All posts by Mark Ranta

Payments Practice Lead Mark is responsible for working with our market partners and financial institution customers discussing, exploring, and examining market trends and key drivers in the evolving digital payment space. Prior to joining Alacriti, Mark's nearly 15 year career has been focused entirely on the banking and payments space, working for solution providers and research firms supporting both the corporate and consumer banking markets. Mark is a Certified Treasury Professional and holds a Bachelor of Arts from Lafayette College.
Alacriti Blog

Shortening the Distance Between You and Your Customers

Sometimes the most basic concepts are the hardest to articulate. Oftentimes at industry events and webinars, we hear a lot of the same buzzwords, whether it’s digital transformation, blockchain, or AI to name a few. But what’s often missing is the speaker’s point of view on what those buzzwords mean to them, or how they define them. There are so many sides to these trends, that putting your talk track into context is important for the listener. So today, I will dig a little bit deeper into customer-centricity, and what we mean when we talk about it from a bill presentment and payment standpoint. 

We’ve talked about the connected consumer and their changing expectations in past posts (Ex. 1, Ex. 2 and Ex. 3).  I think the most basic piece to understand about consumer expectations today is that the connected consumer already has experience with the Internet of Things (even if they don’t realize they have). With the ubiquity of connected apps in homes like those on smart TVs, and with voice-based applications like Apple’s Siri, Google’s Assistant, or Amazon’s Alexa, this trend is no longer isolated to tech-forward consumers, but a full mass adoption trend.  The connected consumer is expecting a personalized experience that is anywhere they are, when they want it, and perfect for the time, place, and device they are using.

When we talk about customer-centricity this is really what we are talking about. Not just enhancing the existing experiences you have available today, but also:

  • Thinking beyond the screen that we’ve been building on for the past 20+ years.
  • Leveraging newly emerging technologies like AI that can adapt to make each user’s experience unique.
  • Building out a chatbot strategy to help meet your clients over voice-based apps anywhere from their cars to their couches

As we’ve said before, don’t be hesitant to embrace new technologies.  As new technologies become available, the best thing to do is roll up your sleeves and jump in. Your client-centric digital transformation strategy will depend on it to keep pace with your clients’ always evolving and changing expectations. 

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Transparency While Being Invisible

Real-time everything is a broad stroke trend statement that affects multiple aspects of the payment workflow. However, one thing has been consistent since the dawn of money movement—the demand for the location of money. 

Transparency is important in the grand scheme of payments because it alleviates a large volume of level one requests into the financial institution. Clarification or requests for information clogs up valuable resource time and effort that could be applied to more value-added service.  

Money Movement Transparency in the Past 

In the pre-digital past, this visibility was delivered in a printed Savings Passbook that could be updated by walking into your local branch and or balancing your checkbook to track each time a bill was paid. If you were a small business, you would have had to use a leather-bound ledger that allowed you to track a larger volume of more complex payments in order to meet bookkeeping needs. 

As time moved on, these tasks moved off of paper and pen-based methods to their digital incarnations. However, one thing that didn’t change in the first generation, was the ability to tell where your money actually was. As soon as you hit send, the money would leave your account (maybe) and would get to where it was going in three, four, to who knows how many days. A consumer or business had to have some level of faith that the payment was going to get where it needed to be. 

Money Movement Transparency in the Future

With the new real-time ecosystems emerging that level of faith is no longer required. Immediate payment networks, such as The Clearing House’s RTP, as well as new international money movement schemes such as SWIFT’s GPI, give us the ability to inform the end-users (those sending or receiving money) of:

  1. Where their money is
  2. Where it is within workflows
  3. Details on fees and other once hidden items 

In the case of RTP, it also gives the participants the ability to make inquiries to one another within the network itself, making it a true two-way communication. If you think about this in the context of making the payment “invisible” in the experience, the importance of being able to communicate with one another to clarify discrepancies or misunderstandings on a particular payment is clear. 

With antiquated systems within the bank being updated to enable real-time data and information, the “as of timestamp” will become a thing of the past. An additional value to having transparency is the ability to see not only where your payment is in the value chain, but also who is taking what slice along the way. This will further increase competition as pricing pressure pushes legacy models out the window. After 40 years without significant change, it’s exciting to see the next generation of payment efficiency coming to fruition. 

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How is COVID-19 Accelerating Digital Adoption In Payments? Part ll

How quickly can humans adapt to technology changes? Many of us have pondered this exact question in some form over the years as we’ve watched technology advances take off. However, this question seems especially relevant now.

In Thomas Friedman’s book, Thank You for Being Late, the author goes into significant detail on consumers’ (or Humans as Eric Teller calls us in his graph) ability to adapt to their environments. As you can see below, it’s a slow and steady line. 

Source: @GrantLichtman (2017, February 9). Retrieved from Twitter.

He then overlaid the graph with technology and how it has been accelerating over time, rather slow and multigenerational at first, and then taking on Moore’s law doubling in speed every two years. The point of the graph is to show that while humans were able to adapt to change when it was at or below our adaptability line, we have now entered into a fairly large disconnect between the two. 

This idea is especially resonant when thinking about the effects that COVID-19 will have on consumer behavior. It is apparent that human behavior has already changed, and trends that we’ve seen around contactless payments and digital commerce have gone into hyperdrive. The fundamental idea of adaptability and the curve that Friedman has in his book is a unique perspective for these changes. The adaptability line that Teller presents doesn’t take into account watershed moments, where the line breaks and a new one takes its place.

When the world more or less came to a halt in March 2020, our line of adaptability broke. We now find ourselves FORCED toward new technology or things that make our existence as humans safer. The data is backing this idea up, and we are seeing a mass-market movement towards newer technologies (e.g. contactless payments, mobile payments, e-commerce) and that demand is pushing more innovation. 

Some recent developments: 

  • With stores closing, brands that used to sell to stores are selling directly to consumers online. For instance, Heinz to Home and Snacks.com. 
  • When COVID-19 became a pandemic, there was a 44% increase in the use of contactless payments with some businesses displaying “card only” signs and refusing cash.
  • As of July, there has been a 40% drop in ATM usage. People are both choosing not to use cash and a lot of stores are not accepting it
  • Sales by consumers using mobile wallets for debit transactions increased by 76.6% in August compared to the same period last year.

Breaking old habits is hard to do, and as Teller’s graph shows us, it is partly due to our inability to adapt. As the famous saying goes, “If it ain’t broke, why fix it.” Well, here we are at a break, and consumers are and will continue to adapt to their new normal. The trends that were slowly burning in the background for the past ten years are all accelerating. It is now necessary to adapt your digital strategy to take this break in human adaptability into account and accelerate your go-to-market strategy. Modern channels like Facebook Messenger and Amazon Alexa that were once thought of as nice to haves are on the path to becoming need to haves. 

Are you up to the challenge? 

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How is COVID-19 Accelerating Digital Adoption in Payments?

The world around us has changed drastically since February 2020. The months where we went from semi-isolation to full quarantine will be studied for years to come in classrooms around the world. One area that is interesting but will get less mainstream focus, is the change that we’re seeing in consumer payment behavior. This is where some lasting impact may be felt permanently. 

For starters, the changes accelerating are not in and of themselves new trends. The world had started shifting towards contactless payments (commonly referred to in parts of the world as “tap and go”) over the past five years. We’ve seen cashier-less checkout stores, most notably Amazon Go, in the news for some time, and we’ve also seen the shift from brick and mortar to websites and mobile apps for at least the past 10 years. 

The sudden dislocation of these trends is extremely jarring. What once were turn of the calendar trends with good CAGR (Compound Annual Growth Rate), are now suddenly trends put into overdrive. While the convenience of sites like Amazon, Uber Eats, or GrubHub was enjoyed by many before COVID-19, they became the only viable options when stores and restaurants were closed or only offered curbside pickup dining. Convenience was replaced by necessity.

The change in consumer behavior from physical to digital has an even greater effect when it comes to payment technology. It’s exciting to see where this goes because the biggest hurdle our industry has faced was how to make the leap from the physical in-store experience to the new world of fully contactless checkout (not just for making the payment, but for the whole checkout experience). 

With that breakpoint, we now have an opportunity to re-think the payment itself. It can be freed from credit and debit rails that dominated the in-store POS experience, and early generations of the online POS experience (that simply replicated the in-store experience) and start a renewed focus on new payment options for consumers to use. Even better, we can create new products and experiences for checkouts like just in time financing options, delayed payment schedules, or new couponing/offer technology. 

These new opportunities were not really possible until recently. For one, we didn’t have a central real-time payments infrastructure to support banks (although we had a few fintech driven options with Zelle®, PayPal, and Venmo being the most prominent). However, with the launch of The Clearing House’s RTP® system, all of a sudden a bank account can be unlocked as a payment token directly from the bank, versus a third-party app. The other challenge was overcoming consumer behavior and bridging the aforementioned conventional physical experience with one that requires a certain level of digital engagement to work. Again, this was a trend that had already commenced; however, it became a mainstream phenomenon in the last three months.  

So this really is a perfect storm for innovation. As Plato said, “Necessity is the mother of innovation,” and the necessity of contactless payments may have just tipped us into a new era of payments innovation and change.  

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Payment Trends from the Stamford FinTech MeetUp

On June 11th, I had the opportunity to join some of our industry’s best and brightest minds to discuss the biggest topics moving the payments industry. While the event had to be virtual, the information presented made it clear that things are changing and moving at an incredible pace in our industry, while firms hitting the pause button face the daunting task of catching up.

From AI to Faster Payments, the topics were a festive grab bag, and I wanted to share a few thoughts on each below. 

Faster Payments at a Global Level – Gene Neyer from U.S. Bank did a great job of running through the macro view of payments on a global level. The fact remains that the U.S. is very much at the beginning of our journey in Real-Time Payments, and we can look outside our borders to get an understanding of best practices and leverage the potholes others hit while on their journey. In all, there are more than 50 real-time payment initiatives underway around the globe, so we certainly aren’t entering uncharted territory! 

Faster Payments in the U.S. – a POV from FedNOW – Connie Theien from the Federal Reserve gave an excellent overview of the role the Federal Reserve has in our discussion of new payments and ensuring the payments market is accessible and safe for all. Connie also discussed how the Fed is looking to the market to collaborate through working groups as we lay the foundation of a new payments ecosystem here in the U.S., and the eventual launch of the FedNOWSM Service. 

As Alacriti is a new member of the Faster Payments Council, I am excited to be a part of these discussions at an industry level and work with the Fed! 

Artificial Intelligence – Rajesh Venkatraman from IBM shared insights on how IBM views AI and what it means to Fintechs and payments. It is hard to imagine a trend with more potential than AI. AI can be applied to so many aspects of banking and payments, however, how to harness that potential is where many institutions’ journey into AI faces a roadblock. I thought Raj’s positioning of having firms look at their IA (architectural design) first and make sure their data is in a clean state was a good starting point. I also thought the discussion around “AI for Good” was important given the current environment we live in. 

Considering that AI could fill up a week’s conference all by itself, the panel did an excellent job covering the topic in the timeframe. 

APIs and Open Banking – The final section was covered by yours truly. This topic is really the undercurrent in all of the trends that we discussed during the day. From a technology standpoint, APIs are how we bring varying solutions and services closer together to unlock innovation. APIs in and of themselves, however, aren’t all we need. The open banking part of this trend, or the willingness for institutions to open up access to their data and services to create an opportunity for innovation, is where we’ll see the broad innovation that is possible.  

Overall it was a jam-packed and informative hour, and it will be fun to continue to unpack each of these trends in the coming weeks and months.  

View MeetUp Playback

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Rule Changes and the Opportunity for Innovation (Webinar Recap)

Compliance and innovation are two words not commonly used in the same sentence, but that’s exactly what we talked about in our recent webinar where we joined Nacha’s Sr. Director of ACH Network Rules, Amy Morris, to discuss the upcoming rule changes for WEB Debits, what that means to payment workflows from a billing and payments standpoint, and most importantly, what it means in terms of unlocking an opportunity for innovation. 

So, what are the upcoming rule changes for WEB Debits?

From a high-level, the new rule means that initiators of ACH payments will be responsible for validating a receiver’s account before sending the payment instructions into the network. The overall goal of this rule change is to reduce fraud. However, it is also a chance for financial institutions to benefit from operational efficiency and cost savings, by reducing bad DDA returns (by upwards of 40%) and NFS or insufficient funds returns (by as much as 45%). Those reductions turn into significant cost savings to your billing and payments operation. 

But why stop just at implementing technology to meet this one rule change? 

Our webinar went on to discuss this as the opportunity for innovation for our payments ecosystem as we shift from an analog payments era (one dominated by processes and systems from the last century) to a real-time payments era (underpinned by new and emerging central infrastructures such as RTP® from The Clearing House). These new payments are going to usher in the ability to go beyond money movement to value-added and cost-reducing services geared more towards customer satisfaction, than protecting it from unhappiness (i.e. fraud). 

From a consumer standpoint, this era change has already occurred. Our modern lifestyles have been driven by the explosion of technology and the advances that have been made over the last few decades of the tech revolution (it is still weird to say out loud but the iPad hasn’t even celebrated its 10th anniversary).

What does this mean in terms of bill presentment and payment?

Businesses have to go beyond just enhancing the existing experiences they support every time a new rule change comes into play. It’s a chance to look at that strategy and examine:

  • Are there new channels available from our partners (or the market) that we can interact with new customers/members/clients/patrons to create better experiences for them?
  • Should we be looking at our solution offering as a distinctly different piece of the puzzle from the rest of our experience layer? Or is it time to think of this as a platform where we can easily add to and/or alter our solution offerings to meet demand as it evolves (who would have thought 10 years ago that AI voice-driven experiences would be where it is now?)
  • Don’t be afraid of new technologies. This goes without saying, but the evolution cycle from TTFHW, to being the number one thing under the tree in December is compressing. As new technologies become available the best thing to do is roll up your sleeves and jump in!
  • Choose a partner (or partners) rather than a provider. The innovation in this space may be built by individual companies, but they will most certainly be perfected by communities! 

So if you start the journey to where you meet your customers where they want to pay with how they want to pay, with digital payments transformation, what are the business outcomes you could expect?

  • Cost reduction – While there may be incremental spending required to implement new technology, as mentioned in our webinar, it may actually lower your overall TCO. Whether that’s a reduction of penalties or fees, or a reduction to call centers for level one support, there can be notable reductions in overall costs with modern systems. 
  • Streamline operations – This is an extension of the cost reduction bucket. To have a great front end/client experience, your platform and workflows internally have to be simplified as well. As data and client expectations move to real-time, the back end has to keep up. By modernizing your payments platforms this benefit can’t be overstated and shouldn’t be overlooked. 
  • Improving the payer’s experience – The payer experience is vital. Giving customers a choice and putting them at the center of discussion is a sure way of improving their satisfaction. 
  • Rapid adaptation to industry change  – Adapting quickly to changing business needs is something that is a core tenant at Alacriti. Speed to market with new and improved experiences, along with rolling out functionality in advance of rule changes is key to minimizing the impact on end-user experience. Also important, having a solution that is adaptable in this new payment era we are entering. 

View Webinar Playback