As the world eases into a “new normal,” financial institutions are ramping up and responding to the changes wrought by COVID-19. A burst of momentum and new developments in faster and real-time payments paint a clear picture of the future and a clarion call to action for financial institutions: The time to act is now. According to a PYMNTS' survey, almost 75 percent of consumers plan to maintain at least some of their digital behaviors post-pandemic. And that’s just the tip of the iceberg. These digital preferences carry over to consumers’ relationships with their financial institutions, and financial institutions must prepare themselves and their customers for the evolution underway.
Highlights from this month’s emerging trends and development are below.
June 2021 At-A-Glance
COVID-19 Impact: New PYMNTS’ research reveals consumers’ shift towards the connected economy is definitive. Digital-first is here to stay.
Faster Payments: Nacha, in conjunction with the Payments Innovation Alliance and Payments Associations, announce the creation of the Faster Payments Certificate program; Same Day ACH volume increased by 88 percent in 2021 Q1.
RTP® and FedNow(SM): Real-time payments operators the Clearing House and the Federal Reserve, discuss their organization’s real-time payments infrastructure; RTP announces a BillPay revolution and outreach to minority communities underway; FedNow Community Hall updates the industry.
The New Role of Operations Workgroup: The New Role of Operations Workgroup continues its work and announces the release of an industry white paper summarizing their work.
COVID-19 has changed the way financial institutions and their customers do business. From digitalization and remote workers to shifts in consumer preferences, the impact of the coronavirus pandemic on financial institutions and their customers is far-reaching. It may permanently affect the way consumers work, shop, and study.
The research bears this out. According to PYMNTS' new survey data, Consumers and the New Retail Landscape, 40 percent of “digital shifters” are doing more online and less offline. A whopping 74 percent of consumers plan to maintain at least some of them their digital behaviors in the future.
The report states:
Our research shows that consumers’ shift towards the connected economy is definitive. The convenience of delivery services and high-speed internet connectivity became an essential utility rather than a 'nice-to-have luxury for the millions of Americans who found themselves dependent upon digital channels to shop, work, or study…The connected economy — which caters to those who do more online and less in stores — has reached a new level of maturity and permanence.
Consumers’ preferences for a “high-speed” digital experience suggest that faster payments may become table stakes for financial institutions and their customers sooner than later.
And with RTP® gaining traction and FedNow(SM) expected to launch in 2023, opportunities abound for financial institutions to explore faster and real-time payments through their core, directly, or through a third-party provider.
Speaking of faster payments, Nacha, in conjunction with the Payments Innovation Alliance and the Payments Associations, announced May 24 the creation of the Faster Payments Professional certificate program. According to the company’s news release, “The program will provide payments professionals a holistic view of faster payments, including current offerings – such as Same Day ACH and RTP – relevant standards, legal perspectives and more while providing those who complete the program with additional expertise in these areas.”
“In just a few years, we’ve seen the successful implementation and adoption of a number of faster payments channels, including Same Day ACH and RTP,” said Stephanie Prebish, AAP, CTP, Nacha’s Managing Director, Association Services, in the release. "With other innovations on the horizon, it is important for payments professionals to have a course of study to help them learn and them demonstrate their expert knowledge in this dynamic area. With Nacha, the Alliance, and PAs, we have assembled payments experts to design and launch this certificate program.”
The development of this certificate program is especially timely considering recent volume reports released by Nacha. According to the release:
Same Day ACH volume increased 88% in the first quarter as the number of payments exceeded 141 million. The value of these payments, $187.6 billion, reflects a 133% increase over the first quarter of 2020. Nacha extended Same Day ACH operating hours on March 19, 2021, and the ACH Network now settles payments four times a day.
“Ongoing adoption and surpassing the 1 billion payments mark show that Same Day ACH is a significant contributor to meeting the nation’s demand for faster payments,” said Larimer in the news release. “Our next enhancement, increasing the per-payment limit to $1 million in March 2022, is another step to expand the reach of Same Day ACH.”
For more on ACH Network volume totals, download the infographic here.
RTP & FedNow
Real-Time Payments Operator Update
In other news, the recent U.S. Faster Payments Council (FPC) Spring Conference brought together Nick Stanescu, senior vice president and FedNow business executive, and Steve Ledford, The Clearing House's senior vice president for product and strategy, to discuss their organizations' instant payments infrastructures.
The Fed Payments Improvement website emphasized: “While The Clearing House’s RTP Network and the FedNow Service will compete when the FedNow Service launches in 2023, both Ledford and Stanescu stressed the importance of collaborating to drive successful adoption of instant payments within the U.S. market.”
During the conference, Ledford and Stanescu discussed their recent collaboration around aligning messaging standards and optimizing the compatibility of their services. “Both the RTP Network and the FedNow Service are using the ISO 20022 standard for message formats,” reported the Fed Payments Improvement website. “Aligning to this internationally accepted standard promotes routing interoperability, end-to-end efficiency of payments and future innovation.”
As noted by Fed Payments Improvement, Ledford and Stanescu also agreed that the time for financial institutions to start planning for real-time payments is now. Ledford suggested that financial institutions ask themselves, “How can I make my existing services better?” He also pointed out that “getting ready for implementation could take longer than anticipated and suggested financial institutions reach out to their third-party service providers for help with integration.
Stanescu suggested a three-step approach: 1) identify your financial institution’s real-time payments opportunities through a review of your business plans and needs, 2) review systems and processes for instant payment readiness, and 3) share your implementation plans with service providers and key customers and learn more about their plans and needs.
For more on this topic, visit FedPaymentsImprovements.org.
As noted in a May 5 release, CEOs of 23 leading financial institutions, along with the chief executives of Jack Henry & Associates and Fiserv, are committing to delivering the next revolution in how bills are delivered and paid by creating a smarter, safer, and more transparent digital experience via the RTP Network.
In a letter, the CEOs of the companies backing the new bill pay capabilities stated their organizations are making the investments needed to deliver a new bill-pay experience over mobile and online channels, noted the release. Billers will be able to present a bill securely through a bank’s digital channel using a RfP (Request for Payment) message over the RTP network. Customers will review the bill, pay immediately, or schedule the payment for a future date. The payment happens in seconds over the RTP network, delivering funds to the biller with confirmations sent to all parties.
TCH and Jack Henry to Bring Real-Time Payments to Minority Communities
To bring the benefits of real-time payments to all Americans, especially those in communities served by minority-owned depository institutions (MDIs), The Clearing House and Jack Henry & Associates are jointly covering the costs of the onboarding fees for MDIs connecting to the RTP Network, using JHA PayCenter™, Jack Henry’s proprietary payments hub, a May 4 joint news release announced.
“Demand for faster payments has never been higher, and all Americans deserve to enjoy the benefits that can help solve many customer cash-flow concerns,” said Jim Aramanda, President & CEO, The Clearing House in the release. “By easing the access to the RTP network for minority-owned banks and credit unions, many individuals and small businesses in these communities can reap the benefits of faster funds availability.”
FedNow Community Town Hall
“FedNow Community leaders hosted a 90-minute webinar on May 4 to share FedNow Service key developments and plans for work and event opportunities in 2021,” reports the FedNow website.
- Technology vision and actions required to prepare for 24x7x365 payments processing
- An overview of the ISO® 20022 message specs
- Updates from the FedNow Pilot Program
- Upcoming engagement opportunities and insights from community members
- Facilitated Q&A session
Resources related to the event are below:
Federal Reserve Invites Public Comment on Proposed Rule
The Federal Reserve Board is inviting public comment on a proposed rule to govern funds transfer over the Federal Reserve Banks’ FedNow Service. According to the Federal Reserve’s website:
The proposed rule would establish a new and comprehensive set of rules governing funds transfers over the FedNow Service and set out the legal rights and obligations of the Reserve Banks and FedNow Service participants. Many of the concepts in the proposed rule are similar to existing provisions that govern the Fedwire Funds Service, which is the payments service currently operated by the Federal Reserve System.
Comments are due within 60 days of the proposal's publication in the Federal Register.
Visit the Federal Reserve website
to learn more.
The New Role of Operations Workgroup
The New Role of Operations Workgroup met on April 30 to continue defining the new role of operations in the wake of COVID-19, identifying challenges, and exploring payments disruptors and their impact on financial institutions and their customers. Currently, the group is working on a paper summarizing the operational changes and challenges the industry is facing, along with several important considerations to guide decision-making as we advance.
The agenda included the following topics:
- FedNow presentation by Nell Campbell Drake
- Challenges Facing Operations subgroup report
- The Faster Payments Symposium (formerly Innovating Payments Conference) update
- Discussions around an upcoming white paper, due to release late summer
The group will meet Friday, June 4 (rescheduled from Friday, May 28, due to the holiday). Watch for an update in next month's executive summary.
NEACH Your Strategic Partner
The proverbial writing is on the wall: Faster and real-time payments are gaining momentum, and the time to prepare is now.
The good news is you don’t have to do it alone. Consider NEACH your strategic partner as you consider educational opportunities or require support in learning more about faster and real-time payments. Email us at firstname.lastname@example.org or call us at 782-321-1011.
AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.