The shift to faster payments may even seem like an obvious move that should have happened years ago.
Whatever the circumstances, real-time payments are going to change the way institutions, businesses, and consumers move money. Whether that’s B2B, B2B2C, B2C, or A2A, the days of “putting a check in the mail” are quickly disappearing.
We can’t watch instant payments move through wires and fiber optic cables, but rest assured, the positive changes will be highly visible. The institutions that fully embrace instant payments will also be the ones that successfully differentiate themselves, retaining existing clients and winning over new business. About Author: Dr. Angela Murphy is VP of Marketing & Solutions at Pidgin, a new, innovative and secure faster payments ecosystem, enabling financial institutions, business owners and individuals to process transactions faster and with lower fees. Engineered to deliver innovation both today and in the future, no matter how payments evolve, Pidgin allows financial institutions to send and receive faster payments almost instantly, but in a more secure way than virtual wallet alternatives. When using Pidgin, money is kept within the financial institution, as opposed to a holding account owned by a fintech provider. For more information, please visit www.pidgin.net.