Alacriti is a member of the U.S. Faster Payments Council (FPC) and we continue to be excited to help shape the future of payments. FPC and payments consulting firm Glenbrook Partners teamed up for a multi-year study following key developments in the U.S. faster payments market. As a result, The Faster Payments Council released this report containing valuable forward-looking insights, some highlights of which we feel are still valuable to review as they relate to consumer bill payments as real-time payments availability and acceptance continues to grow exponentially.
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 stands out to us as top-of-the-list: bill payments. In fact, according to the FPC/Glenbrook Partners report, bill pay was ranked as the top use case by 59 percent of respondents. When we talk about bill payments, there are two models:
- The biller direct model – the payor pays the payee directly on the biller’s website or app.
- Bank bill pay – the initiation of the payment is done via the payor’s bank’s website.
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 callout for the persona within bill payments that will benefit most from the introduction of faster or real-time payments into the model—the just-in-time payor, otherwise known as “the procrastinator” who often waits until the last second to pay bills.
Addressing “Disappearing Payments” with Transparency
With bank bill pay services, there is a period where the movement of the payment disappears from view. When the customer submits their payment within the bank bill pay system, they typically receive a confirmation that their payment has been successfully submitted, but there is a twenty-four to seventy-two-hour period where the money itself is in transit, either in the bank’s batch-based system, within the clearing and settlement process in the network, at the merchant’s bank or loading into the system of record at the biller. The payment leaves your account but doesn’t arrive in the merchant’s account for one to three days, potentially creating anxiety for consumers as they have no insight into the status of their payment, damaging the customer experience.
Real-time payments eliminate this anxiety. As soon as the consumer sends a payment, they receive a notification that the payment has reached the merchant, instantly. This is the digital equivalent of handing cash over to a cashier at checkout, but better since the merchant doesn’t have to undergo a separate, expensive and time-consuming process to collect the money and later deposit it in their account. The process is fully transparent, unable to be refuted, and instant on both ends. As Glenbrook Partners states in the report, “Faster payments allow financial institutions to provide consumers with a transparent bill pay experience and billers with improved reconciliation.”
These and many other use cases are contributing to the overall increased availability and adoption of real-time payments by financial institutions. If your institution is not currently exploring how real-time payments can be an integral part of your strategy for customer acquisition and retention, the time to consider is now.
Updated from a blog originally published July 28, 2020
