Posted by Carl Robinson on 28 Jul 2020
As you may have heard, Alacriti recently joined the U.S. Faster Payments Council and we couldn’t be more excited to help shape the future of the payments market. FPC and Glenbrook Partners have teamed up for a multi-year study following key developments in the U.S. faster payments market. The Faster Payments Council recently released some valuable data in the form of this report. While I recommend reading the report yourself, there are a couple data points that I believe are notable and important to talk about here.
Bill Payments as a Use Case for Faster Payments
Many use cases are of interest to the market when it comes to faster payments. However, there was one that we at Alacriti vehemently agree is a top of the pile use case, and that is bill payments. In fact, according to the FPC/Glenbrook Partners report, bill pay was ranked as the top use case by 59% of respondents. When we talk about bill payments there are two models:
There are pluses and minuses for both models depending on who you are asking (the consumer, the bank, the biller, or the vendor). However, one thing is for certain this disparate model is ripe for disruption and innovation.
Catering to the “Just in Time” Payor
There is a specific call out for the persona within bill payments that will benefit most from the introduction of faster, real-time payments into the model — the just in time payor, or as I have been known from time to time, the procrastinator. This individual waits until the last possible second to pay their bill.
Addressing “Disappearing Payments” with Transparency
In the current model of bank bill payments, there is a period where the payment truly disappears from view. When the customer hits submit on their bank bill pay system they typically receive a confirmation that their payment has been successfully submitted. However, there is a twenty-four to seventy-two hour period where the money itself is in transit, either in their bank’s batch-based system, in the clearing and settlement process in the network, at the merchant’s bank or loading into the system of record at the biller. Literally, the payment leaves your account but doesn’t arrive in the merchant’s account for one-three days. This client experience, and angst, of not getting credit for your bill payment even when the money left your account in 2020 is INSANE!
Real-time payments completely eliminates this anxiety. As soon as the consumer hits send, the next confirmation back is the actual notification that the money is IN the merchant's account. This is the digital equivalent of handing cash over to a cashier at checkout, but better since the merchant doesn’t have to then have a Brink’s truck come to the store to collect the money and then deposit it in their account later that day — it’s transparent, non-repudiation and instant on BOTH ends. As Glenbrook eloquently put it, “Faster payments allow FIs to provide consumers with a transparent bill pay experience and billers with improved reconciliation.”
There is a lot more to this use case and others in the bill payments arena that makes sense to explore as you start on your real-time payments journey. But bill payments are certainly a good first step, because as the old saying goes, “Every long journey starts with a first step!”
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