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Increasing Collections & Satisfaction: Real-Time Payments for Loan Servicing

What are real-time loan payments?

Put simply, real-time payments are a new payment method that instantly takes money out of one bank account and deposits the money in another bank account, 24×7. This same transaction carries the payment and remittance data. These payments run on new rails and move money faster than same-day ACH and debit cards, and prevent ACH returns because they’re irrevocable with guaranteed funds. When a customer submits a payment, they’ll see it immediately taken from their account, preventing overdrafts.

For lenders, this means improved collections, a reduction in operational costs associated with collecting and reconciling payments, and greater satisfaction from customers.


Real-time, real-life lending scenarios

Making a Loan Payment – Repaying a loan is often a recurring event, further necessitating a positive payment experience. If a monthly payment is complicated or delayed by days chances are that a borrower may place less priority on making a payment, opting instead to avoid the frustration. Real-time payments eliminate the monthly guesswork of figuring out when the payment has been processed. Borrowers can be sure their accounts are immediately correct, while borrowers know they have completed their payment by the due date.

Receiving Funds at Loan Closing – Having a loan approved and closed is not the same as having cash in your pocket. Oftentimes there is a delay, preventing borrowers from taking possession of their cash at the same moment their loan is closed. Real-time payments eliminate the waiting period for funds to be available in the borrower’s account, allowing them to immediately use the funds based on their own individual needs.

Real-time loan servicing payments forecast

According to Lipis Advisors, real-time loan servicing payments will grow at more than 100% CAGR from 2018-2022. This growth is expected to explode across all loan types. The total number of real-time loan payments vary for auto, installment and mortgage loans largely due to the number of loans outstanding.

In addition, it is expected that 25% of online bill payments for loan servicing will be real-time by 2022.

Lenders serve a wide variety of customers whose financial situation changes from month to month leading them to use many ways to pay, including debit cards. According to an AFSA survey 76% of lenders accept debit cards today. Those not accepting debit cards today are falling behind both in terms of customer demand for debit card payments and eventually real-time payments. These lenders must act now to ensure they don’t miss customer payments ­or disappoint their customers.

The real-time payments train is on the tracks so it is imperative that consumer finance companies select vendors now who can support real-time payments. Getting it wrong could result in having to redo your payment systems in as little as two years.

Head of Product Management

Mahala Johnson serves as Head of Product Management at ACI Worldwide. In this role Mahala leads product strategy for ACI’s bill payment solutions including ACI Speedpay and drives innovation for billing and payment solutions for several industries. Mahala has 20 years of product management experience in the financial services industry, including leadership roles at First Data, Western Union and eBay.