What will this mean for US banks? Let’s consider the UK where faster payments have been available for over 10 years. Broad consumer adoption has meant that banks without access to the UK scheme lost to those who had it. The competition was further exacerbated by the shift to improved digital and mobile banking customer experiences. Real-time payments and a good digital experience are now table stakes in the UK market.
Consumers look for fast, efficient ways to make a payment, and with Real-Time Payments, banks are presented with increased opportunity to meet this demand through digital channels. The Clearing House (TCH) Real-Time Payments (RTP) System supports this drive to digital experiences with a new capability known as Request for Pay (RfP). RfP stands to disrupt the US payments ecosystem fundamentally by enabling a simple, instant bill pay experience. In a new US consumer payments survey, when asked to imagine an RfP transaction, respondents preferred this method of payment over credit cards or checks.
Why RfP is Preferred Over Traditional Payment Methods
From a consumer perspective, RfP completely transforms the analogue experience of a recipient asking to be paid and the payer responding with, “Here are my sensitive payment credentials. Please take the money from me when you are ready. And oh, don’t misuse my payment information or allow it to be stolen. Thanks.” Using RfP, a consumer is presented with a digital request from their bank, putting him/her in full control of which account they use to make the payment in a safe, secure and convenient digital banking environment. In this case, sensitive payment credentials are never shared outside of a secure environment.
Corporates serving consumers across all industries, including consumer lenders, healthcare providers, utility agencies and universities also benefit from RfP, the most significant reason being the real-time guarantee of funds that are perfectly reconciled without risk of fraud or chargeback.
Financial institutions (FIs) are commercially incentivized by the RTP scheme to convert an RfP into a corporate credit transfer. In 2016 alone, U.S. consumers paid more than 14.7 billion bills, spending $3.9 trillion. This presents FIs a tremendous opportunity to gain wallet share of bill payments. But there is a “but.” The consumer will only form a new habit of paying with RfP services assuming a positive customer experience is provided—something akin to Zelle-like simplicity.
Four Golden Rules of RfP Services
Below are four golden rules FIs should consider when designing a digital customer experience for RfP. Ignoring these may inadvertently encourage consumers to continue using less commercially profitable payment methods or worse still, move to a bank that has embraced and implemented these rules.
- Minimize taps and number of screens
The greater the number of taps and screens, the more likely a consumer is to drop out of the payment process. Corporates won’t be happy either, so they may be less likely to promote the payment method.
- Speed up and simplify authentication
Authentication needs to be simple while maintaining security and protection. Bio-metrics such as thumb print scanners or face recognition are ideal. But instead of requiring consumers to tap or swipe, allow them to authenticate their identity up front. Passcodes and the like are a big no-no; they add unnecessary friction where speed and simplicity are critical to adoption.
- Present key information neatly and concisely. The consumer only needs key pieces of information – who is the requester, what is the amount, what is the bank balance and when does it need to be paid. Extra information such as item/SKU information, recipient account number, transaction reference number, etc. are not necessary for a Real-Time Payment. And again, payment authorization should be able to occur on the same screen, without scrolling.
- Make the experience super intuitive
Consumers must be able to figure out the functionality of digital channel applications before losing interest. FIs that don’t offer easy-to-use digital services risk losing frustrated customers. On the contrary, with a simple, intuitive customer experience, FIs attract repeat usage and save on the cost of product education.
Bringing these rules together creates a positive customer experience. An example looks something like this:
- An RfP is received as an app notification on the mobile phone.
- The notification is tapped/swiped and it opens an authorization screen displaying key information (without scrolling). The thumb print reader is enabled on that same screen.
- Consumer checks the information and presses their thumb to the reader. Job done.
As the industry adopts Real-Time Payments and RfP technologies, standards will emerge that define the best customer experience. It will be interesting to see how these consumer experiences evolve over time and how RfP influences payment habits.
In the meantime, banks should be aware that consumer demand for real-time payments is real. A new survey conducted across the US shows that your consumers are not only willing to use real-time payment services, but they will switch banks to get them.