Just before Thanksgiving, two firms in the payments space finalized a partnership.
Data Center Inc. (DCI), the privately owned developer of iCore360 core banking software and related omnichannel technologies, announced a partnership with the Clearing House (TCH) to bring real-time payment transactions to hundreds more community banks nationwide via the connection of iCore360 to the RTP network.
Officials indicated the RTP network currently reaches more than 50% of U.S. transaction accounts and adoption is growing. They explained RTP technology can enable financial institutions of all sizes to create new payment services and ultimately allow users to exchange non-payment messages and leverage other value-added features.
With the connection of iCore360 to the RTP network, DCI clients will be able to clear and settle payments immediately along with other capabilities for faster, safer and smarter digital commerce.
“We are proud to be among the first core providers to bring more community institutions availability to real-time payments from The Clearing House,” DCI president and chief executive officer John Jones said in a news release.
“We believe this will be a game-changer for our customers and give them the same access to this technology that is afforded to the very largest financial institutions,” Jones continued.
Keith Gray, vice president of strategic partnerships for the Clearing House, added, “We are excited to team-up with DCI to further accelerate the reach and benefits of the RTP network to more community institutions. DCI’s cutting-edge, API-driven core technologies and infrastructures are backed by a uniquely personalized and customer-centered business model.”
As fintech developments germinate from outside firms, a new report from Accenture showed how much these new solutions could impact banks.
Accenture said as much as 15% of banks’ global payments revenue, or $280 billion, is likely to be displaced by the growth of digital payments and competition from non-banks, as payments become more instant, invisible and free.
The report found that global payments revenue will likely grow at an annual rate of 5.5%, from $1.5 trillion in 2019 to more than $2 trillion by 2025.
Accenture emphasized that only banks that change their business models to adopt the latest technologies and focus on providing value-added services to customers will capture a share of the $500 billion in incremental revenue growth.
Titled “Banking Pulse Survey: Two Ways To Win,” the report is based on a revenue-risk analysis model that Accenture developed to measure trends in how consumers pay and projected changes in merchant behavior, technology and regulation. The research is complemented by a survey of 240 payments executives at banks across 22 countries to determine how they plan to mitigate and capitalize on the disruption in payments to grow customer loyalty, revenues and profitability.
“Rather than being at the forefront of the new wave of the booming payments market, banks are feeling the heat from new competition and seeing their margins squeezed,” said Gareth Wilson, Accenture’s global payments lead.
“We face an inevitable world of instant, invisible and free payments, which spells trouble for banks that don’t want to be relegated to the plumbing of payments. But it also presents an opportunity to tap into a new business model based on this digital boom,” Wilson continued in a news release.
The report noted that during the next six years, banks will face further pressure on income from card transactions and fees, with free payments putting 8% of payments revenue at risk.
In addition, competition from non-banks in invisible payments — where payments are completed in a ‘virtual wallet’ on a mobile app or device — will put 3.9% of bank revenues at risk, according to the report.
Card displacement by instant payments, where funds are settled and transferred in real-time and banks make little to no interest, is projected to put an additional 2.7% of payment revenues at risk, Accenture added.
Experts see these developments building on current declines in income from card transactions and fees, with regulation triggering fee compression and technology displacing the role of banks in payments.
Already between 2015 and 2018, Accenture indicated revenue from business customer credit card transactions dropped 33%, revenue from consumer debit card transactions dropped nearly 15%, and revenue from credit cards dropped almost 12%.
The research found that the industry is aware of the challenges posed by new technologies in payments.
More than two-thirds (71%) of the banking executives surveyed agree that payments are becoming free; nearly three-quarters (73%) believe that most payments are already invisible or will become so over the next 12 months; and even more (78%) said that payments are either already instant or will become instant over the next 12 months.
“The digital boom will mean banks have to fundamentally change the way they think about their revenue composition,” said Alan McIntyre, who leads Accenture’s banking practice globally. “Channels that once made the banks billions of dollars will cease to exist.
“To succeed in the future, banks will need to develop new digital business models at scale, with ‘one-click’ payments the new norm, and set their sights on delivering secure, convenient and frictionless customer experiences,” McIntyre went on to say.
In response to these key market challenges, the report mentioned nearly four-in-five (18%) respondents said the main priority for the bank is to build security into retail payments transactions. Nearly one-quarter (22%) cited artificial intelligence, robotics, machine learning and innovative payments hubs as the key platform technology capabilities they need to adapt their core systems to high-speed and continuous payment flows.
Accenture conducted an online survey of 240 retail and corporate payments executives globally from the largest banks in the following countries:
— Australia
— Brazil
— Canada
— China (mainland and Hong Kong)
— Denmark
— Finland
— France
— Germany
— India
— Indonesia
— Italy
— Japan
— Malaysia
— Mexico
— Norway
— Singapore
— Spain
— Sweden
— Thailand
— United Arab Emirates
— United Kingdom
— United States
The survey was conducted between Feb. 14 and March 10. The complete report can be downloaded here.
Mezu, a mobile payments app that can enable users to pay and get paid by anyone anywhere for anything without sharing any personal information, recently announced that it has promoted Luis Trujillo to the role of chief compliance and risk officer.
Trujillo is the first person to fill this role at Mezu and will report directly to Mezu’s board of directors.
Trujillo will be responsible for furthering Mezu’s U.S. compliance and risk program as well as expanding the company’s presence internationally.
Since he joined Mezu in 2017, Trujillo has been instrumental in establishing the company’s anti-money laundering compliance and fraud prevention program, which includes real-time identity verification, including:
— Biometrics technology
— Real-time transaction monitoring systems
— Real-time know your customer (KYC) for streamlined customer onboarding
— Establishing licenses and registrations for the company in the U.S. and Canada.
“Luis has been a critical leader in our team since he joined Mezu,” Mezu co-founder and chief executive officer Yuval Brisker said in a news release. “We understood very quickly that in the fintech industry, building and running a world-class and thoughtful compliance and risk program is essential in establishing credibility and growing the business, especially one like ours that has global ambitions.
“Luis has led every effort to establish Mezu as a leader in the fintech world to be recognized and reckoned with throughout. In his new role, Luis, a formidable and respected authority in the field, will play an even more central role in helping Mezu realize its global ambitions,” Brisker continued.
Trujillo has more than a decade of experience in the payments industry and previously held senior leadership roles in a number of fintech companies and consulting firms.
Trujillo is a former government regulator and member of the Money Transmitters Regulatory Association, where he collaborated with federal and state regulatory agencies, working closely on the supervision of fintech, money transmission, and payments companies.
“I’ve been a firm believer in Mezu’s vision since day one and look forward to playing a leading role in expanding our company’s footprint in the U.S. and internationally by establishing a culture of compliance and sound practices across our global organization.” Trujillo said.
One of the most important parts of the entire auto-finance process is collecting payments.
And the Federal Reserve is looking to help with that crucial process.
The Federal Reserve Board on Monday announced that the Federal Reserve Banks will develop a new round-the-clock real-time payment and settlement service, called the FedNow Service, to support faster payments in the United States.
The board anticipates the FedNow Service will be available in 2023 or 2024.
Policymakers explained the rapid evolution of technology presents a pivotal opportunity for the Federal Reserve and the payment industry to modernize the nation’s payment system and establish a safe and efficient foundation for the future. The Federal Reserve said in this week’s announcement that it believes faster payment services, which can enable the “near-instantaneous” transfer of funds day and night, weekend and weekdays, have the potential to become widely used and to yield economic benefits for individuals and businesses by providing them with more flexibility to manage their money and make time-sensitive payments.
Since its founding more than a century ago, the Federal Reserve has provided payment and settlement services, alongside and in cooperation with the private sector, as part of its core function of promoting an accessible, safe and efficient U.S. payment system.
The Federal Reserve has established over its history a broad reach as a provider of payment and settlement services to the more than 10,000 financial institutions across the country. The agency said that reach will help the FedNow Service support a nationwide infrastructure on which the financial services industry may develop innovative faster payment services for the benefit of all Americans.
“Everyone deserves the same ability to make and receive payments immediately and securely, and every bank deserves the same opportunity to offer that service to its community,” Federal Reserve Board Governor Lael Brainard said.
“FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers,” Brainard continued.
In 2018, the Fed requested public comment on potential services that could be developed by the Federal Reserve to support faster payments. Of the more than 350 comments that took a position on whether the Federal Reserve should develop a new service for faster payments, more than 90% supported the Federal Reserve operating a round-the-clock real-time payment and settlement service alongside services provided by the private sector.
The Fed is now requesting comment on how the new service might be designed to most effectively support the full set of payment system stakeholders and the functioning of the broader U.S. payment system.
In addition, the Fed is announcing its intention to explore the expansion of Fedwire Funds Service and National Settlement Service hours, up to 24x7x365, to facilitate liquidity management in private-sector real-time gross settlement services for faster payments and to support a wide range of payment activities, beyond those related to faster payments.
The board’s Federal Register notice and a list of frequently asked questions are attached. Comments are requested within 90 days of publication in the Federal Register, which is expected shortly.
