In a recent episode of The Alacriti Payments Podcast, Saman Kazmi, host and Marketing Associate at Alacriti, spoke with Paul Steinbrecher, Director of Payments Consulting at Alacriti, to tackle some of the most common questions posed by bank and credit union executives regarding instant payments. The episode shed light on how financial institutions are approaching instant payments and the key advantages that Alacriti’s solutions bring to the table.
How Are Financial Institutions Approaching Instant Payments?
When asked how financial institutions are currently approaching instant payments, Paul emphasized that most institutions start by prioritizing receiving payments. This first step allows them to dip their toes into the world of real-time payments in a controlled, lower-risk environment. However, as they become more comfortable, institutions often move toward sending payments, a more complex but highly beneficial capability.
“Even though some institutions’ primary focus is on receiving payments, many are looking ahead to sending,” Paul explained. “Their priority is finding a vendor who can help them easily transition to sending when they’re ready. This often starts with low-risk use cases, such as paying a vendor or disbursing payroll, before moving into more consumer-facing or commercial use cases.”
Paul noted that the decision to adopt sending capabilities is heavily influenced by the institution’s client base. For a consumer-focused bank, enabling consumers to send funds to their own accounts at other financial institutions might be a priority. For a commercial bank, business-to-business (B2B) payments might take precedence.
What Are the Advantages of Alacriti’s Instant Payments Solutions?
Paul highlighted several key advantages that Alacriti offers to financial institutions exploring instant payments.
- Back-office Portal: One of the most important is Alacriti’s proprietary back-office portal, which simplifies the process of managing payments across multiple divisions within an institution. This user-friendly and low-risk portal allows institutions to initiate payments on behalf of themselves, such as for vendor payments or payroll.
“We’ve built strong partnerships with digital banking providers such as Alkami, Access Softek, and Lumin,” Paul said, “which allows us to integrate our instant payments solutions directly into financial institutions’ existing systems. This makes it easy for them to activate instant payments as soon as they’re ready.”
- Smart/Intelligent Routing: Another advantage is Alacriti’s intelligent routing technology, which automatically determines the best payment rail—whether real-time or traditional—for each transaction. This ensures that the user experience is seamless and that financial institutions can easily offer instant payments alongside more traditional options.
“We’ve seen demand for presenting instant payments as a fee-based option,” Paul explained. “With our intelligent routing system, financial institutions can give users the choice of sending funds instantly for a fee or using a slower, lower-cost option like ACH. This not only enhances the customer experience but also creates a potential revenue stream for the institution.”
How Do Financial Institutions Handle Fraud and Risk with Instant Payments?
Fraud and risk management are critical issues in the realm of instant payments. Paul discussed the differences in how fraud is handled on the receiving versus sending side of transactions. On the receiving side, the risk is generally lower because the payments are fully validated and irrevocable. However, on the sending side, the risk increases because once the payment is sent, it cannot be recalled.
“Fraud is top of mind for every financial institution we work with,” Paul stated. “Our platform is designed to run fraud and risk checks in under one second, which is crucial when you’re talking about instant payments. We also integrate with leading fraud and risk systems, so financial institutions can apply their existing fraud strategies while maintaining real-time transaction speeds.”
Alacriti’s Orbipay platform offers real-time fraud checks via open APIs, allowing institutions to customize their risk management strategies and decide whether to manually review, reject, or approve transactions based on the fraud score returned by the system. This level of customization gives financial institutions greater control over the risks associated with sending instant payments.
What Should Institutions Consider When Adopting Instant Payments?
- Start with low-risk use cases: Many institutions begin with internal transactions, such as vendor payments or payroll, before expanding into consumer or business-facing services.
- Alacriti’s strong integration capabilities: Alacriti’s pre-built partnerships with major digital banking providers, make it easy for institutions to incorporate instant payments into their existing systems.
- Intelligent routing and fee options: Institutions can offer instant payments as a fee-based option, allowing for both convenience and a potential revenue stream.
- Fraud and risk management: Instant payments require robust fraud controls, especially on the sending side, where payments cannot be recalled once sent.
For more expert insights into the latest trends in payments modernization, listen to The Alacriti Payments Podcast.
Alacriti’s centralized payment platform, Orbipay Payments Hub, provides innovation opportunities and the ability to make smart routing decisions at the financial institution to meet their individual needs. Financial institutions can take full ownership of their payments and control their evolution with ACH, Wire, TCH’s RTP® network, Visa Direct, and the FedNow® Service, all on one cloud-based platform. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com
