Real-time payments – the authorization, settlement and movement of funds from the sender’s account to the recipient’s account within seconds, or in real time – opens a number of opportunities for credit unions and their members. It allows payroll to be available in an employee’s account immediately at the end of a shift or for funds from an insurance disbursement to be spent within seconds after it is approved, among other possibilities.
Real-time payments is most known for the immediate availability of funds, but another feature gaining traction is Request for Payment (RfP). RfP gives credit unions the ability to securely present a bill through online banking portals in real time for both consumer billing (B2C) and business-to-business (B2B) billing and payment, similar to bill presentment in the bill pay segment. Payees can see and immediately pay bills in their real-time payment portal and/or bill pay app, as well as schedule the payment at a later date. On the other side, billers are notified their bill has been received by the customer and can match the bill to the payment immediately upon receipt.
How it Works
RfP is a message shared over the same secure payment rails using the same data-rich message set as the payments themselves. The message contains all of the details needed by the consumer to understand the bill, as well as the information required by the biller to associate the payment with the consumer’s account.
Currently, paying bills via the biller’s website (“biller direct”) is the channel of choice for most consumers when making payments. In fact, 76% of bills were paid via this channel in 2020, up 14% over the last decade, according to an Aite report.
While this method is convenient, it does present some challenges: Utility, medical, insurance and mobile phone service bills, among others, are sent either by mail or email. Payments can be made through a financial institution’s bill pay or directly on the biller’s website, meaning the request for payment (the bill) and the actual payment are “out of band” from each other as the information contained in the bill is not automatically transferred to or associated with the payment.
The result? A significant number of bill payment “exceptions” where the biller receives funds but cannot post the credit to the consumer’s account. According to the National Automated Clearing House Association (NACHA), a single year can produce an estimated 130 million bill payment exceptions, costing the industry $720 million. The same study found that 98% of these exceptions were a result of incorrect or missing consumer account information.
RfP greatly reduces the number of exceptions and closes the gap between consumer expectations for payments to be processed immediately and bill processing turnaround time, while also moving the payment from email and web back to the financial institution’s digital experience. The whole process, from bill presentment to payment confirmation, is simplified through RfP.
Payees benefit from RfP as they can pay their bills immediately, helping avoid late fees, fines and disruption of services, while also getting assurance their payment has been applied correctly. In addition, they gain more control over when bills are paid, which can assist with cash flow management. Billers, on the other hand, see cost savings and a greater potential for automation of customer payment processing.
All the benefits to credit unions of a traditional bill pay solution still apply here: Offering RfP capabilities within real-time payments creates stickiness and provides the convenience of online payment. Plus, credit unions gain a new revenue opportunity and a modern rail to replace existing bill pay, all while keeping members on their website or in their app. RfP also comes with the additional benefits of real-time payments and immediate posting to the account, eliminating a major source of exceptions.
RfP can deliver on the promise of a better payment experience and financial outcome for credit union members, businesses and credit unions – a true win-win-win for the financial services industry.
Lou Grilli is a Senior Innovation Strategist at PSCU. In this role, Lou is tasked with building and shaping a superior payment and member experience capability for PSCU and its Owner credit unions. Lou’s long career in payments includes product management, product development and thought leadership in credit, debit, loyalty, mobile payments and digital wallets. Lou has spent the last six years in roles dedicated to the credit union industry.