In an interview with PaymentsJournal at the 2021 Money 20/20 event, Chris Ward, Executive Vice President and the Head of Data, Digital & Innovation for PNC Treasury Management, spoke about the state of the payments industry, PNC’s Strategy, and moving forward with digitization.
From our perspective, what does the state of the payments industry look like today?
It’s a really a dynamic space, especially as we’ve gone through COVID aare coming back to a more normal economy. I regularly talk about the three “I”s of the economy being that the economy is moving to be more immediate, more integrated, and interrupted. And what that means is that consumers and businesses are expecting immediate interaction associated with their transactions and an integrated experience. So, you order your coffee online, you get immediate confirmation about what time it’s going to be available. If you don’t get a response, you actually do not feel interconnected with that experience.
With businesses, it’s the same thing. If you think about all the cargo ships stalled in ports around the country, businesses are trying to get real-time updates about where their products are. People are expecting that immediate and interconnected experience. And if you’re not doing that, it’s going to be interrupted. So, as you think about how businesses are driving towards and thinking about payments, they’re really trying to figure out ways in which they’re going to interact more immediately, and with a much more interconnected experience. This speaks to a lot less checks, a lot more electronic payments, and a more integrated experience. So that when you make a payment, or you receive a payment, you’re giving people or getting an immediate confirmation that the transaction was done. That’s a really different change from how most payments historically were made in the US, which is kind of, you send it in, forget it, versus today, where you send it and get immediate confirmation.
You talked about the three “I”s of the economy. Can you tell me the role they play in PNC’s strategy?
When you think about the three “I”’s of the economy, I like to use practical examples. Think about today’s gig economy worker. The whole notion or the challenges with the labor market, people are really moving towards a work today get paid today model. No one is writing checks for work today get paid today and for that matter, even ACH doesn’t work. If you end your shift at five o’clock, there’s no ACH at 5:30 at night that’s going to impact your account. So, there’s really a move towards leveraging real-time payments, to push the debit as a means of moving money, 24 hours a day, seven days a week. If the shift ends at 10 o’clock at night, and it’s work today get paid today model, that employer is really going to have to have a different solution and think differently about how they’re executing.
We’ve really been very focused on treasury management as a platform and having a platform of services that allow our customers, whether it be through APIs or digital channels, to be able to execute anytime, anywhere, in a manner in which they want to execute to move money. And you know, as I go back to the three “I”s of the economy, that work today and get paid today example is really a great example of people wanting immediacy and interconnected experiences.
From your perspective, how has earned wage access changed the accounts payable business?
They’re really having to think very differently about how they run their processes, whether it be AR or payroll for that matter. In AP, if they’re using a lot of contract workers, that contract worker is going to expect to work today and get paid today. So, if you were running AP once a week, maybe you’re running AP every day now. If you are on payroll it is the same thing. If you’re running payroll every two weeks and now it’s work today get paid today, you’re running payroll every day. Those are very different impacts as to how customers are thinking about things.
I will say also as businesses’ technology continues to mature people are looking to upgrade their infrastructure . They are going to much more real-time process and how they’re doing things internally. And that it’s also transforming the way they’re talking to their banks. Customers now are using APIs to talk to their banks. If you’re in your ERP system, you push the button and you will get your balances real time loaded to your ERP. You’re not swivel chairing over to a bank online portal to get your balances or executing a payment out of AP. When the payments are approved you push the button and those payments executed off real time to the bank. It’s a really different way in which corporate customers are thinking about how they’re working with their banks. But it’s also critical to how they’re running their business. Everything is becoming much more interconnected. Everything is becoming much more real time. You see that going back and forth in between the banks and their customers.
How is PNC utilizing data to add value and actionable insights to its customers?
We have several things underway. We have a really strong healthcare business where we actually help those healthcare entities prevent denials of claims by providing them insight on their claims before those claims are actually submitted. That’s a great example using data. The next is cash forecasting. We have a lot of information about payments that are flowing through our ecosystem that are going to influence a customer’s cash position, so we can give them better insight into what their cash forecast is going to be. Those are two really good examples of being able to use data and being able to turn it into valuable information that a customer can act on. Having a data lake or a reservoir of data and not being able to make sense of it is not helpful.
The last thing I would just say is back to the topic of security and fraud, the data and the patterns associated with how customers are transacting really do help provide safety and soundness to the financial system. Leveraging that will help protect the participants in the ecosystem.
What is next for PNC and what should organizations consider when moving forward with Digitization?
Businesses need to continue to think about the dollars and the data associated with the payment moving together. Almost every company hates playing what I call “the match game”, where you get money in through some means and then you get information associated with that payment through a different means. So, you have to sit there and match the payment and the data together to apply it to your receivable system. I always say, the information is actually more valuable than the money. If you have the money in your bank account, but you can’t apply it to AR, it’s not helping your day sales outstanding or any of the AR metrics that you’re driving your business off of. It goes back to the interconnected experiencespeople are expecting.
The only way you’re going to be able to tell somebody that you’ve received their payment and that you’ve applied it, is by receiving both the payment and the information associated with it. There’s likely going to be a big transformation that the information and the payments need to be sent together.
The second thing is that in today’s digital world, people are more and more interested in protecting themselves and preventing fraud. I think you’ll continue to see a lot of movement by the financial institutions in offering solutions that allow people to make payments using aliases. PNC Bank was one of the first banks in the country to connect Zelle to the real-time payment networks, so that aliases could be used instead of banking information to transact between financial institutions. I think you’ll continue to see that blossom over the next couple of years, in particular for corporate customers. That way corporate customers don’t have to maintain banking information in their systems, they can use aliases, which will improve the security of making electronic payments and also take a lot of friction out of the process.