One of the most rewarding aspects of my role at Alacriti is the opportunity to work closely with our market’s thought leaders and the financial institutions that are on the bleeding edge of the payments market. As Alacriti’s representative on the U.S. Faster Payments Council, I have the pleasure of working on the Education and Awareness work group. As a part of that, I have been exposed to discussions on possible faster payments use cases across the market. It’s a big-picture group working on expanding the horizons of payments and trying to push them to the edges. This is all while thinking about each player in the market. Whether that’s a financial institution, a merchant, a government entity, or an individual, there are use cases that touch all of us. So what does this mean for your industry?
Governments
Let’s start with the hot topic since one, we are coming into the heart of tax season, and two, another round of COVID-19 Stimulus has started to trickle out. Governments stand to gain tremendously for faster payments, primarily because the receivers of those payments are taxpayers and citizens like you and me. Speed is the name of the game for government disbursements, and enabling receipt of those payments via a faster payment system is something I think everyone could agree on. On the other side of this, waiting to pay your tax bill until 11:59:59 pm could be made possible with faster payments. Keeping the money in your account until the last minute could also be a value add. Although unfortunately, it won’t lessen the tax bill, it could alleviate any cost of a late payment!
Insurance
Speed is the name of the game when it also comes to customer satisfaction in insurance disbursements. Often emotionally charged, insurance payouts, whether it’s property & casualty or health-related, have a critical timeline. Getting dollars in hands is an imperative that faster payments can deliver to this industry. Since checks are still dominant in this space, faster payments offer a clear advantage to current workflows in the market. Simplifying the payout process for the consumer or business can lower anxiety and create a better overall experience. This is a win-win scenario.
Financial Services
Looking at banks and credit unions, one usually doesn’t think about the outbound payment workflow from their accounts as a driver of value. However, speed is the name of the game today in terms of options such as merchant advances or loan disbursements/funding. Faster payments offer FIs the ability to quickly move money and get it to the destination account faster, an improvement over many of today’s available workflows. This, in turn, could speed up revenue realization or, even better—create net new fee revenue opportunities like pre-funding receivables for merchants.
E-Commerce
2020 was a dud in some aspects of the economy, but eCommerce was a shining/glowing/on fire spot of the economy as we all turned to our devices to buy things to keep our sanity while in our own safe, confined spaces for the past year. The rise of eCommerce marketplaces where individuals could sell their goods/services/and crafts created a whole new ecosystem requiring payout services. The faster those transactions got to the end merchant, the quicker the next stack of tchotchkes could make it to the marketplace. Also in this category was the growth of Buy Now/Pay Later (BNPL), where you could buy that new Peloton Bike to cycle your days away. Switching out traditional credit card purchases to installment payment plans isn’t necessarily new, but making them simple to apply for as well as part of the in-payment checkout experience exploded over the past 12 months. The value that faster payments could bring will continue to drive use cases for the BNPL space and other FIs looking to enter the game.
While not an industry, I can close this with the discussion on what faster payments mean to the individual consumer. For me, the biggest value that faster payments will bring is the clarity of where your money is at all times. There are times in financial lives where money is “in-between” where it came from and where it’s going, primarily due to the legacy payment systems much of our financial services market relies on. As faster payments become more broadly available, the day-to-day financial management of one’s personal accounts will simplify, and the concept of a “memo post” or “available balance” will become a thing of the past. The money is there, or it isn’t; your biller got paid, or they haven’t. The distance between everyone will be shorter, making everything more efficient and unlocking new opportunities for innovation all around us!
Read how COVID-19 affected industries in the article: Looking Back: The Impact of COVID-19, Broken Down by Industry
Alacriti’s cloud-based platform, Orbipay, delivers solutions across the payments ecosystem, including The Clearing House’s RTP® network, Electronic Bill Presentment and Payments (EBPP), and Digital Disbursements. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com.
