By Michelle Ziolkowski, SVP, Head of Global Payables, Wells Fargo
Since Faster Payments first emerged, they’ve been a defining force in banking and treasury management. Businesses and consumers can now choose a number of options for moving funds efficiently, securely, and instantly.
Often, conversations about methods like Real-Time Payments (RTPs), Zelle®, Same Day ACH and Push to Card focus solely on speed. However, there are other capabilities that make these payment types valuable. Fraud protection, convenience, system integration, standardization, and control are also important to corporate treasurers, their customers, and payees.
Banks and businesses see great potential ahead
It’s these and other areas where leading banks, fintechs, and industry coalitions are focusing the next round of innovation and investment for Faster Payments.
Here are a few trends to watch for:
Loosening limits. Both RTPs and Same Day ACH can now handle up to $100,000 per transaction, which greatly increases their potential in B2B situations. As of March 2021, Nacha also extended settlement windows for Same Day ACH, providing additional flexibility. Next year will see even more opportunity, with Same Day ACH allowing transactions up to $1 million, and RTPs expected to follow suit.
The ACH network continues to grow, driven in part by its wide reach, ease of use, and the uptick in electronic payments during the COVID-19 pandemic. Same Day ACH recently set a record, with 1 billion transactions since inception and more than $1 trillion in value transferred.1 Nacha rules for Same Day ACH contribute to its popularity. Although transactions disburse and settle quickly, they are one of the few Faster Payment types that allow reversals.
Tokens for B2B payments. Consumers quickly adopted person-to-person methods like Zelle because of the convenience of sending money with only a payee’s cell phone number or email address. Behind the scenes, that contact information functions as a token, telling participating banks where to route funds and helping keep the network secure. Now, industry leaders are hoping to leverage tokens more broadly to streamline B2B payments. The Clearing House is piloting a tokenization effort with RTPs; Nacha is in discussions about tokens for ACH. Tokens would eliminate the need for businesses to store sensitive account data for their payees.
New alliances. With several Faster Payment methods gaining solid traction in the market, key players are now exploring ways to team up and expand their offerings. The Clearing House and Early Warning see opportunity to strengthen consumer bill payment by settling Zelle transactions on RTP rails. This enhancement would give consumers more options, especially for time-sensitive payments. Businesses would gain greater efficiencies and a stronger customer experience.
A second collaboration brings the Federal Reserve together with more than 100 leading financial institutions to develop FedNowSM. Standardization, ease, and ubiquity are the goals of this new service, scheduled to deploy in 2023. FedNow will facilitate around the clock, nationwide payments in near real-time, with businesses and consumers able to send and receive instant payments through their banks.
Simplifying ERP integration. Consumer transactions using Faster Payment methods continue to outpace those made by businesses. The need to embed Faster Payment functionality into corporate accounting and ERP systems is a major factor. Now, banks, fintechs, and ERP providers are stepping up. APIs and other system enhancements take the time, effort, and cost out of sending and receiving instant payments. APIs also facilitate banking as a service.
Finance and higher education already embracing Faster Payments
Higher education and consumer finance companies are among the industries already reaping the rewards of instant payments. Colleges and universities find Zelle effective for student athletes and their per diems, particularly in the current remote environment. Consumers appreciate fast access to their credit when loan providers use Faster Payment methods.
Businesses nationwide are optimistic about what’s next for instant payments. While the pandemic slowed growth in 2020, the next few months look bright as companies move from survival mode to planning for the future.
As your organization maps out its Faster Payments strategy, work with your bank to understand where investments will pay off, and to identify the right options and technologies for your specific needs.
For more information, contact your Wells Fargo representative or fill out the Contact Us form on this site.
TM-3268 | 06/21