Blogs

By: Ashton Vandivert, Manager, Emerging Payments

Ready or not, instant payments are here! RTP^® celebrates its fifth anniversary this year and FedNow^SM is expected to arrive next year. If you’re not already utilizing new payment systems, have you started planning to do so in the future?

Let’s talk about the Federal Reserve’s four steps to take when starting your instant payments journey.

Step 1: Get to know instant payments. – As with anything, the first step in a new venture is to lay the groundwork and build a foundation of knowledge before setting out on the course. Developing a deeper understanding of how instant payments work uncovers the possibilities and helps to identify opportunities! Instant payment systems RTP^® and FedNow ^SM deliver solutions that have not yet been offered by any other payment rail, providing opportunities for innovation and expansion of services. To learn about instant payments is to better understand them. Whether you’re independently curious about RTP^® and FedNow or working with a more formal study team, there is a wealth of information online in the form of articles, blogs, webinars and videos – you name it! And of course, here at EPCOR, we have tons of resources in our on-demand faster payments curriculum.

Step 2: Assess account holder behavior. – Once you’ve gotten to know instant payments a little better, the next step is to study account holder behavior. Within the industry, there is increasing evidence to show that consumers and businesses alike are becoming more interested in faster payment options. Digital wallets and mobile payment apps are gaining popularity. Even if account holders aren’t necessarily asking about instant payments, their interactions and account activity can indicate their desire for faster payment solutions. In a recent study by the Federal Reserve, nearly 70% of consumers responded that faster payment capabilities are an important factor and likely to lead to higher levels of satisfaction. In a separate survey also conducted by the Federal Reserve, more than three-quarters of businesses reported using some form of faster payment in the past year. Do your account holders’ behaviors align with this? For example, do you know how much money your account holders have transferred from their accounts to an online payment provider like a digital wallet or mobile payment app? How many of your small business account holders have inflows coming from these providers? By looking into these activities, you may find that the behaviors speak for themselves.

Step 3: Evaluate needs and opportunities. After you’ve researched instant payments and noted your account holders’ interactions with them, step three is diving into how they can be leveraged at your financial institution. Identify needs and what opportunities instant payments provide. In this evaluation, you may find multiple opportunities in various forms. First, focus on account holder experience and how it can be improved. Instant payments are a convenient and seamless way to move money, and payment transparency can offer a sense of confidence and control to your account holders. Improving account holder experience can boost levels of satisfaction and retention and increase the potential to attract new clients. Secondly, instant payments can also be leveraged in product offerings, perhaps as premium value-added services. For example, could your small business account holders benefit from enhanced bill pay or instant payroll services? Enhancements to existing products and services can be attractive, especially when presented with a focus on the benefits and the value added. Finally, instant payments can satisfy needs and present opportunities within your financial institution by creating internal efficiencies and cost savings. By straight-through processing, instant payments can decrease account holder inquiry calls and reduce the demand for manual processing, freeing up both resources and time.

Step 4: Talk to key stakeholders. New product launches take time, planning and collaboration between all parties involved. Offering instant payments is no exception. Getting your full organization involved is key, along with internal stakeholders and external third-party vendors that’ll be impacted by implementation. Start by taking a holistic view of your financial institution. Bring departments together to build cross-functional collaboration – for example, lending, deposit account management, customer service, marketing and even HR. Diversity brings together different perspectives for execution and leverage. You may also discover how various sectors within your financial institution can benefit from and support instant payments. Full organizational involvement is crucial in a successful launch not only for your organization but also for your employees and account holders. Next, reach out to external third parties like your core service provider, software vendors and correspondent financial institutions. Ask what plans they have in place to support instant payments and what role they are playing in the instant payment landscape. By finding out what your vendors have in their portfolios, you’ll be able to further those conversations to specifically fit your financial institution and timeline.

To learn more about RTP^® click here and to learn more about FedNow^SM click here.

Source: The Federal Reserve