Fintech providers, government players, and everyday consumers continue to push forward the global race for constant availability of real-time payments through ever-evolving technology, standards/rules, and payment preferences.
Originally a banking initiative in the UK, the faster-payments initiative aimed to reduce the typical payment times between financial accounts from three business days to a few hours and now also encompasses immediate, real-time payments.
Perhaps once thought of as just a passing trend, faster payments are clearly here to stay. Here are two reasons why you need a plan right now and five steps to help you establish one. (Read on to get these five steps.)
Keith Riddle is EVP, Enterprise Solutions Development, at Corporate One Federal Credit Union
Reason No. 1: Consumers and businesses want and expect faster transactions.
It’s no secret that everyone wants their money to move faster. Research by the Federal Reserve indicates consumers are eager for quicker debit-payment processing, and businesses crave the faster availability of funds. For example, according to an online poll conducted on behalf of electronic payment systems company ACI Worldwide, two-thirds (65%) of small and medium-sized business owners in the U.S. would consider switching account providers for the offer of real-time payments.
In addition, a 2016 Nielsen report titled Channel Effectiveness for Financial Services reported that 73% of consumers are comfortable using a PC to retrieve basic account information, transfer funds (69%), or pay bills (69%). In addition, 33% of consumers use their phones to check balances, transfer funds (24%), or pay bills (21%).
Altogether, consumers’ comfort with and consumption of mobile/digital technology combined with their expectations is fueling the industry’s push towards creation and implementation of faster-payments technologies and solutions.
Reason No. 2: Government and industry players are actively working to make real-time payments a reality.
Transformation of the U.S. payment system is being led by numerous efforts from various organizations, such as the following:
NACHA (the National Automated Clearing House Association)
Mandatory Same Day ACH continues to move toward realization with Phase 2 set to drop in September and Phase 3 right on its heels in March of 2018. Smart financial institutions are preparing for these shifts by evaluating the operational (core processor testing/certification efforts) and financial impacts (product design and pricing considerations) of expedited payment delivery.
Federal Reserve Bank’s Faster Payments Task Force
The Faster Payments Task Force, a coalition of more than 300 diverse payments industry stakeholders who identify and evaluate alternative ways to implement safe, ubiquitous, faster payments capability in the U.S. officially presented in July their recommendations for implementing faster/real-time payments.
The report, titled The U.S. Path to Faster Payments, calls for all stakeholders to “seize this historic opportunity to realize the vision for a payment system in the United States that is faster, ubiquitous, broadly inclusive, safe, highly secure, and efficient by 2020.”
The Clearing House
Also contributing to the faster-payments movement is The Clearing House, a banking association and payments company owned by the largest commercial banks, dating back to 1853. Some of The Clearing House’s opt-in participation for real-time payment delivery Initiatives in the past year include secure tokenization (removing credit card data from a company’s internal networks and replacing it with a unique, generated placeholder, or “token”) of payment requests, enablement of real-time payments functionality, and a partnership with payment systems company VocaLink for the deployment of a real-time payments platform.
Full speed ahead
As the race for faster payments continues around the world, now is the time for your credit union to become more effective, agile, and competitive in this marketplace. In order to help prepare for this shifting payments paradigm, here is a list of five pragmatic steps your credit union can follow to construct a faster-payments strategy.
Download 5 Steps to Establishing a Faster Payments Strategy
Keith Riddle is EVP, Enterprise Solutions Development, at Corporate One Federal Credit Union.