How Financial Institutions Can Future-Proof their Payments Strategy

Payments modernization and strategy are top of mind for most financial institutions, with seven out of ten executives agreeing that transforming the payments industry is a core pillar of their larger digital program, according to Accenture. While most bankers agree on prioritizing a strategic approach to payments, knowing where to start against today's backdrop of accelerated digitization and innovation can be a challenge.

NEACH recently sat down with Keith Riddle, President and CEO of Sherpa Technologies, a credit union service organization (CUSO) owned by Corporate One Federal Credit Union, one of the nation’s largest and most innovative corporate credit unions with $6.5 billion in assets, to talk payments modernization and strategy.

“Payments modernization can take many forms, but as we define it, it’s an open framework, access to multiple payments methods or streams, and the availability of those payments methods within integrated digital experiences,” says Riddle. “If community banks and credit unions don’t seek an open framework where consumers and small businesses can consume multiple payments methods and messages, they fall prey to competitors that have integrated those services within digital experience platforms.”   

The Payments Experience

Within the broader context of payments modernization, no delivery channel impacts the customer experience more than payments for consumers and small businesses. Consumers expect immediacy, transparency, and simplicity in interacting with digital experiences.

“That’s why there has been a significant migration for consumers and small businesses in leveraging FinTech platforms that have embedded payments simply but extensively in their platforms,” says Riddle. “If a credit union or community bank cannot provide that same degree of convenience, simplicity, and embedded functionality to help consumers and small businesses manage their cash flow, then they’re going to start losing those consumer relationships to institutions or FinTech platforms that do.”

Future-Proofing Your Payments Strategy

When we talk about future-proofing your payments strategy, it goes back to that open platform, says Riddle. When he speaks of "open platform," Riddle is referring to an open framework for integrating diverse payment methods and vetted FinTech solutions with credit union systems and applications. Using an open platform means financial institutions can upgrade their strategy or work through a phased approach for their modernization efforts.

According to Riddle, there are a few steps you can take to future-proof your financial institutions and payments modernization strategy:

1. Start small. Payments modernization starts with a single step. For example, if it's real-time payments we're talking about, start with receiving. Even the big banks begin with receiving payments because it allows them to have their consumers and small businesses experience the immediacy factor without addressing all of the digital experience integration upfront. When you're considering a partner, seek out someone who has the experience, the development and testing, and the resiliency in their architecture, so you don't have to replicate those things on your own.

2. Leverage an open framework approach. Once that’s set up, you can move towards a phased approach to payments modernization. You can leverage that same open framework to add more services or act as a collaborator with critical partners to integrate those into your customer experiences. In fact, some core providers are now integrating with open framework solutions. An added benefit of working with an open framework is that you don't have to worry about repeated integration challenges associated with disparate platform connections or technology updates. An open platform manages the complexities of each service, and you and your customers or members receive the benefit. 

3. Look at points of impact that drive immediacy in value for consumers and small businesses. Look at your ACH activity and names like PayPal or similar Fintech payments providers to determine the level of disruption in your customer/member base. What user experience is the Fintech platform offering that you don't? These are potentially immediate points of impact, but it's also where you're most vulnerable with consumers or members using other platforms. Also, consider the needs of your small business customers. How can you offer immediacy and value for invoice collection and payment, those things that would maximize their cash management?

Payments modernization shows no signs of slowing down. With the continued acceleration of digitization and changing customer preferences, delaying your payments modernization efforts can cause customer drop-off and make your financial institution less competitive during today’s rapid pace of change.

Payments modernization doesn’t have to feel overwhelming. All it takes is one small step to start your journey toward payments modernization and future-proofing your payments strategy.

To hear more from Keith Riddle on how businesses can future-proof their payments strategy to drive modernization forward, check out this on-demand webinar featuring Levvel’s FS&P Senior Director Fred Fuller. Click here to read the case study and to learn more about the partnership between these two organizations.