Insights from the Nacha Smarter Faster Payments Conference
The RTP® network and FedNow® Service continue to increase in volume. At the Nacha Smarter Faster Payments conference in May 2024, Mark Majeske, a former team member who designed the RTP network, hosted a panel discussion with financial institutions. Amy Faley, Manager of ACH, Veridian Credit Union; Cassandra Tucker, Director of Operations, ABNB Federal Credit Union; and Anne Sharkey, SVP, Operations, First Internet Bank, discussed the opportunities and challenges associated with implementing instant payments. Here are some key takeaways from the session.
The Drive Toward Instant Payments
The increasing push for instant payments is permanently shifting how financial institutions operate. As a result, many financial institutions need to understand the journey of integrating instant payments, from the initial decision to adoption, operational challenges, risk management, and use case monetization.
One of the key drivers behind the interest in instant payments is the demand from both individual and business customers for faster money movement. “It’s all about moving money when they want to, and that’s an ongoing trend,” Majeske remarked, referencing data from the RTP network showing that 50% of transactions occur after banking hours.
Real-World Implementations: Lessons From the Field
Community banks and credit unions are at various stages of implementing instant payments, hence their experiences offer valuable lessons. For instance, Faley shared that Veridian Credit Union’s decision to embrace instant payments was heavily influenced by the needs of its members and business partners. “Our membership…just wants the money to get there and be in their account as quickly as possible,” she emphasized. The credit union, receiving instant payments since late 2021, has seen a significant shift in transaction volumes, particularly with partners like Venmo and PayPal.
Similarly, Sharkey shared that First Internet Bank’s adoption of instant payments was driven by customer demand and the need to stay ahead in a rapidly changing industry. “We were wanting to be an earlier adopter…seeing where payments were going,” Sharkey said. The bank’s unique position as an internet-only institution has made instant payments a natural extension of its existing services, especially in supporting small businesses and fintech partnerships.
Addressing Challenges: Fraud and Settlement
While the benefits of instant payments are clear, some challenges need to be addressed, particularly in fraud prevention and settlement management. There was initial skepticism from ABNB Federal Credit Union’s executive team, who were concerned about the potential for increased fraud. However, Tucker argued that faster payments do not necessarily lead to more fraud, provided that robust risk management strategies are in place. “We took a very layered approach…to help us identify those account takeover situations,” Tucker explained.
For institutions worried about the complexities of managing 24/7 settlement, Tucker recommended partnering with a settlement agent. This approach can alleviate some operational burdens, allowing smaller FIs to offer instant payments without overextending their resources.
The Case for Early Adoption
The consensus among the panelists was clear: the time to adopt instant payments is now. “This network’s not going away…This is the future of money movement,” Tucker asserted. Early adoption not only positions community banks and credit unions as innovators but also provides them with the opportunity to refine their processes before instant payments become ubiquitous.
Faley also emphasized the importance of moving quickly, noting that many service providers now offer cost-effective, easy-to-implement solutions. “Right now is a good time to jump into it…the cost is even lower for implementation,” she advised.
For more perspective on implementing instant payments, read about Royal Credit Union’s experience.
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
