One of the hottest topics in the payments industry today is faster payments. Consumers increasingly want faster, more seamless payment experiences and a mix of fintechs and financial institutions are releasing new services to meet this demand.
Whether it be new payment rails or the sleek customer-facing interfaces that leverage them, the payments landscape is undergoing a transformation that all industry stakeholders should understand. However, faster payments can be a complicated topic because the term refers to a myriad of different products and services, and uncertainty exists on how to connect to faster rails and what the benefits are of doing so.
To aid industry stakeholders seeking to better understand the rapidly evolving world of faster payments, Nacha’s Payments Innovation Alliance and the U.S. Faster Payments Council (FPC) jointly launched the Faster Payments Playbook, an online educational and decisioning resource.
“Now is the time for financial institutions to become educated about all types of faster payments from Same Day ACH to instant payments,” said Jane Larimer, Nacha President and CEO. “Having a faster payments strategy – or at least beginning the process – is critical for financial institutions so they can meet the needs of their customers now and into the future.”
To this end, the Faster Payments Playbook is designed to help financial institutions create and implement a faster payments strategy.
Introduction to faster payments
The Playbook kicks off with a section called “Faster Payments 101,” an educational primer designed to impart foundational understanding of faster payments and the momentum behind its adoption in the U.S.
The introduction of the Faster Payments Playbook then provides a high level overview of what faster payments are and why organizations might want to develop a faster payments strategy. The term “faster payments” is broadly used in the payments industry to indicate simply that increased speed, convenience and accessibility are essential features for the future of the payment and settlement system. It’s also important to note that a key component of faster payments is the more efficient and transparent provisioning of information related to the transaction.
After defining what faster payments means, the Playbook lists some of the major faster payment offerings:
- Same Day ACH from Nacha
- Real-Time Payments (RTP®) from The Clearing House
- Zelle® from Early Warning
- Mastercard Money Send from Mastercard
- Visa Direct from Visa
- FedNow from the Federal Reserve (as proposed in August 2019)
This section also explains that organizations should develop a faster payments strategy because traditional banking models are under duress from fintechs, emerging technologies, and other disrupting forces. If proper attention isn’t devoted to faster payments, organizations run the risk of missing out on revenue and falling behind their competition.
Getting your organization ready for the future
The rest of the Playbook is divided into the following sections:
- Prepare for Change: It’s important that companies gather the information needed to make a decision on faster payments. Organizations should evaluate their faster payments needs, determine how they can best fit into the marketplace, and establish what technologies they many need to invest in.
- How to Develop Your Faster Payments Strategy: To develop a strategy, the Playbook encourages financial institutions to establish an internal team comprised of all the necessary stakeholders. The team should assess the relevant information and outline a strategy of how to move forward. This strategy should be reviewed and revised as needed.
- How to Communicate Your Strategy: When a plan is devised and agreed upon by the team, it’s important to communicate it to the entire organization, identifying who is responsible for what at each stage. It’s also important to educate everyone on what the benefits of the plan are, which can be done through small group discussions, and presentations, among other options.
- How to Develop Your Internal Education Plan: In crafting an education plan, consider process and policy changes that could impact specific areas. Training also needs to be designed to address specific roles and departments. For example, the information presented to the board of directors might differ from should be presented to the legal department.
It’s important to note that the Playbook is a living resource that will be updated regularly to reflect new developments in the faster payments space. And while this Playbook is designed to help financial institutions develop a faster payments strategy, the next version is geared for business end users.
You can access the Faster Payments Playbook here.