Category Archives: Alacriti Blog

Alacriti Blog

Preparing for Payment System Outages

Of late, payment system outages have been making the news. For instance, customers at businesses across the U.S. such as McDonald’s, Ikea, and Popeyes were unable to pay using their credit cards in February 2021. Their payments processor had a service interruption due to an internet service provider outage. Multiple businesses were forced to only accept cash, and Chick-fil-A ended up giving out meals for free. Problems began at 11:00 am ET and were resolved by 8:00 pm ET. 

Also in February 2021, the Federal Reserve Interbank Payment system was unavailable for a few hours. The incident was attributed to an operational error in the automated data center maintenance process. The error caused a four hour shut down of all the Fed’s financial services, meaning the electronic systems used by banks, government agencies, and businesses could not move money. 

In March 2021, Wells Fargo experienced an outage on the same day stimulus checks were to be deposited. This was attributed partly to high volumes of users attempting to check their accounts. Users tried to log in to check their balance and couldn’t access their accounts. Customers began complaining that their stimulus money wasn’t immediately available.

Payment system outages are inevitable. Technology is not infallible, and we have to be prepared to minimize the number of incidents and the degree of impact that a service interruption can cause. Payment systems have their own unique challenges. 

For one thing, banks and credit unions continue to use legacy payment systems, which can be 20 to 30 years old, or in some cases, even older. These systems are not ideal for a 24x7x365 operating model, which is increasingly necessary as real-time payments soar in popularity, and consumer expectations include 24/7 instant gratification. Existing legacy payment processing systems are simply not built to run continuously, as they were designed for batch-based processes. More payments outside of normal operating hours present mean more pressure to change your system.

For another, the record growth in electronic payments is an additional strain. The pandemic accelerated the growth, with the ACH network seeing 26.8 billion payments in 2020, which is an increase of 8.2% over 2019. The value of those payments, $61.9 trillion, was up by 10.8%. Several core ACH payment categories grew by more than 10%—direct deposit, digital consumer payments, P2P, and B2B. 

So what can be done? One of the things that we can do as an industry is put ourselves in a better position should something go wrong. Payments modernization is necessary to help avert preventable outages and impact. Modernizing payment systems means a number of different changes:

  • Cloud-Native – Solutions should be built for and deployed in the cloud. This means your system reliability moves from a physical location to redundant and always available virtual ones. Moving to the cloud also means scalability, which prevents excessive costs and makes future service rollouts easier and faster. 
  • Intelligent Payment Routing – Provide a comprehensive selection of payment options as well as smart routing capabilities to avoid lost transactions during network failures.
  • ISO 20022-based messaging standards – A common language means greater levels of automation and global messaging consistency and interoperability.
  • Open APIs – Open APIs make it easier for disparate systems to work together easier
  • Microservices-based architecture – Make it possible for changes and updates to be made to a system without the entire system having to go down or be interrupted.
  • Payment network options – Not tying your payment options to just one network or type of payment. Instead, access a platform with various networks and payment types. The more options you have, the less impact an outage will have.

More on payments modernization in the webinar: Payments Modernization Game Plan: Moving Forward with Existing Infrastructure.

Today’s legacy and siloed banking technology infrastructure limit financial institutions’ ability to rapidly innovate. It’s time to look at money movement in a new way. Alacriti’s Orbipay Unified Money Movement Services does just that. Whether it’s real-time payments,  digital disbursements, or bill pay, our cloud-based platform enables banks and credit unions to quickly and seamlessly deliver modern digital payments and money movement experiences. To speak to an Alacriti payments expert, please call us at (908) 791-2916 or email info@alacriti.com.

Alacriti Blog

The SWIFT Approach to Payments Security

Ensuring the security of Alacriti’s payments environment is an ongoing process. It demands collaboration and cooperation across the entire organization. Our role in facilitating electronic bill payments means we are subject to the strenuous requirements set forth by HIPAA, HiTech, and PCI DSS compliance. As more threats and bad actors emerge, we too must evolve to provide a safe electronic solution that our clients and end-users can trust. 

Our security discipline also demands that we stay aware of and communicate other security approaches to our community. Another development within the last couple of years is SWIFT’s Customer Security Programme (CSP). It is another way to help protect the health of the financial system and the counterparties within it.

Here’s an introduction to SWIFT, its CSP, and information on its Customer Security Controls Framework, which lays the foundation of the program.

What is SWIFT?

SWIFT is an acronym for the Society for the Worldwide Interbank Financial Telecommunication. SWIFT provides a platform for standard messaging and communication that connects to over 11,000 banking and securities organizations, market infrastructures, and corporate customers across the globe. The platform supports money movement worldwide by facilitating secure, standardized financial messages between organizations.

What is SWIFT’s Customer Security Programme (CSP)?

SWIFT developed its CSP to help thwart cyberattacks and the negative consequences they can have on businesses, consumers, and organizations around the world. The global ubiquity of SWIFT’s platform makes it a natural place to implement security protocol to help organizations better protect their transactions from fraud. The CSP is built around three core steps:

  1. Organizations should understand SWIFT’s Customer Security Controls Framework
  2. Organizations should close any gaps they identify against the controls
  3. Organizations should self-attest their level of compliance

 

In 2017, SWIFT introduced CSP in self-attestation mode. Which allowed participants to familiarize themselves with the goals, framework, lifecycle steps, and threat mitigation principles of the program. In 2018, SWIFT allowed participants to build on their experience and improve their security posture with additional mandatory controls.

What is the Customer Security Controls Framework (CSCF) v2021?

The CSCF v2021 provides information on changes to controls, additional guidance, and many clarifications to existing controls and their associated implementation guidelines. 

Mandatory controls include restricting internet access, segregating critical systems, preventing compromise of credentials, and detecting anomalies. Read the full framework here.

Image Source: https://www.swift.com/news-events/webinars/customer-security-controls-framework

How does SWIFT’s CSP help an organization’s overall security?

When a participating organization attests its level of compliance, that attestation can then be shared easily, in a standard manner, with counterparties. This streamlined communication can help mitigate risk and let organizations decide if certain counterparties they’re dealing with require additional controls.

How does SWIFT’s CSP help with payments?

SWIFT’s CSP also has a Payment Controls service that sends alerts for suspicious or out-of-policy messages. The Payment Controls leverage real-time payments monitoring, behavioral patterns, and independent daily reporting to help mitigate the risk of fraud.

The Bottom Line: The CSP helps SWIFT customers secure their own environments, detect fraud among their counterparties, and share information that can protect against future threats. This approach promotes both individual responsibility and shared responsibility by improving information sharing throughout the community. 

Related: Alacriti Now a SWIFT Customer Security Program Consulting Provider

 * This is an update on an original post published February 2019

Alacriti tackles the complexity of managing SWIFT security and compliance head-on so SWIFT members can focus on core business activities. As a SWIFT CSP consulting provider, we have in-depth skills and expertise to plan, execute and report on security status and recommend critical improvements to meet and maintain CSP security standards. To contact a SWIFT CSP Consultant, please email swiftcsp@alacriti.com.

Alacriti Blog

Payments Modernization: An Account Holder View

You’ve heard the term payments modernization and appreciate the value. However, offering a modern payment experience can be difficult when you have a legacy infrastructure with various vendor solutions patched together. It makes for inconsistent user experiences across various payment products and services—e.g., a consumer might have a different experience when doing an A2A transfer than when they do electronic bill pay. Having a unified, consistent experience is the key to the future success of your institution. The pandemic accelerated expectations for a superior digital experience,  so convenience and modern user interfaces are also expected. But what does all of this mean from the perspective of your account holders? 

Jane needs to pay her car loan. She knows she can do it using her computer or her phone, but she has been really busy lately and hasn’t had the time to sit down and focus. She asks Alexa on her Amazon Echo Dot to make a one-time payment using her debit card and is relieved to get it paid before she incurs past due charges.

Convenient loan payments mean offering as many payment options as possible — mobile, web, IVR, agent, walk-in, Facebook Messenger, or intelligent assistants. This also means payment methods, such as ACH and card payments, and payment options such as one-time-recurring and autopay.

John needs to pay his HOA bill. He really doesn’t want to set up yet another website account and re-enter his account information, so he uses the bill pay function at his financial institution to quickly pay his bill. He has set up a recurring payment to keep himself on track since it’s only due quarterly.

It’s important to enable consumers to manage and pay their bills all in one place within their existing digital banking channels. Options should include one-time or recurring, immediate, scheduled next day, or a day in the future.

Jane needs to move money between her business accounts at two banks fairly frequently. She transfers money from her bank to her credit union account for payroll as a recurring transaction. It’s an important transaction, and she needs it to happen automatically. That way, she doesn’t miss it while she’s traveling.

On average, consumers own 5.3 accounts across all types of financial institutions. They need to be able to move money effortlessly and securely between their bank accounts, regardless of financial institution, with one-time or recurring, immediate, same day or next date, or future date options.

John used to use a major digital wallet provider to transfer money with friends but got tired of having to make a transfer to his bank account, which takes time unless he pays a fee. He started using P2P at his financial institution to share restaurant bills with his friends using just their email addresses or phone numbers. He liked knowing the funds would go directly into his account vs. using a third-party service.

Consumers take for granted the ability to quickly transfer money to friends and family members without sharing account information. However, financial institutions can offer a more secure, direct to account method of transfer, and with more capabilities such as one one-time, recurring, immediate, same day/next day, or a date in the future.

Jane switched to an insurance company that offered quick claim payments. When she filed an interruption of business claim due to the pandemic, she was thankful to receive the funds right into her account. As an owner of a restaurant, the time and stress to constantly monitor her mailbox for a paper check could have cost her the business, as she still needed to pay her lease no matter what.

Business owners can stand out by quickly and seamlessly sending digital payouts to customers using just their mobile phone numbers or email addresses. There is a clear benefit to the customers inconvenience, and saving on paper checks at the same time provides even more value.

John is setting up a new savings account at his financial institution but is funding it with a portion of another account. Using his phone, he is able to quickly open the account with the convenient funding option of being able to choose from all of his accounts. 

One study showed the abandonment rate for online account opening at 19%. Secure and convenient account funding options are part of the frictionless process needed to decrease account application abandonment.

Jane usually manages her business accounts online but is driving to the airport and doesn’t have time to go through everything on her phone to solve an issue with one of her transactions. She calls into her financial institution, and because they have a holistic view of her profile and transaction history, they are able to quickly see the employee in question she’s referring to and make a transfer for her after she is authenticated. Jane appreciates the quick service and not having to answer a bunch of questions that would take more time that she doesn’t have.

Whether on chat or on the phone, customer service staff should be empowered to quickly access profiles, view reports and transaction history, and schedule and manage payments and transfers on behalf of customers or members.

John has been using his new savings account accesses fairly infrequently. Based on that, his financial institution reaches out to him using a secure message offering him an account with a higher interest rate that allows fewer withdrawals. He appreciates the customized recommendation for his needs and makes the switch. 

In order to make faster and better business decisions, visibility into consumers’ money movement activity and behavior are key. However, just viewing one channel isn’t helpful. A consolidated view of customer and transaction information across channels, money movement services, and lines of business provides is necessary for quality analysis.

Learn more and view the Payments Modernization Update webinar playback.

Today’s legacy and siloed banking technology infrastructure limit financial institutions’ ability to rapidly innovate. It’s time to look at money movement in a new way. Alacriti’s Orbipay Unified Money Movement Services does just that. Whether it’s real-time payments,  digital disbursements, or bill pay, our cloud-based platform enables banks and credit unions to quickly and seamlessly deliver modern digital payments and money movement experiences. To speak to an Alacriti payments expert, please call us at (908) 791-2916 or email info@alacriti.com

Alacriti Blog

Conversational AI for the Customer Experience

Experts predict the proliferation of artificial intelligence will be more impactful than the Internet. Here’s how artificial intelligence can help your business streamline operations and deliver a better customer experience.

Data-Driven Digital Experiences

Technology is making it easier than ever to transact and interact with businesses. From ordering lattes to requesting maintenance service, there is a website, app, or voice command to help consumers complete the task in seconds.

Your customers are becoming more and more accustomed to performing these everyday tasks with the assistance of technology. At the heart of popular consumer brands like Starbucks, Uber, and Spotify are robust technology platforms that constantly churn data to deliver seamless and highly personalized customer experiences. Customers are coming to expect a custom-tailored, data-driven digital experience all the time, whether they’re looking for a movie to stream or paying their bills.

Conversational AI Says “Hi”

Much of this technology is powered by artificial intelligence (AI). A long way from the glitchy concepts of the past, today’s intelligent computer systems enable businesses to enhance the customer experience and drive greater organizational efficiency. AI helps businesses automate operations, increase productivity, and better analyze data to inform strategic decisions across every sector. A recent survey by Wipro Limited showed 98% of businesses believe being an “intelligent enterprise” is beneficial.

Advancements in a specific type of AI called natural language processing (NLP) have allowed for the development of highly sophisticated voice recognition engines that further elevate the technology’s potential. Commonly known as “conversational AI,” these engines utilize techniques like intent classification and contextual understanding to learn more about customers and improve conversational ability over time.

Conversational AI is the force behind a growing $7.1 billion (2020) industry that’s projected to reach over $15.6 billion by 2025. Almost one in four Americans already own a smart speaker, making it one of the most rapidly adopted consumer electronics of all time. And as more consumers adopt these devices, the technology is influencing important shifts in consumer behavior.

Voice as the Next Interface

Voice is the next interface for commerce and communication, and it’s creating new markets ripe with opportunity by revolutionizing how your customers shop, find information, and engage with your business. The shift makes sense—talking is simply much more convenient than typing, and currently, 54% of Americans have used voice commands with 24% doing so daily. Choppy conversations with IVR systems are being replaced with chatbots and other digital assistants that can more naturally converse with your customers.

Modern voice recognition engines are savvy enough to remove much of the friction that riddles customer service today, if not all of it, and the technology is only getting better. Recent studies show that consumers even prefer AI-powered chatbots for self-service answers to simple questions over traditional engagement channels, especially as they become more comfortable using voice technology in everyday contexts. Conversational AI doesn’t only make for a better experience for your customers—it also frees employees from tedious customer service tasks that can be easily automated with the help of AI. In billing and payments, chatbots and voice assistants can help customers resolve many common issues like checking their balances or scheduling a payment without having to contact a live agent.

The Bottom Line: Things move fast in the digital age. It is predicted that by 2025, over 95% of customer interactions will be managed by AI. The way customers find, engage, and transact with your business will continue to change along with the evolution of technology itself. AI can help businesses harness the power of these new channels to optimize the customer experience while driving digital transformation.

For more on AI, see our AI and Customer Service by the Numbers infographic.

 *This is an update on an original post published July 2018

Alacriti created Ella, an AI-powered chatbot that facilitates seamless, personalized, and context-aware interactions between you and your customers through messaging apps, intelligent personal assistants, and directly on your website. To find out how Ella can transform how you engage with your customers, contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

Chatbots Gone Rogue: How Weak Chatbot Security Enables Bad Actors

Over a short time span, chatbots have become standard practice in customer service. Services from basic troubleshooting advice to full-fledged payment services are available to consumers with minimal intervention from human staff. As with any automated process, great care should be taken to make chatbots robust and secure. As they become more sophisticated, the potential for malfunction or even exploitation has increased. This raises the stakes for chatbot providers and users. It also raises the question—what could go wrong if I use an unsafe chatbot?

In 2017, German regulators raised a red flag about a line of children’s toys. The government found that these dolls could be used as a clandestine surveillance device, which is illegal under German law. The dolls were marketed as remarkable new technology when, in actuality, they were just a chatbot. Children could ask the doll questions and get answers based on the doll’s fictional life. Concerns arose when parents realized that their children were having lengthy, if somewhat one-sided, conversations with the doll. The children believed they were having a private chat, but all of that data was being sent to the toy company’s chatbot operator. In addition, several different consumer awareness groups and tech organizations demonstrated that the Bluetooth receiver in the doll was not secure. It could be paired with any phone from up to fifty feet away by anyone who knew how. That phone would then be able to access the microphone and speakers embedded in the doll, listening and speaking through it. It’s no surprise that after the German ban went into effect, owners were told to destroy the doll or either face a heavy fine or a two-year jail sentence.

The doll’s chatbot was vulnerable to what’s called a “man-in-the-middle” attack, in which a third party can access a chatbot conversation. They can then passively monitor the chatlog or even alter the messages sent, perhaps to carry out a phishing attack or trick the user into divulging sensitive information. This is far from the only way a malicious party can take advantage of a chatbot, however.

Other Kinds of Chatbot Attacks

Direct attacks on individual consumers are bad for business, but what can be even more devastating is an attack on the back-end systems directly. Delta Airlines found itself in one such situation a few years ago. Delta claimed that subpar cybersecurity practices from their chatbot provider opened a backdoor to highly sensitive information. Hackers were able to breach the chatbot provider’s systems. They then modified the chatbot’s source code to allow them unrestricted access to other information entered on Delta’s website. In total, some 825,000 customers’ sensitive information was stolen. Chatbots can be a great way for organizations to unify many different services into one convenient location. This creates an attractive target for hackers, who can exploit weak links in the chatbot’s implementation and access many systems through it.

Other types of attacks attempt to overwhelm or manipulate chatbots from the client side. Similar to a denial-of-service attack, bots are deployed to create a huge amount of traffic at once. This overwhelms the chatbot, leading to delays or errors for genuine users. A similar kind of attack uses bots over a long period to mislead the chatbot’s implementer. It’s common for businesses to analyze the usage of their chatbot to inform their development decisions. By consistently sending erroneous queries, the genuine customer data can be skewed to the preference of an outside party. Even worse, if the chatbot utilizes machine learning, it could be trolled into giving unhelpful or even offensive answers. Chatbots like this learn from past exchanges to use more complex and human-like answers. An unsupervised chatbot could easily be manipulated into producing outlandish messages, as with the infamous case of Microsoft’s Tay.

What Can My Business Do?

The potential outcomes from these attacks range from lost leads and wasted resources up to existential threats to an organization. Some organizations opt to develop their chatbots in-house. Limiting external exposure helps to limit risks but can be too costly an option for smaller businesses. The only way to secure the benefits of automating customer service without leaving yourself open is to pick a trustworthy partner. A reliable chatbot operator has strong cybersecurity practices. They also take care to monitor their chatbots closely as part of a larger culture of vigilance. 

Chatbot security is crucial for those who are accepting payments with sensitive financial information. Providers of this service can do their due diligence to ensure the experience is convenient and safe for both user and operator. For the security of the messages themselves, all information should be encrypted. It’s standard practice to ensure only those with the right credentials can read the messages sent if somehow the data is intercepted. Redundant security practices can further boost the security of messages. One such practice is the use of payment profiles. This allows users to select from an account on file rather than entering sensitive information directly. 

Authentication is another crucial piece of the security puzzle. Essentially the chatbot needs to be able to easily verify the identity of the user interacting with it. Without this, impersonators could initiate fraudulent payments. Many opt to just require the user to sign in before they can access the payment chatbot. Generally, the easiest way to authenticate users is via a username and password. For operators, more robust authentication such as two-factor or even biometric authentication is necessary. 

The only thing better than having many different security practices is having one holistic culture of security. Utilizing these practices is crucial, but they each only cover one area. As mentioned earlier, redundancy is crucial. A good chatbot provider will stress-test their systems in varying circumstances, from penetration attempts to natural disasters. In doing so, they see how their other security systems function in the event of a failure of one. 

Chatbots can make your services more accessible and potentially shrink customer service costs. On the other hand, they can frustrate your customers and leave your organization vulnerable. The difference, as always, comes down to design and implementation. From the individual messages to the back-end security, the same security practices that hold true for banks themselves should apply to every new service they hope to provide. Whether it’s designed in-house or outsourced, a properly used chatbot is a worthwhile investment.

To learn more about chatbots and AI, read our resources, Financial Institutions Are Investing in Chatbots and How AI is Saving Customer Service.

Alacriti created Ella, an AI-powered, highly secure payments chatbot that facilitates seamless, personalized, and context-aware interactions with customers through messaging apps, intelligent personal assistants, and directly on your website. To find out how Ella can transform how you engage with your customers, contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

Faster Tax Refunds

The most efficient tax refund is the one that doesn’t need to be sent. Overpaying your taxes means the IRS holds some of your money interest-free until they get around to returning it via a tax refund. By day 29 of the 2021 tax season, the IRS had processed over 40 million direct deposit refunds. Needless to say, if you don’t file your taxes perfectly, you’re not alone. 

The fastest way to get your tax refund, according to the IRS, is to file electronically and opt for direct deposit to your bank account. Taking both these actions bypasses the postal service. This means the time you spend waiting is no longer than it takes the IRS to process your return, plus the time your refund spends moving through the ACH network. The amount of time that the IRS needs to process a tax return differs based on the individual, but an ACH transfer generally takes 2 to 3 days to initiate, clear, and settle. This is faster than paper processing, which can take weeks, but it still has room for improvement. With the release of new real-time payment rails, such as The Clearing House’s RTP® network, tax refunds could find their way from the IRS to your bank account in just a few seconds. 

Before we cover instant tax refunds, let’s go over how things work now. Assuming the taxpayer has opted into using direct deposit, the IRS will initiate an ACH transaction. As mentioned before, this can take a few days. A faster alternative within the ACH network is Same Day ACH. Unfortunately, there are fees associated with this accelerated processing, so this is generally not used for tax refunds. On the bright side, the new real-time rails will offer an economical way to receive tax returns the moment the IRS is done processing them. 

The only real-time payment service currently available in the U.S. is the aforementioned RTP® network. The Clearing House has seen great adoption so far, but the network has not yet achieved the same reach as the ACH network. While The Clearing House is still building its network, another is set for release in 2023. FedNow, by the Federal Reserve, will operate alongside The Clearing House’s network in the hopes of providing broader accessibility. The key distinction between FedNow and the RTP® Network is that FedNow will not be privately owned. Being a public-sector resource, FedNow will be better suited to meet the needs of more diverse and less capitalized financial institutions. Ubiquitous access will be a huge motivator for the IRS to start offering instant tax refunds, and the combined reach of the RTP® network and FedNow are poised to achieve this.

Read more about government issued checks in Poky Stimulus Checks—An Argument for Payment Modernization.

Alacriti’s Cosmos for RTP® enables financial institutions and organizations to quickly and seamlessly connect to The Clearing House’s RTP® network without the burden of significant infrastructure overhauls or capital investments. To speak with an Alacriti real-time payments expert, please contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

5 Common Misconceptions FIs Have About Real-Time Payments

*Originally published on CUInsight.com

Banks and credit unions continually have to make a choice when it comes to technology—maintain the status quo and risk losing account holders, or go through the disruption and cost of a big IT project. The U.S. has been a laggard for real-time payments adoption when compared to our global peers. However, there are some misconceptions about real-time payments that may be contributing to this. Here are five common misconceptions that FIs have about real-time payments. 

  1. I will have more to worry about when it comes to security and fraud

Anytime we have a new payment type, there is always a concern about new types of fraud. However, faster payments don’t necessarily mean faster fraud. When real-time payments first debuted in the U.K., they saw an initial spike in fraud, which quickly dissipated as the participants adjusted to the new real-time nature of the schema. 

In the U.S., The Clearing House’s (TCH) RTP® network was designed to be the safest payments platform available, taking lessons from both offshore and inside our own borders into account. For example, the RTP network is a credit push model, meaning funds can’t be pulled out of an account, but rather the sender has to push the payment from their account to be sent on their way to the recipient’s account. 

Customer education is key here. Since a payment settles instantly, they need to be certain of the recipient’s information that they are sending the payment to. Another measure is transaction limits, currently limited to $100,000, which may lead fraudsters to look for higher value options. Also, according to TCH, fraud tools are available to bank or credit union participants to plug into their systems to help better analyze transactions on the backend.  

  1. Offering real-time payments is way too expensive right now

This may have been true in the past with only on-premise solutions that had very high operating costs. However, cloud-based systems have changed the landscape completely. The total cost of ownership for a cloud-based solution is dramatically different than an on-premise solution. Also, connecting to the RTP network doesn’t mean that you have to support send and receive functionality from day one. You can start with options such as just signing up for receive only. Not only is going live with real-time payments financially feasible, but it is also not a long project. The project timeline is about 3-4 months. 

  1. We need to wait until we upgrade our core system

RTP can be very challenging for legacy cores for two reasons. One is that RTP requires 24x7x365 processing availability as a condition of entry to the network. The other is that RTP processing is at most 15 seconds. This is incompatible with a system that relies on batch processing. While having a modern core processor is ideal for a financial institution, it isn’t always feasible. However, there is something they can do in the meantime. 

A proxy service can liaise between the core and the payment rails. Most of the banks that are going live today with the TCH RTP system are actually going live through technology partners, e.g., Alacriti. As a bank or a credit union, most likely, your best path to enabling RTP for your customers or members is through a technology partner. Sometimes core processors actually provide a range of RTP-related services as well that provide an easy path to access the network. 

  1. Customer demand doesn’t justify this project yet

The value of faster payments has already been demonstrated. There has been more than 80% growth in Same Day ACH from 2019 to 2020. Banks and credit unions are seeing this demand and responding. As of February 2021, nearly 50% of TCH accounts can at least receive an RTP transaction. Also, a recent survey by PYMNTS.com revealed that 24% of consumers would switch to FIs that have real-time payment capabilities, and 30% of consumers believe that access to real-time payments is a key factor when selecting a financial institution. 

Already, TCH has seen tremendous growth for banks and credit unions connecting with real-time payments. Use cases for real-time payments for merchant funding are growing rapidly, and payroll use cases are very popular for both employers and employees. Employers can attract workers with the promise of immediate payment, and employees are able to get their payroll in unprecedented time. 

  1. It’s too early to decide how to connect to the rails; we should wait to see which one system prevails

There is no one-size-fits-all when it comes to real-time payments. For instance, a financial institution that has a few very large corporate clients may not care as much about some of the real-time or faster payments solutions available, but a P2P solution or a faster payment solution that meets the needs of small businesses is a better fit. Ultimately, financial institutions have to look at what’s best for their customers or members. Marrying their needs as both senders and receivers may make interoperability concerns more important. For example, a consumer may want to pay using one channel, but that same consumer acting as a merchant might want to receive funds via a different network. 

We anticipate that rather than one network prevailing, there will be individual networks that will have their niche or their area where they serve the specific use case in question best. Work with your fintech providers and vendors to ensure you have the flexibility and access to the most settlement options possible, ensuring that each account holder can get their needs met today and in a faster future. 

Not set up for 24x7x365 availability? Read more in Real-Time Payments and the Non-24×7 Banking Core.

Alacriti’s Cosmos for RTP® enables financial institutions and organizations to quickly and seamlessly connect to The Clearing House’s RTP® network without the burden of significant infrastructure overhauls or capital investments. To speak with an Alacriti real-time payments expert, please contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

When Compliance Leads to Innovation

It’s that time of year when the compliance officers around the world are looking at their product teams to do their quarterly/annual compliance reviews and reports. An annual necessity that usually involves Alka-Seltzer tabs and some late nights. However, what if we looked through a different prism and thought about this annual compliance review as an opportunity to identify areas for innovation? With network rule changes, such as Nacha’s new compliance rules, many of us are making changes to our systems or processes, but I wonder how many are taking a step back to think about how they could leverage this moment to think bigger? 

Let’s take a specific example and talk about the account validation process for a second. Nacha’s rule change for account validation is specific to the ACH channel and simply states the following (from the Nacha Website).

“Currently, ACH Originators of WEB debit entries are required to use a ‘commercially reasonable fraudulent transaction detection system’ to screen WEB debits for fraud. This existing screening requirement will be supplemented to make it explicit that ‘account validation’ is part of a “commercially reasonable fraudulent transaction detection system.” The supplemental requirement applies to the first use of an account number, or changes to the account number.”

For one, this sounds like a great idea! Why not take the logic to go beyond just ACH as a simple first step and apply it to all of your payment channels? By thinking about compliance as a “check the box” affair, we wouldn’t be thinking about all payments and the value that this rule change will bring to other clearing and settlement networks. We’d just implement and move on. Also, we may not explore options available to us to make that a reality and would only focus on our ACH third-party providers, doubling down on the segmentation of our payments strategy. 

Beyond our shores, we don’t have to look any further than the UK for where this account validation process takes the next step to actually being a user enhancement fraud-fighting tool. The UK has a process for “confirmation of payee” where the account ownership is shared back to the initiator to validate not only that the account is a real account and doesn’t have any fraud flags, but that the name of the owner actually matches what the consumer expects. This helps combat growing categories of fraud such as BEC (Business Email Compromise) attacks where someone poses to be someone else and just asks them for immediate payment to an account. The most interesting example of this was a football club (soccer team if you’re speaking U.S.) nearly sending a $1.25m transfer fee for a player to a fraudster. 

So long and short, we implore you to think about compliance beyond the checkbox. Take a step back and think about what the rule changes are all about in the context of your payments strategy. See if it makes sense to go beyond just complying and leveraging the intent of compliance to innovate your offerings and enhance your customer experience at the same time. 

Read the blog, Rule Changes and the Opportunity for Innovation. 

Stay compliant with Nacha’s Web Debit Rules with a preferred Nacha partner. To find out how your organization can benefit from Bank Account Validation Service, contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

What Faster Payments Can Do for Your Industry

One of the most rewarding aspects of my role at Alacriti is the opportunity to work closely with our market’s thought leaders and the financial institutions that are on the bleeding edge of the payments market. As Alacriti’s representative on the U.S. Faster Payments Council, I have the pleasure of working on the Education and Awareness work group. As a part of that, I have been exposed to discussions on possible faster payments use cases across the market. It’s a big-picture group working on expanding the horizons of payments and trying to push them to the edges. This is all while thinking about each player in the market. Whether that’s a financial institution, a merchant, a government entity, or an individual, there are use cases that touch all of us. So what does this mean for your industry? 

Governments

Let’s start with the hot topic since one, we are coming into the heart of tax season, and two, another round of COVID-19 Stimulus has started to trickle out. Governments stand to gain tremendously for faster payments, primarily because the receivers of those payments are taxpayers and citizens like you and me. Speed is the name of the game for government disbursements, and enabling receipt of those payments via a faster payment system is something I think everyone could agree on. On the other side of this, waiting to pay your tax bill until 11:59:59 pm could be made possible with faster payments. Keeping the money in your account until the last minute could also be a value add.  Although unfortunately, it won’t lessen the tax bill, it could alleviate any cost of a late payment!

Insurance

Speed is the name of the game when it also comes to customer satisfaction in insurance disbursements. Often emotionally charged, insurance payouts, whether it’s property & casualty or health-related, have a critical timeline. Getting dollars in hands is an imperative that faster payments can deliver to this industry. Since checks are still dominant in this space, faster payments offer a clear advantage to current workflows in the market. Simplifying the payout process for the consumer or business can lower anxiety and create a better overall experience. This is a win-win scenario. 

Financial Services

Looking at banks and credit unions, one usually doesn’t think about the outbound payment workflow from their accounts as a driver of value. However, speed is the name of the game today in terms of options such as merchant advances or loan disbursements/funding. Faster payments offer FIs the ability to quickly move money and get it to the destination account faster, an improvement over many of today’s available workflows. This, in turn, could speed up revenue realization or, even better—create net new fee revenue opportunities like pre-funding receivables for merchants. 

E-Commerce

2020 was a dud in some aspects of the economy, but eCommerce was a shining/glowing/on fire spot of the economy as we all turned to our devices to buy things to keep our sanity while in our own safe, confined spaces for the past year. The rise of eCommerce marketplaces where individuals could sell their goods/services/and crafts created a whole new ecosystem requiring payout services. The faster those transactions got to the end merchant, the quicker the next stack of tchotchkes could make it to the marketplace. Also in this category was the growth of Buy Now/Pay Later (BNPL), where you could buy that new Peloton Bike to cycle your days away. Switching out traditional credit card purchases to installment payment plans isn’t necessarily new, but making them simple to apply for as well as part of the in-payment checkout experience exploded over the past 12 months. The value that faster payments could bring will continue to drive use cases for the BNPL space and other FIs looking to enter the game. 

While not an industry, I can close this with the discussion on what faster payments mean to the individual consumer. For me, the biggest value that faster payments will bring is the clarity of where your money is at all times. There are times in financial lives where money is “in-between” where it came from and where it’s going, primarily due to the legacy payment systems much of our financial services market relies on. As faster payments become more broadly available, the day-to-day financial management of one’s personal accounts will simplify, and the concept of a “memo post” or “available balance” will become a thing of the past. The money is there, or it isn’t; your biller got paid, or they haven’t. The distance between everyone will be shorter, making everything more efficient and unlocking new opportunities for innovation all around us!

Read how COVID-19 affected industries in the article: Looking Back: The Impact of COVID-19, Broken Down by Industry

Alacriti’s cloud-based platform, Orbipay, delivers solutions across the payments ecosystem, including The Clearing House’s RTP® network, Electronic Bill Presentment and Payments (EBPP), and Digital Disbursements. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com.

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Open Banking: Discover Ways to Improve Customer Journeys and Experiences (Infographic)

In the cloud-first, open banking world, financial institutions need a new approach. Open API-driven architecture allows financial institutions to rapidly and cost-effectively deliver the products
your customers demand while providing a future-proof platform for innovation.

Here, we will explore how open banking improves customer journeys and experiences.

Download PDF


Alacriti Blog

Bill Pay the Mobile Way

Customers’ expectations for seamless mobile user experiences (UX) grow higher by the day. The ubiquity and immediacy of mobile devices demand that websites are quick to load, well designed, and fully optimized for mobile. In 2020, 56.32% of all web traffic flowed through mobile devices—but mobile devices also tend to have a higher bounce rate than desktop users, and tablet users bounce at a rate somewhere in between mobile and desktop. And the decision to abandon mobile sites happens quickly. When page load time goes from one second to 10 seconds, the likelihood of a mobile site visitor bouncing increases 123%.

Google’s mobile-first indexing ranks websites by looking at their mobile version first and falling back to the desktop version if mobile is unavailable. This signals the importance of employing a cohesive mobile strategy also optimized for search engine optimization (SEO). In addition, users are becoming more aware of the gap between mobile-optimized websites and those that aren’t. They simply don’t have the time, or the patience, to pinch and zoom to try to find the information they need.

4 mobile-focused approaches to bill payments

One study shows that 21% of consumers have used a company’s mobile app to pay a bill. If you’re a business that accepts online bill payments from your customers, presenting a seamless mobile UX is more important than ever. Given the higher propensity for consumers to abandon mobile sites, the prospect of losing the associated online payment dollars is a risk too big to ignore.

What are some steps that you can take to maximize your business’s mobile UX for bill payments? It begins with a website fully optimized for mobile and extends to other interaction points facilitated by mobile technology. Here are four approaches to consider.

  1. Responsive web design – Responsive web design (RWD) automatically recognizes the size of a device screen that’s used to access your billing and payments website. This technology renders the page correctly for various screen sizes by altering the navigation hierarchy, position of text labels, length of text, etc. This automatic adaption presents users with the most actionable links and information in an intuitive way, helping streamline the bill payment process. Make sure your electronic bill presentment and payment (EBPP) solution is built to respond to your customers no matter what device they choose to use.

  1. Bill and payment-related text alerts – Text messaging is an integral part of our daily lives, with Americans spending 25% of their mobile screen time per day texting. And people are engaged with their texts, with 74% of consumers responding to a text message from a business within an hour. This high level of engagement makes text messaging an important way to communicate billing and payments information directly to your customers. Make sure your EBPP solution allows you to send SMS text messages to your customers that alert them when bills are ready to pay, payments are made, etc. These prompts can help encourage on-time payments and keep your customers up-to-date on all activity related to their billing and payments.

  1. Bill payments-by-text – Take text alerts one step further by allowing your customers to make payments via text message. Billing and payments solutions are now built to support bill payments via SMS when a customer links their cell phone number to their EBPP user account. Alerts can be sent and payments can be made without ever having to leave the text messaging interface. Your customers can type a simple command like “PAY” to complete the bill payment transaction.

  1. Messaging platforms – Messaging technology is also an important part of consumers’ mobile lives. For instance, Facebook Messenger is used by an estimated 1.3 billion people, with over 20 billion messages sent between people and businesses monthly. This is yet another communication channel where you can engage with your customers and encourage them to make payments directly through their mobile devices. By giving them the ability to link their Facebook accounts to your EBPP, you can enable them to make payments directly through Facebook Messenger using chatbot technology. The result is an intuitive, user-friendly customer experience built with convenience in mind.

The Bottom Line: Seamless mobile experiences, including bill payments, are more important to your customers than ever. Make sure your business’s EBPP solution gives them the options they need to make bill payments quickly and easily through the mobile channels of their choice.

 Payments modernization is key. Learn why pay by text is so important in 3 Reasons Why You Need to Offer Pay by Text—Now.

  * This is an update on an original post published April 2018

Alacriti’s Orbipay EBPP is a customizable electronic billing and payments solution for businesses and financial institutions of all sizes. Pay by Text is just one of several Orbipay EBPP features available to help you accelerate receivables. For more information, please contact us at info@alacriti.com.

Alacriti Blog

Real-Time Payments and the Non-24×7 Banking Core

24x7x365 access to services is an often noted benefit of the digital era. Organizations that thrive in a digital environment have gained a significant edge in the past year. Those that don’t have found themselves scrambling to find a safe and convenient way to offer their product. The worlds of banking and digital payments are no exception. Members already expect to be able to manage their accounts on the go at any time. With the help of some advanced stand-in capabilities, actions like these are possible outside of the traditional working hours. This approach is reaching a breaking point, due to the demands that the current generation of payments rails and functionality places on a traditional banking core.

What is the Banking Window?

To understand the predicament many financial institutions face, we have to rewind time to the analog era. Back then the banking window referred literally to the location where information and funds flowed in and out of the bank. For everyone, retail bankers and big firms alike, banking was done solely within the “open window” hours. Once the bank closed, everyone went home, and any outstanding changes to a ledger had to wait until the next morning to be recorded at the bank. The clearing process as we know it today originated here as well. Before the end of the working day, an employee would schlep over to the banking window and hand in a ledger, recording the payables and receivables of that day. 

This process was much improved and automated as banks technologized their processes. Firms could communicate raw data to a bank’s central processing system or core. This is an obvious improvement over having to manually transfer that information. These core processors were built to handle massive batches of data very quickly and automatically make the appropriate changes in the bank’s records. As time went on these core systems still reflected the practices of the preceding era—the banking window still only opened during the working hours of the bank. The ledger was digitized, then handed off during banking hours as a compilation of every transaction from that day. 

ATM – Any Time… Maybe

The first dilemma for core processors arrived with the ATM. They made banking incredibly convenient and accessible. But, their accessibility had to be made compatible with the rigid operating standards of the core processor. Stand-in systems were developed to operate the ATM network outside of the banking window, then deliver a batch of the transactions to the core once it came back online. Banks could boast that they were never closed, though was only true from the client’s point of view. In reality, the core system was still taken offline every night. 

These stand-in systems evolved to cover new banking technologies, reconciling them with the batch-based, banker’s hours-only core processors. The most important function is still compiling off-hours data to be entered when the core comes online, since the ways a person can access their banking information have multiplied over time. If a member checks their balance or takes action outside of the core processor’s working hours, then that information is being held by the stand-in system. Today the obvious example would be online banking—most customers want to make transfers or check their balance from anywhere, at any time. The banking core was never intended to be accessible at 2:00 a.m. from the burger shop parking lot, and so the stand-in system has to do the work.

Why it’s Not Good Enough

For the past few decades, institutions have been able to get away with these patched solutions, and the customer experience has been more or less acceptable. As we entered further into the Digital Era, some started to wonder when to stop retrofitting and start building new systems. The transition from physical to digital banking was mainly a technological shift—the culture and practice of banking were not fundamentally changed. The transition we’re in now is cultural, and as such, it is much more difficult to patch around.

Consumers increasingly expect instant, seamless service: in entertainment, ordering products, even with their food. If a financial institution offers a similar experience, nothing is stopping the consumer from switching. The pace of innovation is only going to accelerate. If a new stand-in solution is required each time a new feature is introduced, it won’t be long before legacy cores just can’t keep up.

One such feature is faster payments, specifically instant/real-time payments. Two qualities make this payment rail challenging for legacy cores. One is that they require 24x7x365 processing as a condition of entry to the network. This means very scarce, if any, downtime for an institution’s core. The other is the fact that they are instant, with the very top end of acceptable processing times sitting around 15 seconds. They are fundamentally incompatible with a system that relies on batch processing because they can’t wait until the end of the day to clear. 

Why Not Upgrade?

If the process were as simple and secure as installing a new solution, it would be a no-brainer. However, a financial institution’s core processor is its nerve center. Making any kind of change to it is frankly a risky prospect, especially for a community bank or smaller credit union. These institutions often don’t have the budgetary or staff support to justify a full core conversion. There’s also timing to consider—when to start, where to set milestones. The already-complex payments market is evolving rapidly, so deciding when to stop upgrading and start overhauling is not easy. For some, it might seem more prescient to stick with stand-in processors, which can be developed in-house but are more commonly developed by a third-party service provider.

This means having a proxy service that liaises between the core and the payment rails. One potential route is to leverage the ability to post transactions as “memo posted” to clients’ digital channels while the payment itself is in queue to post to the core. It can be a tenable option for balancing the risks of altering a core processor with the risks of not having any kind of 24×7 capability. The question that remains is whether this balance will be enough to stay ahead of the curve, rather than just keep pace. 

For more on real-time payments, please see our blog, Why RTP, Why Now?

Alacriti’s Cosmos for RTP® enables financial institutions and organizations to quickly and seamlessly connect to The Clearing House’s RTP® network without the burden of significant infrastructure overhauls or capital investments. To speak with an Alacriti real-time payments expert, please contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

5 Ways Chatbots Are Redefining Customer Service

Chatbots are popping up in more places than ever, whether we realize it or not. From receiving personalized product recommendations to simply checking the news or local weather, bots are designed to deliver seamless on-demand experiences without relying on human intervention.

One of the most popular platforms for chatbots is Facebook Messenger. It’s estimated that some 300,000 chatbots are now on Facebook Messenger, facilitating approximately 8 billion messages per month between businesses and users. Facebook Messenger is by far the most used messaging app, with over eight times as many users as its rival, Snapchat. Considering that eight out of ten (79%) adults ages 18-29 use Facebook, Facebook Messenger is a natural place for businesses to invest in chatbots to reach younger consumers.

With all the chatbots currently available on Facebook Messenger and other independent platforms, what are some ways that businesses use them to deliver better customer service experiences? Here’s a closer look at five different ways that chatbots are being leveraged to create positive brand interactions.

  1. Facilitating personal banking

Many of the most common household names in banking are investing in chatbot technology to help serve their customers. Bots are being used to facilitate everything from balance transfers and credit report updates to locating the nearest ATM. Chatbots can help make common banking transactions quick and seamless, helping customers resolve inquiries without intervention from customer service representatives. The result is a more personalized and on-demand experience for banking customers.

  1. Paying bills

Chatbots are also being used in Facebook Messenger to facilitate bill payments across a variety of industries. From anticipated monthly charges associated with mortgages and auto finance payments to unexpected bills related to healthcare expenditures, payments can be made without leaving the Facebook Messenger app. Our chatbot Ella is a prime example. As part of our Orbipay electronic bill presentment and payment (EBPP) solution, Ella lets customers perform tasks such as making account inquiries, resolving issues, and paying bills. All within the convenient interface of Facebook Messenger.

  1. Facilitating more personal and relevant interactions

Chatbots can potentially do a better job of recommending relevant products and services to individuals than human customer service representatives by automatically and more quickly connecting data from multiple sources.

In banking, for example, an agent on a call with a customer will simultaneously need to listen to the customer to ascertain what the customer is asking for while also understanding what the customer already uses and what may be the best recommendation for them—in real-time.

By collecting and recalling past and current interactions as well as pulling data from other, integrated sources, Chatbots can do the job faster and more accurately—and without any human biases or errors.

Amazon’s recommendation engine, powered by purchase and chat histories as well as likes and dislikes, now generates 35% of its revenues.

  1. Driving in-store visits…and sales

The retail beauty giant Sephora uses its Facebook Messenger chatbot to facilitate reservations for in-store makeovers. In a few easy steps, customers can choose a store location and book an appointment with a beauty professional. Using its chatbot to drive these in-store visits and one-on-one consultations has paid off for the company. Sephora has seen an 11% higher conversion rate for appointments booked on Messenger than for any other channel.

  1. Managing hotel reservations and stays

Hotels are also leveraging chatbot technology in Facebook Messenger to service their customers from booking their reservations to settling their final bills. But the real power of these bots might just be in the personal touch they can provide guests throughout their stays. Chatbots can process everything from extra pillow requests to room service orders without tying up hotel staff, creating efficiencies for guests and employees alike. In addition, chatbots also give hotels a unique view of their guests’ preferences and behaviors. This data can be used to help identify upsell opportunities during guests’ stays and provide rich data to help personalize future visits.

What’s next?

While Facebook Messenger is an easy entry point for businesses to deploy chatbots for customer service, other platforms are continuously emerging. And, while typing requests through chatbot interfaces is quick and easy, using voice commands is an even simpler way to deliver on-demand customer service. Intelligent personal assistants like Amazon Alexa and Google Assistant take chatbots to the next level by responding to voice commands and performing specific tasks, like paying bills. The result is a faster and more personalized customer service experience than ever before.

The Bottom Line: Customer service delivered via chatbots is a force too big to be ignored. Understand the touchpoints in your business where chatbots can be leveraged to create positive interactions through the channels your customers use most.

 *This is an update on an original post published September 2018

Alacriti created Ella, an AI-powered chatbot that facilitates seamless, personalized, and context-aware interactions between you and your customers through messaging apps, intelligent personal assistants, and directly on your website. To find out how Ella can transform how you engage with your customers, contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

What is Payments-as-a-Service?

*Originally published on CUInsight.com

You are probably already familiar with the term SaaS (Software-as-a-Service). However, you may not be as well acquainted with PaaS (Payments-as-a-Service). PaaS can also refer to Platform-as-a-Service, but here we will be exploring Payments-as-a-Service. 

PaaS (Payments-as-a-Service) – as defined by the McKinsey Global Payments Report:

While outsourcing of the full payments stack is a possibility, a new generation of technology providers has emerged allowing banks to expand quickly and modernize their payments product portfolio without incurring high upfront investment. Payments-as-a-Service (PaaS) players operate cutting-edge cloud-based platforms to provide specialized services, such as card issuing, payments clearing, cross-border payments, disbursements, and e-commerce gateways.

According to a report from Grand View Research, the global Payments-as-a-Service market size is projected to reach $25.7 billion by 2027. This rapid growth can be attributed to the digital acceleration that has already been in progress, combined with the pandemic which has increased the demand for quick money transfer methods. Due to the rising number of digital financial transactions, the need for cloud-based money transfer platforms, which make it possible to manage higher volumes of transactions faster and at low cost, has increased. 

PaaS offerings are the modern alternative to traditional payments hubs, which are built on legacy technology stacks for on-premise, batch-based deployments. These batch-based ecosystems are a huge roadblock to payment modernization, particularly for the rapidly growing real-time payments market. PaaS is cost-efficient and is designed for cloud-based, real-time 24x7x365 based ecosystems that require fast deployments. 

As we mentioned earlier, PaaS allows for growth to higher volumes of transactions at relatively low cost as you scale, freeing you from the burden of tech debt associated with traditional monolithic payments hubs. While hubs can cost anywhere from  $1m-$25m, with PaaS, you pay for what is needed over time, leading to a much lower total cost of ownership. This is the type of scalability that you should be looking for as the market for emerging payments grows. Additionally, the speed to market of PaaS solutions is a key differentiator. Traditional hubs take years to get to market, while PaaS takes weeks to get you to market.

When an organization uses PaaS, they are also outsourcing integration and compliance concerns,  freeing up resources and increasing efficiencies. Here are some key functions and features to look for in PaaS solutions:

  • ISO20022-native services provide richer, better structured, and more granular data for payments messaging
  • Real-time payments help your organization deliver real-time payment services to customers quickly and easily 
  • Embedded Fraud and risk management helps you manage risk and maintain regulatory compliance
  • Cloud-native built for speed, responsiveness, and reliability and provides you with a strong foundation for innovation
  • Intelligent payment routing options be tailored to your needs and payments scenarios
  • Reporting and analytics provides deep and actionable insights into your payment operations
  • Microservices-based architecture allows innovation and change without disruption 
  • Open APIs provide simple/fast integration with existing systems such as core banking, digital banking, fraud, and risk management
  • Advanced security features to ensure data and privacy protection

Looking to learn more about commonly used payments terms? Check out our blog explaining microservices and API architecture. 

Alacriti offers PaaS on our cloud-based Orbipay platform, which delivers solutions across the payments ecosystem, including The Clearing House’s RTP® network, Electronic Bill Presentment and Payments (EBPP), and Digital Disbursements. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

A Primer on PCI DSS

PCI DSS is a set of data security standards that apply to all organizations that store, process or transmit cardholder data. These standards were developed to help ensure that this sensitive data is handled safely and to help protect underlying cardholders. PCI DSS applies to all organizations that accept or process cardholder data, regardless of the size of the company or the industry it serves.

Who enforces PCI DSS?

The PCI Security Standards Council (PCI SSC) was formed by the major payment card brands (American Express, Discover, JCB, Mastercard, and Visa) to oversee and manage PCI DSS. However, the PCI SSC does not enforce PCI DSS—that responsibility falls to the payment card brands. Each card brand has specific requirements for validating merchant compliance and associated reporting standards.

But our business doesn’t store cardholder data. We work with a third-party vendor that does this on our behalf.

Even if your business doesn’t store cardholder data, PCI DSS still applies to the environment that transmits or processes cardholder data. This includes any service providers that store, process, or transmit cardholder data on your business’s behalf.

What is cardholder data?

At a minimum, cardholder data includes the full primary account number (PAN) that appears on the card. It can also include the full PAN plus the account holder’s name, expiration date, and/or the service code of the card.

How does PCI DSS apply to the software vendors that we use to accept payments?

The Payment Application Data Security Standard (PA-DSS) applies to software vendors and payment application vendors that store, process, or transmit cardholder data on behalf of third parties. The payment card brands encourage merchants to use payment solutions that are tested and approved by the PCI SSC; however, it’s important to note that using a third-party vendor doesn’t exclude the associated merchant from PCI DSS compliance. While it may reduce their scope of PCI DSS compliance, it won’t exclude them from it altogether.

How do the payment card brands enforce compliance with PCI DSS?

There are two primary tools that the payment card brands use to help ensure that merchants are PCI DSS compliant:

  1. Qualified Assessors (QSA) and Approved Scanning Vendors (ASV) 

QSAs are approved by the PCI SSC and perform assessments of PCI DSS compliance. ASVs are also approved by the PCI SSC; however, they focus on performing vulnerability scans of both the merchant and the service provider environments that face the internet.

  1. Self-Assessment Questionnaire (SAQ)

For eligible organizations, SAQ is a validation tool that merchants can use to perform self-assessments of their PCI DSS compliance.

What happens if our business doesn’t comply with PCI DSS?

Failure to comply can result in significant fines from the payment card brands. It’s important to note that the payment card brands will impose these fines on their member banking institutions, who will then pass these fines along to the responsible merchants. In some cases, these fines can lead to the cancellation of merchant accounts by their acquirers.

Is PCI DSS compliance a one-time thing?

No. Ensuring the security of your cardholder data is an ongoing endeavor that requires communication and teamwork between many disciplines. In addition, PCI DSS compliance is predicated upon validation levels that are set by the card brands and based upon transaction volume. As your business grows and changes over time, so might your PCI DSS validation level. In addition, industry requirements and card brand rules may change as well. It’s your business’s responsibility to be aware of these changes and react accordingly.

The Bottom Line: Accepting electronic payments opens businesses up to the possibility of fraud. PCI DSS compliance is an important piece of a larger data security and fraud prevention strategy. For more information on PCI DSS, please visit www.pcisecuritystandards.org. 

If your business initiates web debit transactions, you will also want to know about the new Nacha WEB Debits operating rule, which requires bank account validation. Read more in Understanding the Nacha 2021 Rule Change.

 *This is an update on an original post published May 2018

Alacriti Blog

U.S. Faster Payments – What We Can Learn from the Rest of the World

Real-time payments are finally picking up speed in the United States. The RTP® network from The Clearing House (TCH) has seen consistent growth in its three-plus years of operation, and the Federal Reserve’s FedNowSM Service has recently confirmed its 2023 go-live plan. Domestic payment rails have come a long way in a few years, but we still have work to do before we match the success seen by some of our peers. The benefit of being at this stage is that we can study those successes, and use them to inform our efforts. There are currently fifty-six real-time payment schemes operating internationally. In this blog, we’ll hone in on three of the most interesting cases. 

Japan

Originally an RTGS (real-time gross settlement) system, the Japan Bankers Association (JBA)  Zengin system has been processing payments since 1973, with continual updates since then. Until 2018, it was able to process instant payments between two participating bank accounts during weekday business hours. In 2018 it was upgraded to be accessible 24×7. Despite the sophistication of the payment rails available, around 84% of people still use cash for day-to-day purchases. These obstacles to potential adoption are similar to those in the United States—even though the infrastructure necessary for economy-wide instant payments has been available for so long, the complexity and cost of entry are still a deterrent. The age of the system is also a concern for some, who question whether upgrading 70s-era banking infrastructure can be as efficient as building a new system altogether.

The move to 24×7 as well as using ISO 20022 standards are both intended to incentivize digital payments through the Zengin System. In addition, the Bank of Japan created a “FinTech Center” to incentivize innovation by private companies. This “cashless vision” was inspired largely by the massive expected influx of international attention during the now-delayed 2020 Olympics. An industry panel advocating for the switch to digital payments estimated that the country might have missed out on ¥1.2 trillion worth of transactions, had the year gone according to plan. 

The Japanese government has begun offering rebates on digital purchases in combination with a sales tax hike. Some have criticized the measure, pointing out this might disproportionately affect the elderly and impoverished. This is certainly possible and mirrors similar concerns regarding checks in the United States. For as long as some hold onto the status quo, there will be some value in optimizing more aged solutions.

India

The paradigm example of a successful national instant payment system, India’s United Payments Interface (UPI), is about to enter its fifth year of operation. UPI is operated by a non-profit organization, the National Payments Corporation of India (NPCI). NPCI was formed after the Payment and Settlement Systems Act of 2007 by the Reserve Bank of India and the Indian Banks’ Association. Beginning with a pilot program of 21 banks, UPI has grown to 207 members as of January, and in that month, processed 968.7 million transactions. 

India has over 1 billion mobile phone users, with rapidly growing smartphone ownership. In response, NPCI designed its network to be mobile-first. In combination with its open API accessibility, UPI has been able to reach a staggering number of users via upgraded or purpose-built mobile finance apps. PhonePe, the most popular payment app built on UPI, boasted over 250 million users in November 2020. 

UPI connects multiple bank accounts into a single user interface, accessible from any participating mobile platform. Users are given a customizable “UPI ID” formatted similarly to an email address, as well as a pin code that is used to confirm transactions. This marks a huge improvement in simplicity for the end-user and is likely a huge factor in UPI’s continued success. The sender does not need to remember any long numeric code, and the receiver can decide into which account they would like their funds to be deposited.

Brazil

PIX is developed and operated by the Banco Central do Brasil (BCB) and is state-owned. By the end of its first operating week (Nov. 16 – 20, 2020), the service had already processed some 12 million transactions, worth around BRL 9 billion, or USD 1.7 billion. Users are structured into direct and indirect participants, similar to the RTP® network in the United States. Direct participants have an “instant payments account” with the BCB and can access the network directly. Indirect participants, with fewer members or less capital, have to partner with a direct participant as a liquidator. 

One of the often-mentioned goals of PIX was to foster competition in the Brazilian banking industry. By offering a relatively accessible payment rail, neobanks and fintechs can reach the underbanked. This builds a financial foundation for the citizens, as well as shaking up the competitive strategy of the top banks. WhatsApp connected shortly after PIX’s debut and new “chat banks” like Zro are taking advantage of the disruption to capture a rapidly growing user base. 

Like the other systems covered here, connection to PIX was mandated by the BCB for financial institutions with over 500,000 members. This no doubt contributed to the rapid growth in value sent and total transfer numbers. Already, the numbers reached in the initial weeks are now matched by the daily averages—between 5 and 6 billion Reais are sent in an average 24-hour window.

What It Means for the U.S. 

There is no perfect analogue for the financial system of the United States. Innovation relies largely on demand from firms and end-consumers, yet the average person’s payments literacy is quite low. The actions taken by other governments and central banks to promote real-time payments is a non-starter in the US given the current political climate in Washington and the relative size and influence of the financial sector on our economy, so while slight changes and modifications are possible, overhauling the entire system is not expected. As a result, the best strategic moves to make real-time payments accessible and popular are often the hardest to make. For example, India and Brazil’s central banks mandated connection for the largest institutions. For better or worse, the Federal Reserve does not have this power and has to entice participation by other means.

As for actionable strategies that are employable here, there are still a few good lessons. The obvious one is offering a public network via the central bank. As we know, FedNow will be fulfilling this in 2023. This is crucial because it provides greater accessibility and reach, particularly to community financial institutions and credit unions. A real-time payments network only works if both sender and recipient are participants, so ubiquity needs to be the main goal.

Something that both TCH and the Fed could benefit from is broader outreach. India’s NPCI has gone to great lengths to educate not just financial institutions but also consumers on how to connect. In addition, they made the benefits of the system very clear from the beginning and were able to secure the support of both banks and service providers in advertising the UPI platform. The US Faster Payments Council, of which Alacriti is a participating member, has as part of its mission to educate the market on the value that payments modernization will bring to our economy. There is obviously more work to be done but this is a promising step. 

Another lesson comes from Japan’s attempts to go digital. Japanese banks were expecting a massive influx of international tourism from the 2020 Olympics and used this to justify pushing instant digital payments. Of course, 2020 didn’t go according to plan, and as such, their justification was compromised. The takeaway is not to rely too heavily on one use-case or source of traffic. One potential boost could come from offering a rebate, like Japan’s government did, but perhaps without adding a sales tax as well. One of the benefits of real-time payments is the boost to efficiency—returning some of that capital freed up as a reward to early adopters is a shrewd move and makes it a much easier sell. 

Overall, real-time payments are impacting all payment systems globally. Although countries are taking different approaches to implement faster payments, no economy has a blank slate—there is always a transition from existing practices. It is essential that American financial institutions support the existing infrastructure and needs of the market while setting the foundation for the future payments that will inevitably dominate. The players that stand out in the years to come will be the ones that collaborate and innovate on bridging that gap today.

For more on real-time payments, please see our blog, Why RTP, Why Now?

Alacriti’s Cosmos for RTP® enables financial institutions and organizations to quickly and seamlessly connect to The Clearing House’s RTP® network without the burden of significant infrastructure overhauls or capital investments. To speak with an Alacriti real-time payments expert, please contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

Financial Institutions Are Investing in Chatbots

At the beginning of 2020, 12.2 million Bank of America customers were already using Erica, the bank’s virtual voice assistant (chatbot). Bank of America and other financial institutions are investing in chatbots because they improve the digital experience and can reduce costs. Some financial institutions hire large staffs to develop their chatbots in-house while others outsource development to third parties, often with no upfront costs.

Wide use by consumers

Chatbots are increasingly being adopted by consumers because of their ease of use. Chatbots allow customers to simply say what they want in their own words which are then processed by the software using natural language processing. Natural language processing is made possible by artificial intelligence (AI) and machine learning, making it more flexible and user-friendly than other self-service technologies. Chatbots can facilitate many tasks including transferring funds, paying bills, and answering questions.

Broad deployment by companies

Because of the improved digital experience and operational cost savings, organizations are widely deploying chatbots—it’s expected that $5 billion will be invested in chatbots by 2021. But many more will need to jump onboard to be prepared for increasing acceptance by consumers due to convenience and speed. Servion Global Solutions predicts that by 2025, 95% of customer interactions will be powered by AI.

Microsoft CEO, Satya Nadella, said, “Pretty much everyone today who’s building applications, whether desktop apps, mobile apps, or websites, will build bots as the new interface.”

Chatbots are available through many channels

Chatbots can be deployed via many channels, allowing companies to meet their customers where they are. Interfaces include voice assistants, Facebook Messenger, the web, and other channels.

  1. Voice assistants

Amazon Alexa, Google Assistant, and others allow customers to interact via voice commands. For example, a user can set a timer, check the weather, pay a bill and operate household controls all while cooking dinner.

  1. Facebook Messenger

One of the most popular chatbot platforms is Facebook Messenger. There are an estimated 300,000 chatbots on Messenger, handling 8 billion messages monthly between businesses and consumers. Wells Fargo, for example, has incorporated Facebook Messenger chatbot capabilities to enable its customers to make common inquiries using natural language for such things as account balance, nearest ATM, most recent transactions, and more. According to the bank, the technology helps them better engage customers at the time and place of their choosing. But another key benefit includes significant cost savings. According to Chatbots Life, the use of chatbots can reduce operational costs related to customer requests by 30 percent. And, while some social platforms appeal to a narrower group of users, Facebook provides access to a wide range of consumers, with 24 percent of Facebook’s advertising audience in the 18-24 age range and 10.4 percent in the 45-54 range, and a relatively even share across most age groups.

  1. The web

It’s becoming increasingly common for users accessing a financial institution’s website to be presented with a virtual assistant upfront. According to a survey by Userlike, at least 54 percent of respondents trust chatbots with basic requests and only 9 percent are against businesses deploying support using chatbots—and this number is only expected to grow, especially as consumers and businesses continue to navigate the “new normal” brought about by the global pandemic.

  1. Other channels

Chatbot technology can be deployed using just about any user interface. Anticipated channels include the native text capability of mobile phones, interactive voice response (IVR) systems, and other emerging channels.

Summary

Chatbots are expected to continue to be widely deployed by companies and heavily used by consumers. They are easier to use than other self-service options because they respond to natural language. Chatbots are also available via many user interfaces, enabling financial institutions to meet their customers where they are. Expected benefits include an improved digital experience, increased self-service adoption, lower costs, higher customer satisfaction, and better rates of customer retention. Is it time for your organization to consider a chatbot?

For more on AI, see our AI and Customer Service by the Numbers infographic.

*This is an update on an original post published November 2018

Alacriti created Ella, an AI-powered chatbot that facilitates seamless, personalized, and context-aware interactions between you and your customers through messaging apps, intelligent personal assistants, and directly on your website. To find out how Ella can transform how you engage with your customers, contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

Microservices and API Architecture: Lesson 3

“Microservices, or microservice architecture, is an approach to application development in which a large application is built as a suite of modular components or services.” These services run as autonomous processes and communicate with one another with, you guessed it, APIs.

Microservices are not just beloved by fintechs such as Alacriti and PayPal. They’re also used by giants such as Amazon and Netflix (who run on Amazon AWS cloud servers). You may have seen that microservices provide flexibility. But how? Upgrading a solution traditionally means doing a lot of re-testing for all aspects of the solution. Microservices allow developers to make targeted changes that have their own pathways, making large re-testing unnecessary. Another welcome benefit is that changes can be made (think enhancements and regulatory demands) without worrying about downtime or the entire solution malfunctioning. 

Teamwork is typically a good thing. However, you don’t necessarily want to have your entire IT team working on your solution every time a change is needed. In fact, different teams can work on different components at the same time, rather than having the dreaded project management dependency. Everyone on your team doesn’t have to know the entire solution. Each microservice can be implemented with different databases, software environments, and programming languages. Each service can be managed independently, and one thing changing doesn’t affect the rest of the system. 

As we mentioned in Lesson 1, a full API strategy focuses on microservices-based architecture. This allows you to add capabilities without everything breaking. A perfect example of that is real-time payments. As the demand for faster payments increases, many financial institutions are offering or planning to offer real-time payments. Microservices and open APIs make launching real-time payments without disruption possible. Microservices are the key to digital acceleration and the flexibility to keep pace with the industry. 

Alacriti offers an API First and Microservices based architecture on a cloud-based platform, Orbipay, with solutions for real-time payments, EBPP, and digital disbursements. This provides a flexible integration framework to enable easy integration with internal systems (core banking, fraud, risk management, etc.), and your organization can easily add support for new payment schemes as they become available.

To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com.

Alacriti Blog

Why RTP, Why Now?

*Originally published on CUInsight.com

It’s a common experience. Someone puts a shiny new piece of technology in front of you, and they say that it’s going to change everything: faster, smarter, easier, safer. Great, you think, but… what does it do?

Everyone acknowledges the potential of real-time payments, but it’s still relatively new. In the long-term, the most exciting thing about RTP is the way it will integrate with open banking technology to catalyze further innovation. On the other hand, there has long been a lack of awareness among consumers and decision-makers of how we stand to benefit from broader real-time payments adoption. RTP connection is already a standard among the largest institutions; it’s the mid-sized to local institutions that are next in line now. 

So why use RTP? The most obvious benefit is speed, and while that’s certainly a selling point, the evidence suggests that speed by itself is not enough to get executives on board. They need to see a clear advantage and fortunately, there are plenty. We’re going to go over a few of these RTP use cases, broken down by the different players that might initiate them. Many of these situations cross sectors, the main difference being the specific details of the transaction. For example, any organization with employees would benefit from real-time payroll, but a credit union might see different benefits than a government agency.

Government

The most emphatic case one could make for a government-accessible RTP network is evidenced by the recent U.S. stimulus bills. The benefit is clear—the sooner financial assistance can reach a person who needs it, the better. Even after we recover from our current economic crisis, there will still be strong use cases.

Real-time payments could streamline every step of an often arduous tax process, from collecting to refunding – while saving money on paper checks and manual processes. Payroll would be accelerated, as would government-to-citizen compensation for working expenses like transportation or equipment. Despite modernization efforts, paying fines and other incidental fees to the government can still be a nuisance. Having the option to request and accept payment in one place could make the process easier for all parties.

Regional Bank or Credit Union

Many regionally-focused financial institutions are in the process of deciding whether to connect to a real-time payment system. Thus far, it has been a resource-intensive and time-consuming process, leaving many waiting for a strong use case to justify the investment.

Real-time banking services are already a selling point and will become even more highly sought-after in the near future. The pandemic accelerated the trend line for adoption. Initial use cases include allowing customers or members to receive their paycheck in real-time as soon as work is completed, P2P payments that allow vendors or family members to receive their funds immediately, and real-time bill pay which is good news for last-minute payers. The introduction of these use cases will cause members or customers to consider switching if their current account doesn’t allow them to do the same. 

Insurance

Verticals like insurance or utilities that need to make regular disbursements to their customers will see their processing expenses diminish—in time leading to a drastic reduction in paper checks, if not getting rid of them altogether. This makes both employees’ and leaderships’ lives easier. But more importantly, it satisfies the consumer’s desire for convenience. It might not be long before even same-day processing float is considered substandard. Similar to the stimulus payments mentioned above, insurance disbursements go out to people when they are in immediate need of assistance. Real-time payments would allow an insurance agent to transfer funds to a client as soon as the claim is verified. For example, a car insurance provider could immediately provide funds for transportation from the scene of an accident, or to hire a rental car. As with many industries, real-time payments access is already incentive enough for many consumers to switch to a more modern provider. 

Lenders

Whether it’s to an end consumer or otherwise, any industry that issues loans can benefit from a real-time infrastructure. Being the first to offer this capability presents a huge marketing advantage. A car loan provider could offer on-the-spot financing and request-for-pay. This shortens the borrowers to-do list. They can send the first payment immediately and from then on receive a monthly request-for-payment message. All the client has to do is accept the request, and then the payment is instantly received by the lender.

Corporation

In comparison to traditional transfer systems, real-time payments are resource-efficient. They provide a single point of contact for both the payment message and information regarding the payment. The ISO 20022 standard employed for real-time payments provides the data necessary for ease of processing into backend systems, as well as increased fraud protection. The result is a significantly streamlined workflow and efficiency that pays off in shrinking operation costs. The data-rich messages sent on real-time networks allow for better cross-sell opportunities, improved forecasting tools, and automated transfer services. 

Small to Medium Business

Businesses can be made and broken in the time between initiating payment and final settlement. This is especially true in times of economic pressure. For example, a manufacturer operates at a deficit from the time they ship to the time they receive payment. If this same business can receive funds as soon as they make a sale, their growth trajectory has a better foundation. They can close sales and purchases in real-time and immediately redirect the funds. 

Another use case for businesses is payroll. Employees can receive paychecks instantly and with more flexibility, and the payor does not need to account for the float period— funds deduct immediately. If the business is accustomed to that float period, they can nudge their payday to the date that the payment would be received without any disruption to their current budget. This is an especially important feature for employees in the gig economy or those who work irregular hours. Overall, businesses see happier workers, increased revenues, and accelerated growth.

Individual

One appealing use is P2P. If a convenient interface is provided, real-time payment is more appealing than both cash and competing mobile payment services like Venmo or CashApp. Mobile payments offer convenience but in a closed-loop system. If a customer needs to make a mortgage payment, for instance, they need to transfer funds to their bank account. This means either waiting at least a day for a free transfer or paying for an “instant” transfer. 

The use of banking aliases could drastically simplify sending P2P transfers through a bank’s real-time option. An alias would allow users to share a memorable, unique identifier rather than an account or routing code. Best practices have yet to be established, nor has a convenient method of standardizing these aliases between different banks. Once these hurdles are crossed, however, consumers will be happy to simplify their finances.

As we mentioned a few times, consumers, especially Millennials and Gen Z, are willing to switch service providers to access real-time payments networks. In fact, 30% of consumers believe that access to real-time payments is a key factor when selecting a financial institution. This goes for banks, credit unions, utilities, payroll providers—if your firm is moving money at any scale and wants to win life-long customers, then moving to real-time is a necessity. But this demand is itself an opportunity. 

For more on real-time payments, please see our blog.

Alacriti’s Cosmos for RTP® enables financial institutions and organizations to quickly and seamlessly connect to The Clearing House’s RTP® network without the burden of significant infrastructure overhauls or capital investments. To speak with an Alacriti real-time payments expert, please contact us at (908) 791-2916 or info@alacriti.com.