Enabling real-time payments is vital for any bank or credit union to remain competitive. Consumers have grown accustomed to sending and receiving real-time payments through a variety of fintechs, such as peer-to-peer (P2P) payment apps.
Demand for real-time payments has become even greater lately, as inflation makes the need to receive cash quickly more vital, and more and more people are working freelance or in the gig economy and need to get paid quickly.
However, it is complex and labor-intensive for many financial institutions to connect to the existing real-time payment networks, and many lack the proper tech infrastructure. That’s where partnerships come in; by partnering with a respected vendor, FIs of any size can future-proof their business and easily connect to all the major real-time payment (RTP) networks.
To learn more, PaymentsJournal sat with Parag Rohan Jain, GM of Fiserv’s NOW Network, and Sarah Grotta, Director of the Debit and Alternative Products Advisory Service at Mercator Advisory Group. Also joining the discussion were Michael Curran, AVP of Digital Enterprise Solutions at the $11 billion-asset Bethpage Federal Credit Union, and Jeffrey Staw, Chief Innovation Officer at Open Technology Solutions, a consortium that provides technology support to several credit unions, including Bethpage.
Complexity of Connecting
The biggest reason small to mid-size financial institutions should look to partner when it comes to real-time payments is the sheer complexity of connecting to RTP networks, said Jain.
That’s why Fiserv created the NOW Network, which acts as a gateway and routing engine connecting banks and credit unions seamlessly to real-time payment networks and routing transactions to a large spectrum of end points.
“As expectations for real-time capabilities increase, financial institutions need to enable their customers to reach as many of these end points as possible, or risk losing customers,” Jain explained. “It’s laborious for them, however, to connect to all these networks. But through one integration with NOW, we can enable financial institutions to easily connect to all the real-time payment networks.”
Grotta added that due to the complexity of real-time payments, financial institutions don’t need to jump in all at once. For example, they can start by enabling their clients to receive real-time payments, and then work toward originating them.
“You can walk before you run, and understand the rules of the road before jumping in fully,” she said.
Curran noted that Bethpage, a Fiserv customer, benefits from integrating with the NOW Network by gaining access to well-known RTP networks such as Zelle and others.
“These are brand names that advertise on television and that consumers are familiar with,” he said. “They’re leaders in real-time money movement and we want to partner with them.”
Staying Relevant Amid Competition
Jain said that it is imperative for all financial institutions to give their customers access to real-time payments in order to remain competitive. Those that don’t will be left behind.
“Financial institutions need to act fast to give their customers what they want, before they decide to work with another institution that offers the connectivity they are looking for,” Jain said. “More users than ever before are gaining access to real-time payments, and this includes both consumers as well as businesses.”
Grotta added that financial institutions that don’t currently have a road map in place need to start planning as soon as possible.
“You can’t find yourself playing catch-up when dealing with something that has the complexity of real-time payments,” she noted. “You need to have this in place for customers sooner rather than later. Consumers are increasingly expecting real-time payments.”
In fact, remaining competitive was the number one driver for Bethpage to partner with the NOW Network and offer real-time payments to its members, said Curran. Currently, the institution enables receiving real-time payments only but hopes to originate them as well shortly.
“We’re in competition not only with banks that have big pockets, but consumer expectations from other industries as well,” Curran explained. “Amazon can deliver most products by the next day, or even same day in some cases. But when customers move money digitally, it takes two to three days. Financial services are really lagging behind retail and other industries and looking to play catch-up. As a credit union, we are constantly looking for opportunities to jump ahead and move forward.”
Since adopting real-time payments, Bethpage has seen it used in a variety of payment types beyond just person-to-person payments. These include merchant funding, online gambling, and receiving wages. The last example is critical, as many workers increasingly do not have typical 9-to-5 jobs where they get paid every two weeks, and instead, work in freelance roles or in the gig economy where they get paid at irregular intervals.
“Real-time payments in the wages category, especially, could be a game changer for us, and we don’t want to be caught behind,” Curran added.
Jain also noted that “in this high-interest-rate environment we are currently in, the cost of capital is high and that’s boosting the desire for on-demand money.”
In general, beyond even just payments, consumers have grown to have a “right now” mentality, and banks and credit unions need to be able to meet those expectations, said Open Technology Solutions’ Staw.
“People want things to happen, and they want it quickly,” he said. “That’s why so many fintechs have been able to be successful; they bring a new service to market fast, and they focus on one specific area that they are really good at.”
Through technology partnerships, “financial institutions can better compete in this area, and consumers can now get these services from your institution rather than a fintech,” he added.
As technology rapidly changes, so do the expectations of consumers when it comes to payments, and Fiserv is constantly evolving its capabilities, said Jain.
“We are constantly thinking about how to provide real-time capability for new use cases and new end points,” he said.
Curran added that this spirit of constant innovation is why Bethpage thinks of Fiserv as more than just a technology vendor but as an R&D partner.
“Working with Fiserv has made it possible to offer these services that are in demand today, and also be ready to offer whatever new services emerge in the future.”