The PaymentsJournal Podcast

E-commerce giants such as Amazon and Shopify use data to create highly personalized customer experiences. Yet, bill payment remains largely untouched by this transformation, leading to friction, higher costs, and customer frustration. Despite the wealth of payments data available, many organizations fail to leverage it to enhance customer interactions and reduce costs.

This gap presents a major opportunity: by applying data-driven insights, businesses can not only improve the payment experience but also drive efficiency, reduce costs, and boost customer satisfaction.

In a recent PaymentsJournal podcast, PayNearMe’s John Minor, Head of Product and Gustavo Jordao, Product Manager, joined Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, to discuss how payments data can help organizations deliver better payment experiences.

Payments data provides organizations with deeper insights into consumer behavior, extending beyond transaction details. It captures factors such as time of day, device used, and payment method, offering an in-depth understanding of consumer interactions.     

These data points can be synthesized to create a comprehensive view of the customer’s mindset and context during payment, enabling billers to turn transactions into personalized interactions that improve the overall customer experience. 

Beyond improving customer experiences, payments data plays a key role in operational efficiency, helping businesses reduce operational costs. Businesses that embrace automation and data-driven decision-making can streamline processes and lower their total cost of acceptance.

“One of our clients in the lending space was able to save $44,000 a month just by leveraging automation,” added Jordao. “By triggering specific rules based on transaction data, they streamlined payments and significantly cut costs.”

Any discussion of data inevitably leads to artificial intelligence (AI). However, success with AI or machine learning depends on clean, structured data.     

“There’s so much buzz about AI, but we put in our 2025 forecast that it’s going to be the second adopters of AI that will really reap the benefits, as opposed to the first movers and early adopters,” Apgar said. “So many companies are rushing to find so many applications for AI that I think it’s too easy to stub your toe, especially in a customer-facing or risk-facing application.”

AI depends on high-quality data. Poor data can lead to unreliable insights. To ensure accuracy, organizations must prioritize data cleanliness, implement strong monitoring systems, and maintain transparency in AI decision-making.

“It’s about understanding the interactions and making sure you’re instrumenting the transactions you rely on to create good datasets,” Jordao said. “That’s one of the key things about AI—making sure that you have a way to trace and audit how it’s being used, because it’s a very complex tool. You should be able to control its application and drive it toward      performance and a better experience for consumers.”

Fraud detection is an area where AI excels, analyzing vast amounts of data to identify anomalies and automate responses—a costly and time-consuming task. Fraudsters are becoming more sophisticated, making it more difficult to flag fraudulent transactions based on isolated data points. 

“Risk is a highly complex interaction—there’s no single red flag for fraud. That’s where machine learning takes the spotlight as a tool to be used,” said Jordao. “One of our gaming clients reduced fraud by 60% just by leveraging AI to analyze transactions in real-time—something that would be impossible to do manually.”

ML models excel at recognizing patterns and triggering automated actions. Unfortunately, few organizations have fully leveraged the power of AI and machine learning to enhance the bill pay experience.

“As it relates to bill payment, generative AI could be used to replace or automate several aspects,” Minor said. “Automated bots could handle outbound and inbound calling, messaging, and communication using generative natural language processing. That could help lower the costs required to collect the payment.”

E-commerce has set the standard for data-driven personalization and the bill pay industry must follow-suit. “In e-commerce, data is being used to personalize what you see, how you can pay, and what items belong together, which varies by consumer,” Minor said.

“Those insights are gained by leveraging clean data like past purchases, browser history, and location. Bill pay is no different. Consumers need access to different content and options beyond just completed transactions. They want to complete what they’re there to do at a given point in time.”

For example, a customer logging into their bill pay account may not intend to make a payment immediately. If their bill isn’t due yet, they may be looking for information such as their payoff date or account details. A personalized experience can anticipate this and present relevant options.

Additionally, payment experiences should adapt based on the access point. If a customer pays through a mobile device, the system could suggest payment methods optimized for mobile transactions.

Despite these possibilities, many organizations have not prioritized personalization in bill pay.

“What you see sometimes in bill pay is that organizations haven’t given the process the same amount of focus as they have on the product they’re selling to the consumer,” Minor said. “Unfortunately, they are often using fragmented platforms that aren’t able to ensure the consumer is able to complete the thing that they’re there to do at a given period of time.”

Data offers significant advantages; it is not just an asset—it’s the foundation of growth and innovation. However, the true power lies in how organizations interpret and apply their data. 

Leveraging data gives businesses the ability to better understand customer behaviors, preferences, pain points, and purchase drivers. To maximize value, businesses should seek partners who provide actionable insights that drive measurable results. Clean, structured data not only improves efficiency, but also serves as a springboard for delivering exceptional payment experiences.   

“We’ve heard a lot in the news about payments orchestration,” Apgar said. “That’s been the buzzword in the payments business for the last couple of years. That is also data-driven, but I think the way that we’re talking about using data in this context takes the payment experience to the next level of payment orchestration, not only from the data that is being captured, but the way it’s being applied.”

As AI continues to shape the future of payments, organizations must carefully evaluate potential partners, ensuring AI is used responsibly and critical data remains protected. “With great data comes great responsibility,” Minor said.

The future of payments isn’t just about adding new technology—it’s about creating an experience that is seamless, secure and deeply personalized. True, sustainable innovation requires more than just ‘bolting on’ the latest shiny object; it demands a strategic approach that drives real value.

“Data is behind everything we do. If you’re not thinking about data, you’re already behind. Our job is to democratize it, make it actionable, and help our clients lower their total cost of acceptance,” said Minor. 

The post The Untapped Power of Payments Data in Bill Pay appeared first on PaymentsJournal.

Just as organizations are implementing artificial intelligence and machine learning in novel ways, cybercriminals are continually looking to incorporate AI into their attacks. The disruptive technology allows criminals to find targets more effectively, scale their efforts, and forge better attacks that are increasingly harder to detect.

In a PaymentsJournal podcast, Alex Cox, Director of Threat Intelligence, Mitigation, and Escalation at LastPass, and Jennifer Pitt, Senior Fraud and Security Analyst at Javelin Strategy & Research, discussed the AI-powered methods cybercriminals use, the impacts of AI-related fraud, and the ways that organizations can protect their customers and themselves.

One of the areas where AI excels is in sifting through massive datasets to pinpoint an anomaly. Many organizations use that capability to identify fraudulent activity. On other hand, criminals use that functionality to find their next target.

“Bad guys have a big data problem that AI is helping them address,” Cox said. “For example, there was the MOAB list that came out recently, which is the Mother of All Breaches, and it had billions of username/password pairs. If you think about the magnitude of credentials that are available publicly, the amount of data makes it difficult. The bad guys figured out that if they put these things into language learning models and use AI to help them manage that data, they’re able to pull things out more efficiently and summarize it.”  

Once criminals have parsed large data sets to find their target, AI can also be implemented to make fraud attacks more effective. In the past, phishing attacks were much easier to spot. There may have been incorrect grammar in the email, a logo that wasn’t quite right, or other cues that the communication was fraudulent.

“Enter AI and LLMs, and criminals can go to this LLM and say, ‘Help me craft this phishing e-mail based on this lure,’” Cox said. “It will write it for you in very convincing English language that appears it’s from a native speaker. Once you get past all the technical controls, the final barrier is the person. If the person can look at an email and think it sounds like a person, it’s not a phishing e-mail, and they respond to it, it has made the bad guys that much better.”

Another way that cybercriminals are employing AI is to create deepfakes, with the objective of either creating a convincing persona or assuming an existing identity. This ability is just one aspect of the growing AI arsenal available to criminals.

“The combination of these capabilities is significant,” Cox said. “Microsoft has analyzed how some of the bad guys use ChatGPT, and you see them using it the same way that the traditional good guys are using it. They’re summarizing, they’re getting help with coding, and they’re getting ideas on how to improve their attacks. With this blended threat, they are able to use AI to pull information on a target, based on their internet presence, and craft an attack that is potentially able to compromise the target’s machines.”

The powerful technology has led to a decrease in the technical sophistication required to carry out damaging cybercrimes. There has even been a shift toward AI agents, which are fully autonomous fraud engines. It means criminals can lean on artificial intelligence to do much of the heavy technical lift.

“AI is allowing these bad guys to do this en masse,” Pitt said. “We used to see phishing emails where you’d have one single attacker that would have scripts and send out a few phishing emails or a few social engineering attacks. Now it’s all being automated with AI, so it’s thousands of emails, thousands of social engineering attacks, thousands of malware attacks all at once. It’s just easier for them to get that information out there.”

Just as criminals find new ways to implement AI, many financial institutions are searching for ways to combat these attacks. To do so, a three-pronged approach that considers people, process, and technology is required.

On the people side, it means education. Organizations should ensure that their employee base, and potentially their customer base, understands that fraud attacks are now more sophisticated. The end user should understand that they can never fully trust the communications they receive, and they should question unusual asks.

From a process standpoint, organizations should take a zero-trust approach which includes constant authentication.

“We need to look at what we call perpetual KYC,” Pitt said. “In banking, traditional Know Your Customer processes often occur once, typically during onboarding, or on a cyclical basis. We look at the sanctions list, the person’s income, perform their identity verification, and then it’s set aside. Perpetual KYC uses AI to do continuous authentication in the background automatically in real time.”

Integrating AI to combat AI-driven fraud is one of the most powerful technology approaches available to organizations. Fraud and security teams can use artificial intelligence for anomaly detection among large data sets, and they can use it to summarize the gist of a large collection of documents. Organizations can also use AI to make their fraud prevention efforts more effective at a larger scale.

Though there are powerful benefits to adopting the disruptive technology, AI has many well-documented flaws. For instance, the technology is only as good as its data set, and it has been known to produce false or misleading information. These issues have caused some misgivings about AI adoption among many professionals.

“It’s important to use these tools as fraud professionals,” Pitt said. “We may be hesitant to use tools that we think are going to be used by the bad guys. Start using the tools and get familiar with that, if you’re not already as an individual. Tell your organization how AI can be beneficial. Yes, AI is absolutely used by the fraudsters, but if we don’t how to use it for good, we will never, ever beat them.”

For many institutions, another barrier to AI adoption is the organization’s resistance to change.

“I spent about half of my career working for big banks,” Cox said. “Typically, when a new technology comes out, they will ban it and then bring it on board over time in a way that makes sense. I think that AI is moving so fast that that approach is not going to work anymore, because you’re going to be at a disadvantage.”

One benefit for financial institutions is the sheer amount of education that’s available to them about artificial intelligence. AI has dominated the attention of the tech world for over a year, and the disruptive technology has been heavily scrutinized from every angle.

The amount of information available means security and financial professionals have a multitude of training opportunities they can use to educate themselves and their organizations. There is also constant news about the emerging capabilities of AI, and the techniques that cybercriminals use.

“Think about what you do day-to-day,” Cox said. “Think about the work that you have to do at your job and then start thinking: how can AI help me here? It should be clear very quickly that it will be valuable for a lot of different things. Just keep track of the threat environment, understand what’s going on, and that will help you make the right decisions to protect your firm.”

The post AI Has Become an Integral Part of Fraud Prevention—and Fraud Attacks appeared first on PaymentsJournal.

Imagine a world where payments are seamless, customer data is secure, and merchants can easily manage a multitude of payment options while still providing the best customer experience. That’s the goal of unifying payment credentials. Payment tokenization is a crucial technology that is no longer a luxury but a necessity for merchants looking to thrive in today’s digital economy.

In a PaymentsJournal podcast, Sheena Cherian, Director of Product Management at Worldpay, and Don Apgar, Director of Merchant Services at Javelin Strategy & Research, discussed the evolution of payment tokens and highlighted how partnering with a trusted expert can help merchants maximize their full potential.

Think of tokenization as giving each credit or debit card a secret nickname or surrogate value. Instead of storing a customer’s actual card details on an e-commerce site, merchants can store this surrogate value—a unique string of characters called a token. While this token has no intrinsic value, it acts as a secure placeholder and is mapped back to the underlying card during authorization. Tokenization technology was introduced in the early 2000s with acquirer tokens, sometimes called merchant tokens. These were the first steps but had limitations.

Initially, acquirer tokens were designed to protect cardholder data and fight fraud. Network tokens emerged next, offering more security. Network tokens involve card networks like Visa and Mastercard and add another layer of protection. However, even these tokens are not foolproof. Setting them up involves coordination between several players: the merchant, the customers, and the card issuer.

As retailers began adopting channel-specific strategies and processor-specific tokens, the pursuit of more advanced technology created new hurdles, such as managing multiple tokenization systems and reconciling data across different platforms.

Ideally merchants would tokenize every transaction to create a complete picture of the customer’s shopping journey. While this helps personalize offers and improve overall experience, merchants also need flexibility. They might work with different payment processors (PSPs) or other service providers and tokenization shouldn’t restrict these choices. So how did we get here?

Today’s shoppers expect a seamless experience as they constantly switch between devices and channels. “I could be starting my journey on an iPad, browsing through different products on a retailer’s site, and then pick up where I left off on my mobile device,” said Cherian. “The seamlessness extends to the methods in which I can make a payment.”

While beneficial for customers, this omnichannel journey can create a major headache for merchants: how can they keep track of their customers across various touchpoints? Each device and channel can generate a unique token, making it difficult to recognize the same customer moving between platforms. This can lead to issues like misapplied loyalty points and an increase in friendly fraud.

“Our recent research on omnichannel payment strategies revealed a core issue,” said Apgar. “How do merchants unify these tokens and get a clear view of the customer journey?”

Some merchants are tackling this by building their own token vault—a highly secure, specialized data hub that protects sensitive information—or partnering with specialized vendors. This gives them control over token generation and flexibility with different payment processors (PSPs). But running a private token vault is expensive, even for large businesses. “Your tokens are only useful within your own system,” said Cherian. “If no one else can read them, managing your vault becomes a real burden.”

For merchants seeking an orchestrated payment environment without the headache of managing their own vault, Vaulting as a Service (VaaS) offers a compelling solution.

“A few larger merchants have included their own token vault as part of a larger orchestration strategy and so by controlling the vault they have ultimate flexibility to link tokens and engage PSPs as needed,” said Apgar. “But running a vault is expensive.”

Worldpay has stepped in to help merchants overcome this challenge.

“Our standalone payment credential platform helps merchants manage, unify and leverage their payment credentials for a variety of use cases,” said Cherian. “We offer our own acquirer tokens, network tokens and life cycle management for both cards and tokens. We’ve intentionally designed our platform to avoid silos. Think of it as a beehive: different honeycombs representing different token types and services work together within the hive, creating a powerful synergy.”

Worldpay’s payment vault acts as a secure central hub of the credential management platform, ensuring sensitive data is segregated and protected from unauthorised access.

While the company has boundless capacity to solve current and future merchant challenges with tokenization, Cherian highlights three methods for deploying payment credentials, managing everything from tokens to other sensitive customer data like Personal Account Number and Personally Identifiable Information. 

The first approach is designed for merchants who want a simple solution. Worldpay’s fully managed service handles everything, providing secure network tokens with no effort required from the merchant.

The second approach is for merchants who require more control. Worldpay offers a SaaS model via API access that enables integration with external systems while leveraging the benefits of its credential platform.

Finally, the third and most comprehensive approach incorporates the idea of a universal token. “Our platform enables merchants to work with multiple acquirers while providing a single, unified view of their customers’ shopping journey across all channels. This is what merchants need,” said Cherian. This approach solves the challenges of security, customer visibility and platform flexibility all at once.

As Cherian explained, it’s important to select a payment service provider with a deep understanding of payment credentials. This expertise, honed through years of experience, experimentation, and research, allows them to effectively navigate complex use cases. Partnering with a PSP who is dedicated to working closely with merchants ensures optimal payment solutions and seamless integration.

The post Unifying Payment Credentials: Simplifying the Complexity of Payment Tokenization for Merchants appeared first on PaymentsJournal.

Many financial institutions are feeling the urgency to make headway on payments modernization and digital transformation initiatives. However, all the factors involved in outsourcing an essential function like item processing might make a migration project seem like a daunting task.

In a recent PaymentsJournal podcast, Candace Burleson, Senior Implementation Analyst at Fiserv, Amina Moyer, SVP of Core Banking Solutions at Community Bank, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed the successful item processing migration at Community Bank, the issues it solved, and the opportunities the modernization project created.

Prior to the implementation, one of the biggest challenges at Community Bank was staffing. The Item Processing (or Proof) department struggled to retain knowledgeable staff. The roles were often considered entry level, even though the team was a critical component of the financial institution’s daily operations.

“The hours can be demanding, and our Proof and IT teams had many late evenings to ensure the balancing and timeliness of the cash letter getting out the door,” Moyer said. “Our mainframe tasks were extensive, comprised of multiple checklists that were probably no less than three or four pages. That poses significant risks if the teams handling those tasks lacked any expertise or overlooked a step.”

The bank’s IT teams were also responsible for server maintenance and timely software updates, which were crucial to preventing any processing disruptions. Before the migration, Community Bank was a fully in-house shop for all their processing, which is why it chose to first migrate item processing to an outsource environment ahead of its full core system migration.

However, the project still presented challenges because the bank had to maintain daily operations.

“That is a common refrain we hear from financial institutions, that they have a bank to run,” Wester said. “When they look at all the challenges of taking on a project like this, that’s on top of all the stuff that has to be done in terms of running a bank, plus the fact that every bank is different. Everyone has their own challenges, whether it is staffing or the nuances of how they may run their business. It can be a scary thing to undertake.”

Once Community Bank made the decision to migrate item processing—with Fiserv’s aid—the process was accomplished in steps.

“First was discovery,” Burleson said. “We worked collectively as a team, the Community Bank team along with myself. We discussed processes and procedures that they were working on in-house, gathered data which assisted me with the best setups for the institution, both for capture and then the back-end processing approach.”

The next phase of the process was development. Fiserv and Community Bank professionals worked on coding collectively. They identified the items that they would capture daily and the expectations for the receipt of files from item processing.

Then came testing, which began internally on the Fiserv side and then was piloted at Community Bank. There was continuous testing to ensure that both parties were receiving the correct data on a timely basis. The final phase was the go-live and support process.

“On go-live week, we monitored all incoming and outgoing files, outgoing meaning cash, letters, files back to the bank,” Burleson said. “We were able to exclude a lot of things that they were doing internally, and it was a good teamwork effort.”

One of the immediate impacts of outsourcing item processing was that it alleviated many of the staffing issues Community Bank faced when employees retired or moved on to other opportunities.

The bank was also able to initiate cross-training within their operations team, which turned out to be a significant advantage. Cross-training brought fresh perspectives to the table, which identified opportunities for process improvements and efficiencies.

The additional training not only increased the depth of knowledge within the institution’s teams, but it also helped employees recognize their value to the organization. The staff was more aligned with the bank’s broader goals because they had time to stop and see where they were on the bank’s road map, when previously they were too bogged down with day-to-day tasks.

“I’d also say our client experience improved,” Moyer said. “In addition to migrating item processing, we introduced front counter teller capture at our branches, which reduces errors. In the past, those types of errors that were occurring at the teller line posed both a financial and reputational risk to our bank. The teller capture solution came as a benefit through migrating and implementing the item processing solution.”

Within the banking industry, front office projects often take precedence. However, the middle and back-office touch so many aspects of a financial institution’s operations that updating these functions can have a dramatic impact. Still, the work involved in modernizing those aspects of the business has made many banks hesitant to take on such a demanding task.

“For financial institutions, this is a shining example that these processes are difficult, but they can be done,” Wester said. “If you are looking at manual processes, paper-based processes, it’s beyond the point where these things need to be taken care of. So much of what we’re looking at in financial services—from a technology standpoint—depends on a completely digital middle and back office.”

These manual day-to-day tasks can not only mire down a bank’s operations, but they also create operational risks when there are errors and delays. However, a staff that understands these functions can be instrumental in a successful migration.  

“The collaboration was key, in addition to having teams that are intimately familiar with the day-to-day and the whole experience here,” Moyer said. “The strength of the teams on both sides is what contributed to the success of this migration. It just gave a comfort level to the team when they were trying to unwind years of these manual tasks and relating them to what today is going to look like.”

The post Item Processing Migration Success: A Client Case Study appeared first on PaymentsJournal.

For more than 15 years, PayNearMe has helped billers optimize the payment experience. In a PaymentsJournal podcast, John Minor, PayNearMe’s Chief Product Officer, joined Brian Riley, Co-Head of Payments at Javelin Strategy & Research, to discuss how poor payment experiences contribute to rising operational costs and drive up the total cost of acceptance.

Many billers struggle with outdated technology that offers limited payment options and delivers subpar user experiences. This often results in increased exceptions such as higher call volumes, chargebacks, and manual interventions—all of which drive up operational costs.  

“Payment exceptions are on the rise which really drive up the cost of acceptance,” said Minor. According to Minor, an exception is anything that causes a payment to fail, be delayed, or not happen at all. These exceptions require manual intervention and extra resources such as service calls or ACH returns, which ultimately increase expenses.

“Taking a good payment is easy; the complexity lies in managing exceptions,” he said.

Workflow automation plays a critical role in minimizing exceptions and reducing operational overhead. One of the most common payment exceptions—ACH returns—can take days to process due to the delayed nature of the network. Without the right workflows in place, managing these returns can become costly and inefficient. Minor pointed out that implementing automated workflows to process exceptions efficiently, reduce manual intervention, and provide consumers with the right payment options helps businesses minimize costs and improve overall payment efficiency.

Platform reliability is paramount to a business’ success. Reliability means ensuring every payment is processed smoothly from start to finish—every time. “If you can’t take the payment, nothing else matters,” said Minor. “Clients have told us that failed payments keep them up at night. Reliability is fundamental, and we’ve built our platform to deliver consistent performance.”

Riley agreed, adding “Ensuring transactions go through without issues is critical.”

Consumers expect payments to be as seamless and effortless as shopping on Amazon or ordering an Uber. By focusing on convenience and ease of use, billers can enhance customer satisfaction while reducing internal efficiencies 

A platform that consolidates all preferred payment methods helps businesses stay ahead of evolving trends. PayNearMe enables clients to accept payments via traditional methods as well as alternative options such as Apple Pay, PayPal, Venmo, Cash App Pay, and cash.

“Businesses really need a unified solution that evolves with new payment trends,” Minor stated. “With our platform, they don’t have to worry about development costs every time a new payment type emerges.”

Self-service is a key factor in reducing the total cost of acceptance. Businesses are turning to self-service solutions for efficiency, while consumers increasingly expect the convenience they provide. The indirect costs of payment acceptance, such as employee time spent assisting with transactions, add up quickly when self-service options are lacking.

“We’ve worked with several clients to increase self-service rates and seen places where it improved as much as 40%,” said Minor. With PayNearMe’s Smart Link™ technology, clients have significantly increased self-service adoption—reducing manual support needs while enhancing the customer experience.

Self-service empowers consumers to complete essential tasks—such as making a payment, setting up autopay, or checking due dates without customer service assistance. This streamlines the payment journey and eliminates unnecessary operational costs.

On the business side, self-service provides real-time visibility into payment workflows, access to critical data, and the ability to take action within the platform without needing direct support. By democratizing access to insights and automating routine tasks, self-service capabilities can reduce overhead, enhance efficiency, and ultimately lower the total cost of acceptance.

According to Minor, businesses evaluating a payments platform should focus on three key factors for long-term success and cost reduction:

By prioritizing these factors, businesses can enhance payment experiences, improve operational efficiency, and significantly reduce the total cost of acceptance.

The post The True Costs of Poor Payment Experiences (And How Modern Technology Can Help) appeared first on PaymentsJournal.

Last year, PSCU and Co-op Solutions combined and rebranded as Velera. As part of this transformation, Velera seized the opportunity to assess its product journey and modernize its products and solutions to meet the rapidly evolving needs of credit unions and their members. This meant a commitment to developing new solutions and services, while at the same time improving its existing solution portfolio with new features, functionality and enhancements.

One year into the integration, Velera’s Denise Stevens, Executive Vice President and Chief Product Officer, and Cody Banks, Senior Vice President for Product Experience and Enablement, reflected on the progress, highlighting goals set and the milestones achieved along the way. They spoke with Brian Riley, Co-Head of Payments at Javelin Strategy & Research about this on a recent PaymentsJournal podcast.

One of Velera’s first priorities was to create a strategic focus group made up of a diverse collection of credit union clients. Their role is to help Velera make informed decisions, navigate anticipated changes and make sure the impact on members remains a priority. That could mean anything from adjusting operations—such as staff or members interacting with a different interface—to something as simple as analyzing reports with slightly different data.

Velera then organized the company’s solutions into four categories, each representing outcomes that matter most to credit unions and their members.  

The first category focuses on delivering connected experiences, providing members with a seamless and relevant payments experience. These experiences range from users of mobile and online applications adopting features like setting travel notes, buy now, pay later and digital issuance to in-branch interactions. These innovations help create a more connected financial experience.

The second category ensures operational efficiency. Velera developed a suite of tools designed to streamline business processes for members, whether they’re visiting a branch or calling member service. The agent program for contact centers, along with frontline tools, plays a key role in enhancing service and efficiency.

The third area is fraud and protection, ensuring that credit unions stay ahead of fraudsters—not just proactively, but also by swiftly adapting to emerging fraud patterns.

“We take an omnichannel fraud approach where we have a number of products that are designed to move on from simply layering them,” said Banks. “Now we’re moving more into linking these things together, especially to fight first-party fraud.”

The final area is growth, which is especially important as credit unions look to attract younger members while also expanding into business accounts—an often untapped market. There is potential to attract higher-spending accounts, particularly among individuals who are credit union members but conduct their business banking elsewhere, such as at larger banks.

“The whole focus of the asset concentration of credit unions becomes important,” said Riley. “There’s a lot of unknowns ahead within this year. Delinquencies are up, some loan volumes are up and some are under real stress with their net-interest margins. Being able to balance that and keep the business running is really where the credit union industry needs to focus.”

During their product assessment, Velera’s team identified products that clients could immediately take advantage of without necessarily relying on processing. However, they also wanted to ensure a thorough vetting process to confirm the products were market ready. This was especially important given the heightened expectations following the integration.

“We identified nine products, including Zelle and our ATM network,” said Stevens. “They’re already being evaluated by certain credit unions that weren’t taking advantage of these products before. We’re really excited about the nine that have already hit the market, and we’re well-positioned to deliver on our integration plans to upgrade a lot of the existing products.”

Velera has more than 50 agile teams working behind the scenes to manage the development process for the integration. They recently completed the first round of migrations to a new 3D secure platform, consolidating Velera’s clients onto a single platform. These efficiencies led to a 177-basis-point reduction in fraud.

A new feature now available is Card on File,  an enhancement within digital applications that also integrates via API to keep merchants updated whenever a card is stored.

“I personally lost my card a few weeks ago and had to get a replacement,” said Banks. “It took me a few hours to scroll through my bank statement to figure out Netflix, Hulu and everywhere else where my card was on file. We have introduced a new feature that allows members to see and update everything seamlessly and efficiently. It’s a tremendous cardholder efficiency, and it keeps the card top of wallet, which is so important.”

This tool provides credit unions with the ability to track where their members have active subscriptions—an area closely linked to first-party fraud. By offering better visibility into recurring payments, credit unions can proactively identify and mitigate fraudulent activity.

Fraud continues to be a top concern for many, especially as younger demographics—an essential target group for credit unions—express heightened worries about it. In response, credit unions have intensified their efforts to combat fraud, and it’s yielding positive results.  Recent findings from Velera show that 77% of credit union members are now at least satisfied with how their financial institutions handle fraud, a notable increase from 63% in 2023.  

With a diverse range of utility-driven features in their product offerings, Velera remains focused on leading with value. The team has kept its eyes on clients’ needs, first and foremost—recognizing that this member-first approach is essential.

“It is a delicate balance to make sure that we’re hitting all the key themes and categories,”  said Stevens.  “We have a responsibility to deliver a seamless integration and maintain business as usual, along with a commitment to deliver innovation to the industry.”

The post Transforming Credit Unions: A Case Study appeared first on PaymentsJournal.

Back in 2011, a group of Iranian hackers launched a series of distributed denial-of-service (DDoS) attacks against nearly 50 U.S financial institutions. The attacks were alarming enough, disabling bank websites and preventing customers from accessing their online accounts. However, the situation became even more troubling when it was revealed that these attacks were sponsored and directed by the Iranian government.

Since then, nation-state cyberattacks have remained a top concern for cybersecurity professionals. Countries like Russia, China, and North Korea have joined Iran in being held responsible for these advanced persistent threats, commonly referred to as APTs. In a PaymentsJournal podcast, Stephanie Schneider, Cyber Threat Intelligence Analyst at LastPass, spoke with Tracy Kitten, Director of Fraud and Security at Javelin Strategy & Research, about what financial institutions can do to combat these threats from rogue nations.

The four nations carrying out these attacks are playing the long game. They’re patient, developing tools and tactics to achieve their objections, and essentially have an open checkbook to fund their operations. They’re also good at remaining undetected for as long as possible, allowing them to continuously siphon information or maintain access for future operations.

Understanding these nations’ geopolitical context and their distinct motivations for engaging in cyberattacks is key.

The Chinese government, for example, conducts cyber activities to advance their national interests and economic position. They’re interested in obtaining intellectual property and data from private and public sectors to position themselves as an economic powerhouse. By actively infiltrating Western critical infrastructure, they’ve aimed to establish persistent access for potential disruption during future conflicts.

The Russian government enables broad-scope cyber espionage to suppress certain sociopolitical activity, such as in their ongoing war in Ukraine. Their focus is on stealing valuable information related to active conflicts to position themselves as a great power, rivaling the West and the U.S.

North Korea aims to collect intelligence, conduct disruptive attacks, and generate revenue. They continue to seek ways to get around their heavy economic sanctions to fund their weapons program.

Finally, the Iranian government has exercised increasingly sophisticated cyber capabilities to suppress sociopolitical activity. They also see themselves in competition with the West, specifically the U.S. Interestingly, Iran has also started to conduct more financially motivated attacks, like ransomware. Like North Korea, Iran is under tight sanctions and needs to generate revenue. But they’re also interested in creating chaos and disrupting their adversaries’ incident responses, as the 2011 attacks demonstrated.

“Iran’s attacks were a big wakeup call,” said Kitten. “That catapulted information-sharing among financial institutions. That helped to cement the fact that we need to be sharing threat intelligence and looking for indicators of compromise.”

There are three basic types of threats at play here. The first is monetary attacks, particularly as several of these countries seek ways to bypass restrictive sanctions. As a result, they’re targeting banks and trying to steal cryptocurrencies. Financial espionage also provides an avenue for gaining political leverage.

“Think about the sensitive personal information that a bank has access to,” said Schneider. “They’re trying to erode customer trust in critical infrastructure, things that regular citizens depend on. If they can shake that trust, that can also be beneficial for them.”

Then there’s the idea of hybrid or unrestricted warfare. There is an increasing number of attacks on critical infrastructure, including not just financial institutions but also sectors like energy and water. These attacks are designed to disrupt operations, incite panic, and spread misinformation in the background of ongoing conflicts.

Security professionals are growing more concerned about the idea of collaboration between these nation-states. Different techniques are being used by China, for example, as opposed to Russia. If Russia collaborates with China, it could become challenging to determine whether a cybercrime is being perpetrated by Russia or China.

“In the coming year, the discussions around threat intel—and especially around attributing indicators of compromise to specific threat actors—is going to become critically important,” said Schneider.

Nation-states are continuing to invest and develop their tools to be harder to detect and defend against. They tend to use large language models (LLM) like ChatGPT in their cyber operations as support for their campaigns rather than using these tools to develop novel techniques.

But for the most part, they’re turning to the easiest way in, which tends to be social engineering and phishing. Humans remain the weakest link in security.

“We’ve seen time and time again these Russian APT groups using watering holes and conducting social engineering to get folks to click on links,” said Schneider. “It’s really basic stuff, but it’s effective.”

Criminals have also been creating synthetic identities, using them to set up bogus accounts and carry out attacks against financial institutions.

“The APT groups purchase bits and pieces of PII [Personally Identifiable Information] from multiple sources and then create a new identity,” said Kitten. “That’s been challenging for financial institutions to detect and track.”

Technology is moving toward creating realistic deepfakes specifically designed for fraud and account takeover attacks. As the financial sector uses more voice verification, someone could take voice samples of an individual and create a deepfake call powered by an LLM that’s been trained by using stolen credentials, biographical, or personal information from that individual. The result is that voice-authenticated AI could respond to challenge questions based on that stolen data in real-time.

What should organizations do to protect themselves from these threats? The first step is practicing good cyber hygiene.

“APTs have access to advanced tools and resources, but they will use the easiest method available so that they don’t burn those novel tools,” said Schneider. “Using a password manager, creating long complex passwords for each account, making sure that your systems are up to date—those types of things are really simple, but really important to get right.”

The entire organization should buy in to these efforts, from the CEO down, to provide investments in solutions that can be used across departments. Employee training and awareness is crucial to protecting against things like social engineering threats.

About half of the population is now using pass keys to mitigate cyber threats, according to some reporting. These allow users to log into a site or device by using something like a fingerprint or PIN.  Pass keys have the advantage of being phishing-resistant, reducing the human element, and they cannot be shared.

Finally, organizations should consider setting up an advanced threat detection program, including threat intelligence.

“I would encourage financial institutions, especially smaller ones, to ensure that they’re working with third-party vendors who are trusted, experienced partners,” said Kitten. “Make sure they’re asking the right questions and thinking five years out about what this solution is going to look like.”

Schneider added: “If we’re aware of who is interested in targeting us, and staying up to date on the latest tactics, techniques and indicators of compromise, we will be in a much better position to defend against those threats.”

The post The Growing Threat of Cyberwarfare from Nation-States appeared first on PaymentsJournal.

Commercial solutions offered by banks have typically been tailored to larger corporations, with a one-size-fits-all approach that often doesn’t meet the unique needs of small businesses. As a result, many small business owners have turned to consumer-focused products, which lack many of the key functions they need. The lack of compelling options available have driven many to seek financial solutions outside of their financial institution.

In a recent PaymentsJournal podcast, Tim Ruhe, VP, Head of Small Business Payments at Fiserv, Ryan Looper, Director of De Maison East, and Brian Riley, Co-Head of Payments at Javelin Strategy & Research, discussed the challenges small businesses face and the opportunities financial institutions have to better support their small business clients.

De Maison East is a beverage company founded in 2020, right at the beginning of the pandemic.

“Everything changed,” Looper said. “In that moment, it was like diving into a pool in the dark and hoping there was water there. One of the challenges was our customer base had just been decimated, because all restaurants were closed. This put a spotlight on connecting with customers and getting revenue going, getting accounts receivables and payables going as part of our operational load. It just felt like one of the things we needed to focus on.”

During the pandemic years, the company focused on examining its business processes and identifying potential growth strategies. While the beverage industry is well-established, it remains somewhat conventional in many ways, and many of De Maison East’s customers were still paying invoices by paper check.

Recognizing digital payments as a powerful growth driver, the company began to encourage its customers to make digital payments.

“It might sound a little far-fetched that digital payments would be innovative, but they definitely are for our business,” Looper said. “As we were thinking about scalability and the customer experience, we decided to go with a fintech partner. The move allowed us to give very fast feedback to our customers with regard to payments. To this day, we still receive a majority of our payments digitally, and it was a blessing in disguise that we could do that in a difficult time.”

The speed and transparency gained from the shift in payment processing made an immediate operational impact for De Maison East, which typically handles numerous smaller transactions. The improvements in the receivables process helped De Maison East optimize cash flow to focus more on its customer relationships and driving its business forward.

“One of the things we hear from small businesses is they’re spending close to 20 hours a week managing the back office and payments, and they’re not able to focus as many hours and cycles on their businesses they’d like to,” Ruhe said. “Businesses are finding themselves using lots of different tools from different providers and not necessarily going through their financial institution.”

Small businesses want to perform and automate tasks such as paying suppliers, receiving payments from customers, sending invoices, and performing transactions at their physical point of sale. In many cases, an integrated solution isn’t available to accommodate their needs.

The commercial offerings from financial institutions can be daunting because they are highly sophisticated. While they are capable, they are often not designed for companies with less than 30 employees.

On the flip side, consumer solutions don’t offer enough capabilities for small businesses. They may be able to pay bills, but an organization will have trouble paying suppliers. There’s also no invoicing capabilities or merchant services.

“What we’re finding is that there’s this Goldilocks segment,” Ruhe said. “How do financial institutions serve the small business segment and their needs while retaining the capabilities and the simplicity? There’s this new category, which is integrated small business solutions, that they’re trying to solve for.”

Although the lack of a fit-for-purpose solution has caused many businesses to partner with fintechs, many would still prefer a solution provided by their financial institution—if it were available.

“If a financial institution provided a small business with an easy to use and highly capable solution, it would be a huge advantage and very appealing, because it creates less dispersion of platforms,” Looper said. “We’re constantly in our financial institution, so if it was a home base, that would be incredibly advantageous.”

One main reason a small business solution offered through a financial institution is so compelling is that it’s a one-stop shop. Instead of paying for multiple platforms and spending time manually reconciling the information, the payment data can be consolidated in a single dashboard.

Another critical advantage is that banks can offer access to real-time payment rails like FedNow and RTP. Overall, the speed and efficiency gains that a financial institution can provide can have an exponential effect on small businesses.

The small business segment has been somewhat underserved by financial institutions, which is why many companies have turned to fintechs. As banks begin to tailor their small business offerings, they should start by taking a holistic view of their customers.

“If a financial institution had the ideal full relationship with a small business, what would that be worth?” Ruhe said. “I’m sure they have a need for business cards, and I’m sure they have deposit accounts. I’m sure they need, in many cases, invoicing capabilities or merchant services. What would be the value of that relationship? Put a number on it and do the math. Now you can say, how am I doing in terms of wallet share?”

Once an institution understands the full needs of their client, they can deliver an integrated experience that includes all the key jobs to be done and work to win the customer back.

“If you define that as your end state, it gives you a good road map,” Ruhe said. “Now you know what the value of the business is, you know how well you’re doing in serving that small business. You’ve done an assessment, and you have a clear road map for how to deliver an integrated solution. The customer doesn’t want to go to different places, he just needs the best possible set of capabilities.”

As financial institutions consider their small business solutions, they should understand that there can be a vast difference between organizations. A physician and a plumber might both be considered small businesses, but they have far different financial needs.

“It’s not just a one-trick pony about fixing the receivables and the cash flows, it’s getting deeper into the relationship with that business,” Riley said. “As the business grows, the relationship could move to treasury services and deposits and even bleed over to the consumer side of the business. Having that whole view is important in an area that’s somewhat amorphous because of the definition of a small business.”

Even though small businesses have varying needs, there are many common threads between them. One of those threads is they are constantly looking to their financial institution for help.

“The messaging to small businesses is important,” Looper said. “It’s a massive opportunity for financial institutions, especially in the beverage space, which is a bit of an analog space, to transition us over. We’re all using banks. We have our financial institutions. It’s a huge opportunity to bring us over and give us some tools to grow an important segment in the U.S. economy.”

For financial institutions, there are solutions that can help them deliver the key functions that small businesses require. For instance, Fiserv recently launched its CashFlow Central platform designed to support a small business’ accounts payable, invoicing, merchant services, cash flow management, and business card demands. The integrated platform can help financial institutions deliver the solutions their clients need and take advantage of a unique opportunity.

“We have a market of 34 million small businesses in the U.S., representing 43% of the GDP and 70% of GDP growth,” Ruhe said. “That’s $150 billion in value to financial services, so there’s a tremendous opportunity here. Small business is big business—it’s the heartbeat of America and the fuel of our economy. So I would say start tomorrow.”

The post Financial Institutions Can Be the Payments Hub That Small Businesses Need appeared first on PaymentsJournal.

There have been many highly publicized efforts to introduce biometric authentication into the merchant space, such as Amazon’s palm payment technology. While widespread adoption of biometrics in retail has yet to occur, intriguing use cases continue to emerge.

In a recent PaymentsJournal podcast, Christopher Miller, Lead Emerging Payments Analyst, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed the scenarios where biometric verification has proven effective for merchants, the challenges hindering widespread adoption, and the future of identity verification technology.

Over the past few years, biometric technology has gained traction in three key areas.

The first is consumer authentication for rewards and loyalty programs. For example, some fast-casual restaurants have implemented facial recognition software at kiosks to quickly connect users to their accounts.

“It is primarily used as a means of reducing friction for the consumer and potentially rewarding loyal customers with a unique experience,” Miller said. “Lurking behind that is the notion of authenticating payments, because the store or the merchant can of course have payment information on file that is authenticated by your biometric, but that’s not necessarily the driver or the problem that the merchant is trying to solve.”

The second area is payment authentication, where biometrics enhance identity verification. In the EU, for instance, it’s increasingly common for issuing banks to request biometric authentication through their apps when customers transact with a card. This additional security layer helps reduce risk, fraud, unauthorized transactions, and even returns.

Many merchants have also adopted biometric authentication to minimize fraud, particularly when renting out high-value goods.

“If you want to secure a bulldozer for a weekend project with a credit card, it’s important that the merchant who is renting the bulldozer knows that you who are renting this are actually the person who owns that credit card, and you haven’t given them a bad card, or one that eventually is going to be declined,” Miller said. “Because once you leave with the bulldozer, it’s over, and that’s a big loss.”

The third area of biometric adoption is replacing traditional payment devices with biometric credentials, such as in pay-by-palm, facial scanning, or fingerprint recognition. In these cases, the customer presents a biometric credential linked to their payment method, authorizing and completing the transaction seamlessly.

From a merchant’s perspective, there are two main barriers to biometric adoption. For in-store biometrics, the primary challenge is the cost of the systems such as optical scanners or fingerprint readers. For major merchants with thousands of point-of-sale stations and checkout lanes, this expense can be significant.

The other challenge is the consumer adoption process, which often involves multiple steps and introduces friction.

“About 20 years ago there was a pilot with a company called Pay By Touch that enabled you to pay with your fingerprint in the grocery checkout,” Apgar said. “But that required consumers to pre-register and to put their payment card and their fingerprint in a database. Then the reader could access and translate the fingerprint into the payment card. In the case of the bulldozer rental, that would require me to have my fingerprint on file with the issuer.”

To address these issues, companies like CLEAR, which provides identity verification at airports and stadiums, offer reusable biometric credentials. CLEAR already has a large customer base that has enrolled for streamlined airport authentication. These existing customers could use their credential at any merchant that partners with CLEAR—or a similar network—without needing to re-enroll.

“The emergence of reusable networks of biometric credentials goes a long way towards solving some of the consumer friction problems,” Miller said. “In the same way that it was impossible to expect that consumers would establish a unique credit line at every store that they shop. The same consumer logic that led to the general-purpose credit card is likely to lead to at least a small number of general-purpose biometric credentials.”

Though consumer adoption may present a challenge, consumers have shown they are not opposed to biometric authentication. In fact, many routinely use biometric credentials every time they pick up their mobile devices. In many cases, they also rely on biometrics to make payments through digital wallets.

“One of the advantages of Apple Pay in the e-commerce environment is that if you pay by Apple Pay online, you can use your fingerprint on your iPhone as an authentication method,” Apgar said. “Validation and identity confirmation is much more important in e-commerce and in remote transactions than it is in in-lane, in-store transactions, because in the e-commerce space, merchants have liability for identity fraud.”

Retailers bear the full burden of chargebacks in e-commerce transactions, giving them a strong incentive to verify consumer identities. However, cart abandonment remains a major concern, as businesses strive to balance security with a seamless customer experience. In an ideal scenario for merchants, payment methods would free, transactions would be irreversible, and consumer identities would be fully authenticated.

“Consumers want the ability to charge back a transaction if the package doesn’t arrive like it’s supposed to,” Apgar said. “They like having the card issuer, in the case of card payments, being able to intervene as the arbiter if the merchant doesn’t deliver as promised. There is a cost to that, and there is this back and forth; the needs of consumers and merchants aren’t entirely aligned.”

Another point of contention between merchants and consumers is privacy. Payment authentication is often seen as a threat to privacy, as a record of a consumer’s purchases can paint a detailed portrait of their behavior.

“There are ways that those connections can be severed such that nobody knows that a person, who is actually me, bought these embarrassing items at this embarrassing store,” Miller said. “Rather, it’s some token of a card that I have that is confirmed by another party, and that’s less good for the merchant, if only because they can do less with the data at the end, but also because they’re less able to monetize the data that they’ve gathered around consumers.”

The collection and use of consumer data have long been sources of tension in the marketplace, and this issue is unlikely to be fully resolved. The introduction of biometric data adds another layer of complexity, raising critical questions about who stores this data and how is it secured.

The cost and privacy concerns likely mean that the return on investment for biometric authentication investments isn’t there for merchants right now. However, issuers are also involved in these transactions and may have a stronger incentive to implement biometric authentication in retail environments to reduce fraud and risk.

The expense will likely be lower for issuers since they wouldn’t need to install fingerprint readers or other physical devices. Instead, they are more likely to leverage existing mobile apps to collect biometric credentials. Some banks have even discussed how implementing a biometric authentication program for their customers could strengthen their relationships.

“If there’s a place where this is more likely to happen, it is issuer-driven,” Miller said. “It is mobile-gathered and performed, and it is possibly part of a larger grab by those issuers. It’s interesting to think of banks becoming potentially identity-confirming sources of their own. Certainly, the larger banks might have the ability to take their networks of 30 or 50 or 100 million customers to create biometric authentication methods for their own purposes.”

The post Biometric Authentication Faces Barriers, But Use Cases for Merchants Have Emerged appeared first on PaymentsJournal.

There have been remarkable strides toward U.S. real-time payment adoption in recent years, driven by growing demand among businesses and consumers. As the long-awaited ubiquity of instant payments draws closer, the financial institutions that have yet to adopt this nascent payment method face tremendous downsides.

In a recent PaymentsJournal podcast, Justin Jackson, Head of Enterprise Payments at Fiserv, and Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, discussed the concerns many institutions have about instant payments support, the benefits of real-time payment adoption, and the steps institutions can take to stay competitive.

There are approximately 9,000 banks and credit unions in the U.S., and roughly a quarter of them are active in instant payments. While financial institutions are often separated into adopters and non-adopters, the actuality is a bit more complex.

“We often speak as though the other 75% are one homogeneous group that all look and think and act the same, but that’s not the case,” Jackson said. “They’re all individual businesses. They have their own strategies and their own goals and concerns. Each of them has factors that influence their decision of what they’re going to do with real-time payments.”

Some institutions are concerned about potential technology challenges when implementing instant payments. They aren’t sure about the magnitude of the change, its impact on operational processes and existing systems, and whether it will require additional staff.

Cost is another major concern for many banks and credit unions, as they worry that instant payments could introduce incremental expenses beyond their control. For example, if an originator were to come online and the volume of received instant payments increased by 10X or even 100X overnight, it could lead to unforeseen ramifications.

Additionally, many banks remain uncertain about the fraud risks associated with instant payments. These concerns—spanning technology, fraud, and cost—are weighing on institutions to varying degrees. However, as more organizations adopt instant payments, many of these worries will subside.

“They’re thinking through these concerns, and they are seeing what their peers and their colleagues are doing and they’re deciding that maybe it’s time,” Jackson said. “We’re nascent in the adoption of instant payments within the U.S., with FedNow being live for about a year and a half and we’re not even at a decade with the Clearing House’s RTP network. We have about 25% of the industry live and that’s tremendously fast for a totally new payment mechanism like this.”

For all the concerns about adopting instant payments, the disadvantages are mounting for financial institutions that lag behind. Consumers have quickly become accustomed to real-time experiences, such as instant access to vast libraries of music and movies.

As these experiences become the norm, both consumers and businesses are increasingly perplexed as to why moving money still takes so much longer.

“Retail goods are an example that comes to mind, where you can order something on your phone and sometimes receive it the same day,” Tavilla said. “There is also the precision and the transparency with my packages, where I know exactly where the UPS guy is. But when you move your money, it takes multiple days, and you don’t have the precise information as to when and where the money is in terms of the process.”

The increased demand for real-time money movement means instant payments are becoming a table stakes offering for financial institutions. However, real-time payments are much more than an obligation—they are a transformative force that delivers substantial benefits.

“There’s one credit union that we worked with to take live on the instant payments networks,” Jackson said. “In the first couple of days after going live, incoming transactions hit the 1,000-payment milestone. After a few months, they got to the point where they were processing 10,000 transactions a month for their members, who were receiving these real-time payments from originators outside of their institution.”

The resulting deposit growth at the credit union was almost $60 million in net new deposits, simply due to taking their real-time connection live.

Other advantages of real-time payments are more efficient controls and better risk management processes. When an institution initiates a payment, it knows exactly what the balance of the account is. The financial institution secures funds instantly when its user makes a payment, and it can restrict unauthorized use of those funds. In addition, the bank doesn’t carry the risk that the funds aren’t there.

The institution is also immediately ready to process a payment at any time, and it is guaranteed credit. If a bank receives a transaction and posts it to an account, it doesn’t face the risk that comes with a return window of two to three business days, where a payment could be clawed back. This extra control is a significant benefit that isn’t available with non-instant payment methods.

There is also a less obvious benefit to the acceptance of instant payments: customer retention. For example, after many gig economy workers perform their food-delivery or ridesharing services for the day, they want to cash out their earnings immediately to pay for groceries or bills.

Many fintech companies that facilitate gig economy platforms have touted their ability to pay out instantly to attract talent. However, that real-time payment capability is only available if the worker’s financial institution supports it.

In some instances, if a contractor requests instant payment but their bank isn’t eligible, fintech companies have encouraged them to switch to a competing institution that supports real-time payments.

“That’s huge, when someone else is marketing against you and encouraging your customers to go to another institution because you don’t offer the service,” Jackson said. “That attrition risk is something that just kind of comes out of left field. It’s easy to solve for—just accept the instant payment—but it’s something that isn’t often thought about. It’s becoming more of a problem for the institutions that have decided not to get into instant just yet.”

In addition to mounting consumer demand, recent research indicates that 90% of businesses consider instant payments to be important or very important.

“As a business owner, one of the things that’s most important is cash flow and access to working capital,” Jackson said. “The nice thing about instant payments is they are 24 hours a day. There is no availability window, they are seven days a week. There’s no weekends or holidays, they are 365 days a year. At any time, a business owner can receive or send a payment and know that within 15 seconds it’s available and it’s confirmed.”

These transactions could include payments to vendors and suppliers or incoming payments from customers or investors. Immediate access to money movement is tremendously valuable to business owners, as it increases efficiency. Business owners know exactly where their payments are, and once received, there are no exceptions—no two-day return window and no risk of a clawback.

Real-time payments allow organizations to use funds immediately and confirm that an obligation has been satisfied. They also give business owners more time to focus on running their company and serving customers.

“The improved customer experience that I get from my bank or my credit union as a result of the instant payment goes a long way,” Jackson said. “There is a lot of impact to the business owner by having access to instant payments and that is going to become more of a drag on the institutions that haven’t gotten into this space. Businesses are starting to think about where they bank based on the availability of instant payments functionality.”

The demand from businesses and consumers means real-time payments adoption is going to continue to grow by leaps and bounds. As adoption accelerates, there will be increasing pressure on banks and credit unions to become real-time. Though these institutions have a myriad of concerns about implementation—and no two banks are the same—there are solutions for every situation.

Some financial institutions may want to manage all the network integrations and run software in their own data center. Others might prefer to outsource the whole operation and buy instant payments support as a service from a provider. Still others might want to integrate instant payments via API directly into an app that they or a third-party has built.

“At all ends of the spectrum, regardless of what you want to do with instant payments, there’s a solution out there,” Jackson said. “I would say for any financial institution that’s not yet in this space, talk to your provider, whether it’s Fiserv or someone else. Ask them what they have, tell them what you’re looking to do, and get into the game here.”

The post The Downside of Not Offering Real-Time Payments appeared first on PaymentsJournal.