Real-time payments are revolutionizing the way people move money, with new networks and technologies launching to meet consumer and business demand. Yet, there are still thousands of financial institutions in North America that haven't connected for real-time capability.
In a recent conversation, Matt Wilcox and Tim Ruhe from Fiserv discussed what these institutions need to know and do so they can remain competitive and provide value to consumers. Wilcox is president of Digital Payments Solutions, and Ruhe is vice president, product strategy, Real-Time Payments. They work with financial institutions to enable real-time capabilities across all of the payment services offered by Fiserv – from core integration and person-to-person (P2P) payments to bill pay, commercial payments and beyond. The conversation was edited for length.
Wilcox: Let's start by defining what we mean when we talk about real-time payments.
Ruhe: “Real-time payments” refers to the ability for you or me to pay or get paid instantly by any person or entity we know. Consumers can’t do that in all cases today. Of course, with brick-and-mortar commerce, you can walk into a store, pay for your purchase on the spot and walk out of the store with it. But other transactions don’t always work that way, such as receiving a claims payment, or an insurance payout, or paying a bill. Those payments are not instant because we rely on older payment network rails like the Automated Clearing House (ACH). Today, a new set of real-time payment rails is being introduced in the industry all over the globe. Ultimately, that will mean a better user experience through instant, 24/7 service.
Wilcox: There seems to be some confusion around these new payment platforms and networks. Are all of them important for a financial institution, or will just one suffice?
Ruhe: The short answer is, they're all important for different reasons. If we look at how card payments work today, we have multiple networks, but those older networks are too slow to support instant payments. With the ACH network, payments take a few days. To get to instant, the industry had to create these new rails, and they all operate differently.
Wilcox: Tell us more.
Ruhe: For example, in the case of Zelle®, a P2P solution that you can think of as the bank equivalent of Venmo or PayPal, you can pay with an email address or a mobile phone number. That’s pretty convenient. The RTP® network from The Clearing House and the FedNow® Service are two versions of what we might call “real-time ACH.” They help move money to and from bank accounts instantly.
You want to integrate with your account processing platform for real-time capability once, and then have that foundation to build on as you add services.
Wilcox: How would you guide a financial institution in starting to use these new rails for real-time payments?
Ruhe: The first key is to think ahead about what you want to do long term. What services do you want to offer, and to which of your customers? There are a number of payment services you'll want to real-time enable, but you can't start with everything. So start with one. The first service most financial institutions want to enable is real-time P2P, and they often start with Zelle®. But there are other services that can follow behind that, which will lead you to need and want other rails.
The second key is to take a platform approach. You want to integrate with your account processing platform for real-time capability once, and then have that foundation to build on as you add services. So it's important to think ahead and partner wisely. A platform approach will help you to achieve your objectives near term and long term, with less integration and customization.
Wilcox: We've seen great momentum among our clients with the platform approach you’re talking about. Financial institutions really appreciate the fact that they can connect one time to offer Zelle® for real-time, P2P payments, and then use that connectivity for the RTP network or the FedNow Service. What about institutions that want to start on the commercial side?
Ruhe: It's especially important for them to think strategically about what to launch first, second and third, and then to do that in an extensible, smart, reusable way. It's back to that platform approach: Build once, deploy many. Integrate once, build the first capability on that and deliver it quickly. But start to deliver other services pretty promptly on top of that. In the commercial environment, they can't wait two years between services to get to market. So, it's important to lay out a detailed road map.
Wilcox: What would you say to financial institutions who haven’t started with real-time payments, and wonder if they’re too late?
Ruhe: They're not too late. The clock is ticking, but the game is far from over. If you have a game plan that works, and start soon, there are a series of services financial institutions can start to deploy today.
Wilcox: So there's time to catch up?
Ruhe: Yes, but I wouldn't wait too long. I would start planning that first step as soon as possible and plan upfront to add step two, three and four in rapid succession. Then you'll catch up. Get in, take a smart approach and get going.
Wilcox: So, financial institutions have three specific action items to move toward delivering real-time payments to consumers and business clients: First, identify the end-user services that are your top priorities. Then, get expert help to draw a road map – our Fiserv team will be happy to sit down with you and help you make a plan. And finally, begin execution using a building-block approach.