Banks have to consider many factors before changing their technology. Will it disrupt ongoing operations? How will it mesh with their existing suite? What’s the net gain? And last but not least, how much will it cost?
Those factors must be considered by banks of all sizes but especially smaller ones, Barry Kislingbury and David Godfrey said. Mr. Kislingbury is the lead product consultant and Mr. Godfrey the principal consultant for immediate payments for ACI Worldwide, a provider of banking and payment solutions to more than 5,100 organizations around the world. More than 1,000 of the largest financial institutions and their intermediaries along with thousands of merchants use ACI technology to execute $14 trillion in payments and securities every day.
Mr. Kislingbury said ACI’s new cloud-hosted payments solution helps financial institutions capitalize on opportunities when serving individual and commercial clients in an increasingly competitive marketplace. No matter the institution’s size, it can access real-time payments schemes via both The Clearing House and Zelle networks. That is an opportunity smaller companies previously found more difficult and expensive while receiving lower quality service, Mr. Godfrey added.
“Our solution can run in the cloud and offer customers the ability to connect to the faster payments schemes through the cloud,” Mr. Kislingbury said.
“Our services eliminates any Cap-Ex and moves the cost to Op-Ex, allowing expenditure on access to payment services to be matched with the revenue generated,” Mr. Godfrey said.
ACI’s solution provides another key benefit while eliminating a common reason many companies shy away from investing in payments technology.
“If they are unsure of future volumes, many organizations protect themselves from having to install a large environment they may not be able to use,” Mr. Kislingbury explained. “Using a solution like ours allows them to ramp up the volume as they get bigger.”
Business partners first connect to ACI Worldwide and then to TCH and Zelle, he added. Those partners can choose to be in either one or both.
“All of us are trying to build this environment and generate revenue and volume for all,” Mr. Kislingbury said.
Some companies question the merits of investing in real-time payments technology, believing Automated Clearing House (ACH) suffices. There’s a couple of reasons they should, Mr. Kislingbury suggested. One is that is where the big players are headed. Wells Fargo, for instance, offers customers the opportunity to transfer money with Zelle.
The second is changing customer expectations. People are used to getting things now, not later. Holland provides a useful example, Mr. Kislingbury said.
“In Holland, same-day ACH clears and settles every 90 minutes. The reason they are opting for the real-time scheme that feel the 90-minute waiting period is not what people expect.”
Devices connected to the Internet of Things can move money around in real-time, Mr. Kislingbury said. That’s a challenge American big banks have not yet grasped. It’s also not cheap to switch from a banking environment that is batch-based to one in real-time.
But there are so many benefits it’s amazing some don’t get it, he added. Trust in the accuracy of current balances. Have absolute confidence a transfer has been delivered.
“Look at the member banks funding this and talk to their CEOs,” Mr. Kislingbury suggested. “They all get it, because there is an understanding at that level that if the bank wants to survive and be relevant and modern for the next generation, they need to invest in real-time technology.”
The challenge is ensuring that realization seeps down to the implementation levels, Mr. Kislingbury said. Silos have to be eliminated and every area of operations has to buy in.
Smaller banks have a unique opportunity to catch up, Mr.Godfrey said. They can more easily make a business case and many would like to enact a real-time payments system but they have not traditionally had access to clearing house technology. Big banks, on the other hand, have the money and access but struggle with the amount of work required in the conversion.
Many institutions without US banking charters would love to access the country’s real-time banking schemes, but would need to access through another bank on that bank’s terms to enter the system. Contrast that with the United Kingdom where fintechs are allowed to directly participate. That gives them an advantage over American companies.
“I think this gives the UK’s economy, and consumers in the UK, an advantage over the USA,” Mr. Godfrey said. “US-based companies could equally take advantage of access to the UK’s payment systems, it is to the benefit of the country and the consumers in that country to widen access to payment systems.”