When it comes to faster payment discussions, the most popular questions we hear are:
- What are some use cases of real-time payments?
- How do I show an ROI on the investment required to start on a faster payments journey?
These are great questions, and the fact that we get them in some form in every introductory meeting we have shows us that the market is rapidly gearing up to move forward on their real-time payment projects. When it comes to the questions, answering the first is what leads us to the second answer.
So, where to start with the use cases? Identify if your financial institution has any immediate client needs—taking care of low-hanging fruit and listening to your customer or member base is and always should be step one. Quite frankly, if any are pressing enough, you don’t need to read any further. Get going on your faster payments project ASAP! However, if there are no immediate needs, or a scattering of needs that seem to be all over the place I would offer the following advice.
If you are a financial institution that has both consumers and commercial clients or members, the first use cases of focus should be your business clients. This is because, for all practical purposes, business banking is driven by a fee-based mindset while consumer banking is a free-based mindset. Meaning, as you introduce new functionality or enhanced services, your business clients expect to pay for those improvements. Whereas, as an industry, we have, for better or worse, trained consumers to expect to receive services for free.
Second, businesses of all types benefit from faster access to funds, whether it’s improving their working capital management or procure to pay or order to cash processes. Access to immediate and irrevocable funds helps all aspects of B2B payments. That’s not even going into the value of all of the data and information that can be sent along with the payment in the new payment rails. This will have a great impact on the eInvoicing and Business Bill Payment models that were built around the legacy payment infrastructures we still currently rely on.
As the adoption of faster payments continues, and more financial institutions connect to the RTP network, and additional clearing and settlement channels come online, offering real-time payments will rapidly become a necessity. Businesses will find faster money movement services from other financial institutions that are connected to these networks and realize the potential they bring to their treasury and operations teams. The subset of use cases for B2B payments is massive, and as noted, are traditionally fee-based. So, the ROI of offering these services tends to become an exercise of setting a price point per transaction (or bundled transactions into a tiered service model) and build out your volume models to show revenue, similar to other payment types. However, as noted earlier, the value of the payment rail is in more than just faster funds movement (which is great on its own). It’s also in the data that moves with the transaction, giving financial institutions the ingredients to create net new products and services, and that is where the true ROI resides.
Learn more in Why Banks and Credit Unions Need Real-Time Payments.
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 about RfP, please contact us at (908) 791-2916 or info@alacriti.com.
