The impact of COVID-19 continues to play out on multiple fronts. A new Federal Reserve study found that nearly half of American businesses surveyed said the pandemic is accelerating their plans for faster payments adoption, reported the FedNow(SM) Instant Payments Community. Also in the news, Robert Fisher, Chairman of the Independent Community Bankers of America (ICBA), will testify at a House Small Business Committee hearing on what’s next for the Paycheck Protection Program (PPP) forgiveness.
Also in the news, just as Same Day ACH (SDA) is ready to mark its fifth anniversary, Nacha released its Q2 numbers, which shows significant growth for SDA. In the second quarter of 2021, Same Day ACH payment volume was 148.7 million, an increase of 82% over the same time in 2020. Also, on the real-time payments front, Chase Bank announced it is launching a B2B payment option using The Clearing House’s (TCH’s) Real-Time Payments® (RTP) network.
These are just a few of this month’s headlines. Read on to learn more about these and other stories.
NEW FEDERAL RESERVE STUDY
A new Federal Reserve study found that nearly half of American businesses surveyed said the pandemic is accelerating their plans for faster payments adoption, reported the FedNow(SM) Instant Payments Community. According to the study, nine in 10 expect to be able to make and receive faster payments within three years, which coincides with the projected release of the FedNow Service in 2023.
As noted on the FedPayments Improvement website, key findings from the study include:
- Most businesses surveyed have already sent and received some type of faster payments in the past 12 months, primarily via digital wallets, Same Day ACH and “push to card” services that use debit card networks.
- Nearly two-thirds of those surveyed (and more than three of four large/very large businesses surveyed) indicate that access to faster payments would factor into any decision to switch banks in the future.
- The faster payments capabilities most demanded by businesses support use cases that will help them improve cash flow management, payment operations efficiency, ease of access and security. And certain high-demand use cases, including electronic invoicing and bill pay with remittance details, are best supported by instant payments.
Click here to read the full findings.
The Independent Community Bankers of America (ICBA) announced on August 30 that ICBA Chairman Robert Fisher is scheduled to testify Wednesday, September 1, at a House Small Business Committee hearing on what's next for Paycheck Protection Program (PPP) forgiveness. The president and CEO of Tioga State Bank of Spencer, N.Y., will discuss community bank PPP lending, loan forgivingness, and efforts to streamline the forgiveness process.
According to the announcement, the Small Business Administration (SBA) on August 4 launched a Direct Borrower Forgiveness Portal for certain borrowers to streamline forgiveness. However, some community banks have chosen not to use the portal, preferring to guide their customers through the forgiveness process themselves.
Community banks were the top PPP lenders, accounting for some 60 percent of its total loan amount and 58.3 percent of the nearly 49 million jobs saved by the program.
With Same Day ACH about to mark its fifth anniversary, new figures from Nacha show astounding growth for this faster payment method, reports Nacha. In the second quarter of 2021, Same Day ACH payment volume was 148.7 million, an increase of 82% over the same time in 2020. Those payments transferred $250 billion, up 115% from a year earlier.
“These phenomenal increases come just ahead of Same Day ACH turning five later this month. The figures speak to how the payments community has so widely accepted Same Day ACH in a relatively short time,” said Jane Larimer, Nacha President and CEO.
Speaking of faster payments, real-time and same-day payments are increasingly popular among businesses that want to send and receive funds quickly, according to CFO Daily News.
The 2021 Treasury & Fraud Controls Survey Report from Strategic Treasurer and Bottomline Technologies reported that when asked what their payment modernization programs included, companies’ top answers were:
- Real-time payments (45%)
- Same-Day ACH (36%)
- FinTech integrations (34%)
- Application Programming Interfaces (APIs) (27%)
- FedNow instant payments (23%)
A recent report revealed that 86% of A/R departments view themselves as “somewhat” or “very modernized.” However, the study’s findings show otherwise:
- 26% use mostly manual processes
- 37% use a mix of manual and digital processes
- 29% use mostly digital with some manual processing
- 7% are all digital
You might consider these findings to assess where your financial institution stands on the path to payments modernization and what next steps you might need to take to prepare your organization to meet shifting cultural and customer demands best.
Due diligence is essential for third-party risk management with growing numbers of financial institutions considering relationships with financial technology (FinTech) companies.
To that end, the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency recently released Conducting Due Diligence on Financial Technology Companies: A Guide for Community Banks (Guide). The Guide was created to help community banks conduct due diligence when considering relationships with FinTech companies.
You can access a copy of the Guide on the FDIC website.
RTP® AND FEDNOW(SM)
In other news, Chase Bank announced it is launching a B2B payment option using The Clearing House’s (TCH) Real-Time Payments® (RTP) Network. As reported by the Payments Journal:
The new Chase product enables immediate wholesale payments between companies, or certain consumer-to-business transactions, such as buying a car. The bank is piloting the product through an undisclosed fintech partner.
Consumers who don't take out a loan must pay with cash, a cashier's check, or wire transfer in the auto industry. Chase wants to replace this with a real-time digital payment. Real-time payments in a car dealership can also speed up other processes, such as setting up the vehicle's registration…
He added that Request for Pay would also provide better transparency about the resolution of business-to-business transactions. "A corporate would like to know if and when you paid and be told in real-time to ship a product or provide a service," he said. "That’s not present in all payment types."
In another sign of continued growth, BankProv announced it is also a participant in TCH’s RTP network.
According to PYMNTS.com, “BankProv has partnered with COCC, its core provider, to connect to the RTP. BankProv CEO Dave Mansfield said the bank’s newer clients, especially those that are cryptocurrency-related, often need to move funds fast in order to deal with valuation risk because of the inherent volatility.”
The announcement follows news that Corporate America Credit Union (CACU), serving nearly 500 credit unions nationally, has joined the RTP network. According to the news release, CACU serves as a funding agent for its members.
PAYMENTS MODERNIZATION SURVEY
Volante Technologies, a company specializing in cloud payments and financial messaging, revealed findings from its payments modernization survey focused on mid-tier banks and credit unions in the U.S. The results indicate that real-time payments connections are predicted to triple within the year, and that cloud Payments as a Service (Paas) is a growing industry priority.
According to the report:
Among the respondents, 15% say their bank is currently connected to The Clearing House's Real-Time Payments (RTP) system, while 45% say they plan to connect. Among those who plan on connecting, almost half (48%) say they will connect to RTP within a year. Forty percent say they are not planning on connecting to the RTP network. Therefore, within a year, a majority (60%) of these banks will be connected to RTP, four times the current level.
Although RTP adoption was initially slow due to the cost and complexity of installing and supporting a new payment infrastructure and the novelty of 24x7 real-time enablement, the pace has increased dramatically in the past year. The alternative of using cloud-based PaaS is gaining market traction because of the lower costs associated with cloud infrastructure, both for set-up and ongoing operations.
You can download the results of the survey here.
“The Federal Reserve has now published its third and final research brief in a series on remote authentication fraud,” according to its FedPayments Improvement website. “Authentication Fraud Mitigation Approaches, Key Findings and Recommendations (PDF) focuses on approaches and tools to mitigate remote authentication fraud, as well as possible ways the Fed and industry can work together to improve fraud mitigation, build awareness and engage industry stakeholders.”
You can download the complete series of research briefs here.
PAYPAL AND FISERV PARTNERSHIP
According to CNBC News, Paypal and Fiserv announced a new partnership enabling gig economy workers to get paychecks deposited into a PayPal or Venmo account.
"The use cases that this can support are a 1099 (independent contractor) payment for a gig economy worker, a claim payment for an insurance company, a tax refund from the federal government, and more." Nandan Sheth, global head of payments at Fiserv, told CNBC. "It's a combination of convenience and real-time payment experience combined for the consumer."
Dominick Gabriele, Senior FinTech and Specialty Finance Analyst at Oppenheimer, told CNBC, “The partnership has the potential to disrupt the way consumers bank.”
NEACH—YOUR STRATEGIC PARTNER
Disruption. It’s what has defined the last 18 months. Through it all, NEACH remains committed to meeting the needs of its members, providing best-in-class tools and resources designed to help members succeed in today’s complex landscape.
To learn more about real-time payments and their impact on the industry, we invite you to check out our educational resources, Real-Time Education for Real-Time Payments 101 and The Building Blocks of Faster Payments. Also, please take advantage of our Payments Hotline at 855-NEACHQA.
For updates on these and other stories, visit NEACH’s Innovating Payments website.
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.