Fireside chat: How banks and their customers intersect at real-time payments

If you’ll pardon the currency pun, payments are a two-sided coin. Pay and get paid, for example. Accounts payable and receivable. Direct debit success and authorized push payments (APP) fraud. In the spirit of that dual approach, we’re heading toward the end of 2022 by pairing Bottomline’s commercial head of banking for North America (Chuck Garcia) with our global head of platform and transformation in the UK (Colin Swain) for a fireside chat. Several key issues, from instant payments to fraud, are shaping the headlines that will define 2023. Bringing both sides of the pond together firms up a compelling conversation, including geographic nuance on the issues, and insightful predictions

Chuck Garcia: Colin, I think I’ll start with real-time payments, or as it’s known in the UK and EU, instant payments. You know, I was reading our recent report on competitive banking, which shows real-time payments have jumped ahead of cloud migration and fraud to become the top priority for banks next year. While I think cloud is still very, very much on the mind of most executives, it’s good to see real-time payments take the top spot. In the US, I think this has a lot to do with the expected advent of the FedNow “faster” payments platform. From my standpoint, FedNow will open real-time payments beyond the handful of players and participants currently in that arena. I expect to see a lot of smaller to midsize banks participate now, whereas before, they couldn’t justify the cost of that endeavor. Are you sensing that non-financial service businesses are on the same wavelength?

Colin Swain: Yes, and it doesn’t really surprise me, Chuck. The consumer’s world is always on, and they’re accessing financial services through a multitude of different channels and devices. As a business, you can see your financial and cash information sliced and diced in different ways. And yet, we still live in a world where the transfer and settlement of money between two accounts can take days. And if you're going internationally, it can take even longer. As you’ve mentioned, digital transformation and cloud migration have been at the top for years, and rightfully so. But now, anything outside of real-time settlement feels fundamentally wrong.

Garcia: Which is why I think we’re seeing digital transformation become more tangible. It has really taken a positive form as we see meaningful movement on real-time payments. And let me add one more thing here, I think the Fed over here has done a good job communicating with its member banks. They have opened the door for more entry points.

Platform talk: Bearing the cost of innovation

Garcia: I’m also excited to see the Fed open these doors to innovation, because that’s about the crux of the matter. Colin, I know one of the things we both deal with daily is the need to get businesses onto suitable payment platforms, and we’re always looking for a way to incentivize them and get them a cost structure that will work for them. I’m looking at it strictly from a commercial banking side of the house. Businesses that have successful relationships with their banks will push on the technical and financial aspects of digital platforms. And if it’s good for the bank it’s good for their client base.

Swain: I would add, from a corporate perspective, that cost is just one component of that choice, and let’s not overlook that we’re defining how companies pay and get paid. Looking at the EU and the UK, I see a massive decline in checks over the past 20 years. Buyers and sellers are much more comfortable with digital platforms and real-time payments. Why pay to maintain a legacy infrastructure and wait five or six days for payments to settle when I can get it instantly? There’s a high operational and overhead cost to maintain check payments, which corporates aren’t interested in.

Garcia: But at the same time, as I saw in one interview recently, we’re not going to see the last check in history cut during our lifetimes. And that brings me to another thing I’ve read a lot about recently: this concept of being “digital first” as a bank rather than “digital only.” And I’m comfortable with that. If I take that stance, I’m saying I focus first on digital experience and execution, but I’m not forcing digital as the beginning and the end. There's still a significant piece of the commerce cycle that deals in cash and deals and checks. And sure, paper and what’s physical has diminished and will continue to diminish. But a digital-only platform can alienate or limit customers.

Swain: I think when we talk about digital first, what’s important is that it’s inclusive. It embraces how they want to use your products and services and defines the best way to serve them. I think in terms of “always win.” And I think more and more companies have come around to the fact that “digital first” is the best way of serving them. That is not the only way. I was talking with someone the other day about APIs, why we have them and what they’re used for. That’s important, but APIs don't solve customer problems. People, products, and businesses solve customer problems. Customers genuinely want to engage and consume services in lots of different ways. So, the trick here is not an API strategy. What's your customer strategy? What's your customer experience strategy? Do they want to consume your services through an API? Do they want a fantastic digital user experience?

Garcia: Or, more importantly, Colin, what can a partner do to bring that digital experience to life? I start with the workflow and the client experience. Your end customer is the one who's going to be using the system, and they pay banks to utilize their systems. Then you need to look at reliability. Track records need to be established everywhere, whether it’s the largest banks or mid-market banks. Workflow and reliability are what we hear from our clients, and I think those are the factors that will lead the market.

Swain: Well said, Chuck. It’s all about where the market is going. That is important. Not just because of conversations like this but because it means we're building our technology to help customers connect and compete. So that essentially ensures our customers don't have to worry about real-time payments or don't have to worry about compliance or don't have to worry about new regulations coming in. They can take all the advantages of it. A good partner will navigate the market and ensure businesses don’t have to make radical changes to exploit it. It's not just about finding partners. It’s looking at investments in the market.