The Business Case for Real-Time Payments in the U.S.
Real-time payments has been a hot topic for so long now that rather than asking ourselves ‘what’s the business case,’ we should really be asking how we can jump-start our real-time payments implementations.
Some markets, notably the US, have found the business case question more challenging because there is not the regulatory impetus (i.e. PSD2 in Europe) to consider real-time and open payments simultaneously. Many institutions have also concentrated on retail use cases, believing their corporate banking real-time payments to be served by RTGS (real-time gross settlement) systems. But RTGS systems were designed for high value, interbank transactions. And those aren’t the only kinds of payments that corporates want to make or receive.
Smart banks are tracking the digital transformation of the ecosystem and the impact on customer experience expectations. The biggest trend? Choice. The ability to choose more initiation methods facilitated by real-time payments is a clear demand in the retail space. But choosing payment routing based on a whole range of factors, from cost to SLAs around tracking, reporting and fraud, is a value-add that can be monetized in the corporate market.
To be able to offer this kind of choice, banks need to bring together their traditional retail and corporate payments silos. This is a technical challenge, but one that is solvable. Unlocking the value of real-time payments through technology means an enabled integration and orchestration layer that allows for incremental improvements, rather than rip and replace, to protect your core and existing business.
The benefit of tackling real-time and open payments hand-in-hand lies in leveraging the rich data available both from real-time standards, and via integration of that data with behavioural profiling and AI for improved fraud prevention, tailored loyalty incentives and more.
Balancing the cost of this payments evolution against the potential for new revenues is not easy, but it is more complex than predicting volumes in the markets where you do business. And the US is a more complex and crowded market than some of those countries where domestic real-time schemes have already launched. Which is why the ability to drive revenues from real-time payments lies in a bank’s ability to provide value-added overlay services that meet its customers’ needs and differentiate from the competition.
ACI Worldwide is running an Executive Roundtable series throughout 2018 in cities across the U.S. – ‘Driving revenues from real-time payments – the B2B business case conversation, continued.’ Upcoming events will be held May 8-10 in New York, Charlotte and San Francisco.
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