To meet evolving consumer expectations, instant payments and 24/7 money movement are quickly becoming the new normal. However, the benefits of instant payments extend beyond consumers to provide businesses with seamless, low-cost and hassle-free payments made possible by new technologies.
Financial institutions can maximize the value of instant payments in four important ways for their business customers.
1. Reduce Friction and Costs With Request for Payment
Request for Payment triggers convenient, secure digital payments directly from bank accounts. Unlike traditional direct debits, Request for Payment transactions are real time, suitable for ad hoc payments and can be received and sent through multiple channels.
Request for Payment can be the core of a payment transaction. It ensures reconciliation by both parties.
Request for Payment and instant payments enhance business-to-business and business-to-consumer digital transactions. For businesses, reconciling payments under traditional payment schemes can be complicated and costly. In contrast, all the information needed to reconcile a transaction is contained within a Request for Payment, including the invoice or purchase order number, payer account information and the payment method. Businesses can use this information to automate reconciliations.
Consumers benefit, too. Rather than receiving an invoice by standard mail or email and initiating a payment separately in a different app, people can receive, pay, track and store bills and invoices in one place through a payment initiation device such as a digital wallet or an API.
Request for Payment and instant payments enhance business-to-business and business-to-consumer digital transactions.
2. Embrace Open Banking
For Request for Payment to succeed, financial institutions add services that combine it with instant payments and open banking APIs. That can create more flexible, convenient and secure payments.
Open banking provides the mechanism for third parties to become the owner of the relationship with the financial institution's customer, providing them with a range of innovative services and reducing friction and costs. Third parties are not a threat to financial institutions but rather a way of providing services and ecosystems that are at the center of accountholders' financial lives.
3. Understand the Context of Data
Financial institutions are realizing the potential of the rich data that comes with 24/7 instant payments. Understanding and using that data requires a payments platform that supports data normalization across all channels and touchpoints. A best-in-class platform should enable artificial intelligence and machine learning for information analysis, decision making and monetization.
When data is normalized – with context for how it was created and used – it becomes valuegenerating information that helps financial institutions manage liquidity, offer new services and expand their customer base.
4. Optimize Flexibility for Growth
The variations and complexities of payments pose a major challenge for financial institutions that operate on legacy, product-focused systems rather than modern customer-centric technology.
Payments are a complex service involving significant regulations, risks and costs. They are a core part of financial institutionns' value proposition and should be owned, managed and controlled by banks and credit unions. But many financial institutions view payments as a service they provide to support other areas of their business
Financial institutions can change that by outsourcing through a payments-as-a-service solution. Costs and risks decline, staff members are more effective and financial institutions become more agile, tactically and strategically. While financial institutions still provide services to accountholders, a trusted technology partner manages behind-the-scenes complexities.
When financial institutions incorporate additional services and payment options, they meet the holistic needs of businesses and consumers. As instant payments become the norm, those services and options help banks and credit unions maintain a healthy revenue stream and gain a competitive advantage.