Rachael Tomaney: This is not the first white paper on real-time payments, nor will it be last, as real-time becomes the new norm and exerts it influence on the wider payments ecosystem. But what do you see as the key findings of this particular paper?
Craig Ramsey: In countries where real-time payment schemes have yet to launch, we often have banks ask us how they can make money from this new payment type. This research clearly outlines new use cases where there are great opportunities for revenue gains – including for banks in those countries that are yet to implement a real-time payments scheme at the national level.
Leo Lipis: The question is no longer about whether banks can make money from real-time payments; it’s about what can be learnt from banks that are already doing it successfully. We have identified new uses cases that supplement these proven revenues. The industry is correct in that it’s harder to monetize P2P instant payments in most countries, but banks will provide new services to corporate customers and charge them for that functionality. Business-originated payments – the ‘C2B’ space – will be a hotbed of real-time innovation.
RT: Where do these new real-time payments use cases sit in the value chain?
LL: One of the key areas for innovation in real-time payments includes the high-volume biller space. Request for Payment (RfP) launches in the US and Europe later this year, and in the UK when the new Faster Payments platform goes live. RfP brings with it the opportunity for banks and financial intermediaries to add value for those currently collecting bill payments through other methods; mortgage companies, credit card issuers, utilities and public authorities. RfP puts them back in control of their billing and associated processes, and it can improve cashflow and liquidity management, reduce chargebacks, enable faster notification of incorrect account details and simplify reconciliation of payments to customer bills.
CR: It’s important to remember that the RfP functionality is a message, but the end result is a credit transfer. So it’s not a new way of doing payments, it’s a new way of requesting that a payment happens. It really focuses on improving the experience for both the biller and the payee, which is where the value sits.
RT: Are there only new revenues to be made in the corporate banking space? What’s the business case for real-time payments in retail banking?
CR: The business case for retail banking is a case of staying in business by retaining total numbers of accounts, and the values within them. Unless banks offer P2P real-time services, they are going to push customers to shift money out of the banking system and into the fintech ecosystem. Consumers will move money into wallets provided by innovative new competitors if they provide better P2P services built on real-time rails. A subsequent reduction in account holdings would limit the ability of the bank to generate profits from corporate and investment banking.
The US is a great example of where this lesson has been keenly learnt, when we consider the rise of Venmo and the banks’ investment in Zelle. The banks have capitalized on the enormous growth in real-time P2P by integrating their own service into the mobile banking experience. Zelle has seen tremendous growth, overtaking Venmo in transaction values and volumes. This has been crucial to retaining the customer relationship and the customers’ holdings within the banking network.
RT: The new white paper also looks at the convergence of real-time and open payments. How do open APIs and Open Banking fit into real-time payments innovation?
LL: The ease of access to real-time payments are the key to uptake. This means ubiquity for the end customer, but also simplicity for fintechs. They need to access real-time payments processing to enable their new front-end propositions. This is delivered through a combination of Open APIs and open banking, which will enable and regulate the flow of transactions and data between fintechs, banks and billers. API-based communications will also ease the integration of these services into other systems at the biller’s business. This will be where value, such as ease of reconciliation, will be delivered to the corporate customer.
CR: There’s a misnomer that open banking is somehow the enemy of the banks, but it’s the complete opposite! An open payments ecosystem allows a bank to promote its services in a much broader fintech environment. Banks should consider fintechs the delivery point for their own banking services; those that the fintech cannot deliver. Fintechs are an outlet for your products, every time you open access to a fintech you gain more delivery channels. Fintech customers need to hold deposits in banks to service the products fintechs are promoting.
Combined with real-time payments to service those products in a timely manner, the proposition of moving money into fintech channels only as and when needed is much smoother from the customer experience point of view. Any bank that still sees open banking and real-time payments enabled through open banking as any kind of threat is simply not approaching the opportunity correctly.
RT: What’s your key takeaway when it comes to how banks can capitalize on this new real-time and open payments model?
CR: When a fintech integrates payment services into its offering, it wants to partner with banks working with modern technologies. From a fintech perspective, an API-enabled banking partner is a much more attractive proposition. Any bank that only offers legacy modes of integration, or worse, only batch processes, makes themselves too difficult to do business with. Fintechs are nimble new businesses, without legacy infrastructure. They are unlikely to be supportive of payment systems that don’t work in real-time, or don’t support and easily expose the rich data they need to feed into their services. They’ll want to leverage new real-time payment overlay services such as confirmation of payment or integrated receipts. With traditional RTGS, it’s slow, inefficient and expensive to create these features. New payments players are looking to quickly and easily integrate into banking services, based on real-time payments, hence the need for instant and open.
ACI Low Value Real-Time Payments 
