The hottest topic in the payments industry is the rise of

The most promising type of faster payment is called

To understand how RTP fits into the faster payments

Joining us was Steve Murphy, director of Commercial and

During the conversation, they discussed the state of faster

With improved processing speeds and advances in mobile

Murphy said that these twin trends are coming together to

Not wanting to miss out, many companies are now exploring

One popular product is NACHA’s Same Day ACH, which allows receivers to see funds clear in as little as a few hours, depending on when the transaction is initiated, said Prabhakar.

Another popular product is Zelle, which has about 250

However, Zelle transactions are still settled at the end of

In fact, until the Federal Reserve’s recently announced FedNow

As the only current real-time rail, TCH RTP is experiencing

Since RTP was not set up for one specific use case—only P2P

Moreover, the number of transactions is rising, as is RTP’s

Companies such as Volante are enabling this growth, as they are making it easier than ever to plug into TCH RTP.

When the Federal Reserve announced

At face value, one might expect that since FedNow will

Prabhakar pointed out that the Federal Reserve’s

And at the end of the day, Prabhakar reasoned that end

“So what banks need to do is really focus on what services

Ledford agreed, noting that after the Fed’s announcement,

In order to understand the challenges of adopting RTP,

For the former group, they’ve taken a “build it and they

These banks have multiple legacy systems—Wire, ACH,

There’s also the issue of pricing. Large banks need to

As a provider, Volante has worked to make connecting to RTP

Smaller banks have other challenges, namely customer demand,

These banks are also not entirely sure what customers are

Murphy pointed out that fraud is another major area of

With so many moving parts, Ledford stressed the importance

“You need to make sure you’re doing things like getting your

Volante has been helping financial institutions hook into

The very first TCH RTP was initiated between BNY Mellon and US Bank, and was made possible by Volante’s VolPay technology

Volante’s chief concern is making RTP available to banks of

As a further incentive, Volante is offering the service

Prabhakar noted that while Volante can’t solve all the

For its part, TCH is focusing on educating the public about

“Our job is to make sure that folks understand the network

To learn more about the cloud-based real-time payments service mentioned in the podcast, visit https://www.volantetech.com/freertp. For Mercator’s take on where payments hubs and payments technology are headed, read the white paper “From Payments Hubs to Digital Ecosystems”.

The post How Volante Technologies and The Clearing House Are Making It Easier to Benefit From Real-Time Payments appeared first on PaymentsJournal.

Faster payments are poised to reshape the payments industry by offering an array of alternatives to traditional payments. From same-day ACH to digital, open-loop cards, businesses and consumers have many options to move and receive funds faster and more cost-efficiently.

And when the Federal Reserve announced that it would roll out its own real-time payments platform as early as 2023, the momentum of faster payments only grew.

To understand the faster payments landscape, including the benefits and challenges for specific industries, PaymentsJournal sat down with Sean Healey, Head of Issuing Product Management for the Americas at Wirecard.

Joining us in the conversation was Sarah Grotta, director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

During the conversation, Grotta and Healey discussed how SMB lending, e-commerce, and the utilities industry will be impacted by the rise of faster payment options.

Peer-to-peer transactions constitute the largest segment of faster payments. Mercator Advisory Group predicts that this will continue to be the case in coming years.

Healey agreed with Mercator’s prediction, noting that Wirecard also sees this segment as the driver of faster payments, overall. For example, if a consumer can reimburse a friend for lunch right away via a P2P app like Venmo, yet they still receive a paper check for a rebate or refund from a business, they may start wondering why. These changing expectations pressure businesses to explore faster payment options.

The B2B space also makes up a large portion of the faster payments market, but there is much room for further adoption.

Since faster payments have not fully caught on in B2B transactions, “U.S. businesses are leaving a ton of money on the table at the moment,” said Healey. The Hackett Group estimates that the amount of money lost from suboptimal working capital performance is over one trillion dollars.

“This points to the need for faster B2B payments to streamline cash flow management in areas ranging from accounts receivable to SMB borrowing,” he said.

While adopting faster payment capabilities does require some investment from businesses, Healey pointed out that faster payments are more cost-effective to issue compared to paper checks, and that using digital payments creates opportunities to drive new revenue streams.

Grotta agreed that faster payments can lead to cost savings. “What we’re seeing in the way of cost savings, efficiencies and better cash flow management, through not just speed of the transaction, but through improved data, is a big win with a clear benefit,” she said.

Wirecard has spent a lot of time studying how to apply faster payment solutions in the SMB lending space.

One immediate thing to note is that alternative lenders now play a major role. That’s because the SMB lending vertical has been largely ignored by traditional lenders because the types of loans SMBs need, typically below $250,000, are less profitable for large banks.

Another aspect Healey highlighted is that SMBs often borrow due to opportunities and challenges that arise suddenly, rather than with an eye on planned, long-term growth. For example, a company might need to replace a broken pizza oven or take advantage of great wholesale prices on needed goods.

“What that means from a payments expectation standpoint is that small businesses need to be paid faster than traditional mechanisms may allow,” said Healey.

He also pointed out that offering faster payments sets you apart from your competitors, meaning that SMBs might be more likely to do business with you.

Faster payments via a digital channel also come with the benefits of data. Lenders can use the data to inform or change their models, allowing them to more accurately determine credit risk for future borrowers. This is especially important for alternative lenders, since traditional lending models might not capture all the risks and rewards in this space.

Given the proliferation of digital payment options and mobile technology, one might assume that cash is on the verge of obsolescence. However, Healey offered a counterpoint: It depends on where in the world you are.

“If you look at Mexico, e-commerce giants like Amazon are actually introducing hybrid systems to accommodate cash-based transactions,” said Healey, who handles Wirecard issuing products in the U.S., Mexico, and Brazil.

Such systems allow customers to order online and pay with cash upon receiving the order.

In other areas of the world, digital payments are growing. In Sweden, for example, real-time banking transactions hold over a third of the market share. China is another country where digital payments are paramount.

Many Chinese citizens use super apps such as WeChat to conduct online shopping. These apps allow the user to do everything from making mobile payments to scheduling grocery delivery. In this environment, “anything you want to do is accomplished through a single app and through digital payments,” said Healey.

He explained that this approach has substantial benefits for both consumers and companies. Digital technologies streamline the acquiring process for ecommerce merchants wishing to do business across borders, for example.

On the consumer side, digital technology enables more effective consumer incentive programs. Wirecard recently conducted a consumer survey on consumer incentives and found that a plurality of respondents (45%) reported that digital, open-loop gift cards were their preferred rewards channel.

Some industries have room to grow when it comes to digital payments. For instance, many utility companies still rely on outdated ways to transact with their customers.

“The utility industry in general really needs to think about how to make payments more efficient and convenient for their customers,” said Healey. He said a striking amount of companies still make payments back to consumers via check, which is costly and has a higher administrative burden.

However, Healey did note that many companies have fully embraced a strategy of digital transformation, a process that Wirecard can help facilitate.

“One particular facet of the experience that we’ve really helped to digitize is the credit balance refund,” said Healey. When a consumer moved and was owed a refund, utility companies would historically send them a check with the amount, which sometimes proved problematic due to the change of address.

“Our digital payment solution and digital payments in general kind of remove that friction,” explained Healey. It also empowers consumers to decide which payment methods works best for them. Those who prefer checks can still be accommodated, but many will prefer the convenience of receiving refunds digitally – such as on an open-loop card.

Healey concluded by encouraging companies to be open-minded about embracing a digital transformation in payments. “A digital payments transformation for your business may not be as costly as you’d expect,” he said. “It may actually end up creating new revenue streams for the business.”

The post How Faster Payments Are Impacting SMB Lending, E-Commerce, and the Utilities Industry appeared first on PaymentsJournal.

The dispute process is a crucial component of the credit card industry. When a consumer disputes a transaction, believing it to be fraudulent, for example, the card issuer and merchant must resolve who is financially liable for the purchase.

And with the transaction volume of credit cards expected to rise significantly over the next few years, the number of disputes is expected to increase as well. In response to the forecasted increase in disputes, Visa and Mastercard have implemented changes to their respective dispute processes.

To understand the dispute process generally, and what changes Mastercard and Visa are making, PaymentsJournal sat down with Lynne Baldwin, the president of BHMI, and Brian Riley, director of Credit Advisory Services at Mercator Advisory Group.

During the conversation, Baldwin and Riley discussed how transaction volumes are rising, what changes the major networks have made, and what to expect going forward.

Riley began the conversation by providing a forecast of credit card transaction volumes in the United States.

By the end of 2019, Riley predicted that the number of credit transactions will hit 50 billion, a significant increase over the past few years. In 2015, the U.S. transaction volume hit 33.9 billion transactions.

The high number of transactions translates to large sums of money being spent.

The dollar volume is in the neighborhood now of $4 trillion for 2019, said Riley. Just looking a few years ahead to 2020, what we predict is transaction volume will be 66.8 billion transactions, accounting for 4.7 trillion in dollar volume, he said.

As the number of credit card transactions increases, the number of disputed transactions will also rise. With more disputes on the horizon, it’s important that consumers, issuers and merchants understand how the dispute process works.

The first thing to know about the dispute process is that it is complicated.

“Dispute management is truly very complex,” explained Baldwin. “This is because for each type of dispute, each card network has very specific steps and timelines that have to be met.”

Although the process varies by network, Baldwin provided a rough overview of how the process works in general. She explained that a dispute claim typically begins when a credit card issuer or cardholder asks the merchant for a copy of a transaction ticket.

The two parties will message back and forth until the proper information is either supplied or not. In the former case, the provided information may be enough to resolve the dispute.

For example, the cardholder may not remember the transaction, but once shown evidence of the sale, they may be satisfied, meaning the process is able to end at this point, said Baldwin.

However, if the information is provided and the cardholder still denies the transaction, or the merchant is unable to provide the information, the dispute process begins in earnest.

In these cases, the issuer will return the financial liability back to the merchant. If the merchant has sufficient information that the consumer did indeed make the purchase, the merchant can challenge the issuer and, if the issuer agrees, the liability will go back to the customer.

While this can be the end of many disputes, there’s the potential for more steps if the customer provides additional evidence to contest the issuer’s finding.

“The final phase is arbitration, which is when the arbitration is finally submitted, and the card network itself is asked to step into the process,” said Baldwin. She explained how this step can cost a lot of money for the initiator, due to filing and review fees. Then the card network will issue a ruling that often entails large fines for the losing party.

“Currently, only Visa allows an arbitration appeal, and it must be for amounts greater than $5,000” said Baldwin. “The arbitration appeal ruling is final.”

Given how complex dispute resolution can be, Riley pointed out that any inefficiencies in the process can waste tons of valuable time and resources.

With the number of disputes expected to increase, Mastercard and Visa felt that the time was right to revamp their dispute resolution programs, explained Baldwin.

For Visa, the new system is called Visa Claims Resolution, also known as VISA VCR, while Mastercard’s new system is the MasterCom Claims Manager, also called Mastercard MCM.

Baldwin explained that for Mastercard, the overall goal was to manage the dispute lifecycle in one place, simplifying the overall process. To do so, Mastercard reduced the amount of time that a claim can be outstanding, and also eliminated arbitration.

In addition, Mastercard now requires more information from issuers before a chargeback can be filed.

Visa also wanted to speed up the process and eliminate unnecessary processing before it flowed into the dispute lifecycle. Thus, Visa implemented new processing rules that eliminate a large number of chargebacks if the transaction data does not support the chargeback, explained Baldwin.

Further, Visa’s rules have already split chargebacks into two categories, allocation and collaboration, said Baldwin. Allocation allows Visa to assess the responsible party without furthering the disputes lifecycle, thereby shortening the process overall. Any remaining disputes fall into collaboration, where the parties proceed to the dispute process to reach resolution.

Additionally, both networks have been working on consolidating the reason codes to further simplify the process. However, each network still has its own codes.

Both Baldwin and Riley agreed that it’s very important to pay attention to the dates and rules governing the process, especially since the time frame to resolve disputes has been reduced.

“People have to be very vigilant in making sure they don’t let these time windows expire,” said Baldwin. “Because if you let it expire, and you are the one trying to show evidence that it’s not your fault, you will lose. And it’s all about win-lose when it comes to chargeback processing.”

With large sums of money at stake, it’s important for customers, issuers, and merchants to familiarize themselves with the dispute resolution process.

The post Visa and Mastercard Changed Their Dispute Resolution Process. Here’s What You Need to Know appeared first on PaymentsJournal.

When the United States implements sanctions against a country or a group of individuals, domestic companies are required not to do business with the bad actors. From narcotic traffickers to suspected terrorists, belligerent states to authoritarian governments, there are many individuals and groups that companies are barred from dealing with.

These economic sanction programs are enforced by a branch of the U.S. Department of Treasury called the Office of Foreign Assets Control (OFAC). Ensuring compliance with OFAC is a risk management challenge that must be solved, or else a company can face fines and bad publicity.

To help companies understand how to navigate economic sanctions and the tools available to do so, PaymentsJournal sat down with David Barnhardt, Chief Experience Officer at GIACT, and Steve Murphy, director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

As a research and consulting group specializing in the payments industry, Mercator Advisory Group focuses a lot on risk management concerns.

Since companies that deal with payments facilitate liquidity for global economic activity, “the industry is responsible for risk management and particularly vulnerable to risk management difficulties,” said Murphy. He sketched out two major buckets of risk management.

The first is that companies want to prevent and mitigate financial fraud. The second major area is that companies must comply with a myriad of laws related to sanctions, screening, automated money laundering, know your customer (KYC) requirements, and so on.

The increased interconnectivity of the economy means that both fraud prevention and regulation compliance are becoming expensive to handle, said Murphy. Yet, a failure to comply can cost a company even more, in terms of economic and reputational damage.

Companies operating in the United States face many compliance challenges as the country has some of the most stringent regulations governing payments, with OFAC being a prime example.

At first glance, one might assume that only banks and other financial institutions would be bound by OFAC requirements, said Barnhardt. But in actuality, anyone who processes transactions “that are sanctioned by OFAC requirements must adhere to those regulations.”

This could include an eclectic mix of companies, ranging from automobile dealerships to insurance companies to cellular companies, not just banks. Barnhardt explained how at a car dealership, for example, they’re actually required to make sure a potential customer is not on a sanctions list prior to approving their transaction.

While many industries fall under the regulatory gaze of OFAC, compliance requirements can vary by industry.

“Being cognizant of the different industries and what those industries require is what GIACT really specializes in,” said Barnhardt. Different industries can have different requirements governing the frequency with which you have to screen new customers or your existing customer base.

To aid corporates and banks in their risk management efforts, GIACT created the EPIC Platform. The EPIC Platform is an acronym meaning enrollments, payments, identification, and compliance. It consists of multiple products which are all intraoperative with each other, enabling businesses to handle a range of risk management needs.

It starts with enrollment, allowing the business to confirm if the consumer really is who they say they are. Once the identity of the person in question is confirmed, the business can use gOFAC Monitoring—a component of the EPIC Platform—to ensure compliance with the OFAC requirements.

gOFAC Monitoring works by checking the confirmed identity against the OFAC sanctions list and the “politically exposed person” (PEP) list. Barnhardt noted how gOFAC is configurable to specific countries, meaning that companies doing business outside of the U.S. can effectively use the product as well. The platform also takes into account variations in name spelling or order to identify potential matches.

Since the frequency with which some companies need to check their existing customers against the OFAC sanctions list can vary by industry, gOFAC Monitoring can be configured to check at the proper times. Some companies need to check monthly, while others check quarterly, biannually, or annually.

“gOFAC Monitoring automates the screening of customer records and updated OFAC and sanction lists and notifies users of potential hits to review,” summarized Barnhardt.

Once a client is enrolled and passes the OFAC compliance check, the EPIC Platform can also be used to validate a bank account used to disperse funds to or debit from. “Not only can we confirm that the account is open and valid, we can also confirm the signatory or the name that’s authorized to transact on the account,” said Barnhardt.

He added that the EPIC Platform also helps fend off email compromises, as the software can be used to detect fraudulent or made up emails from people posing to be legitimate companies. So if your company receives a suspect phishing email from an account posing to be one of your clients, the EPIC Platform can flag it as suspicious.

The range of risk management tools bundled together in the platform stood out to Murphy.

“In addition to specific OFAC compliance and sanctions screening, there is an overlapping benefit to this type of platform and service, which is fraud mitigation and fraud prevention in the first place,” said Murphy. He added that such a service is crucial given the rise in fraud and email scams.

Barnhardt agreed, pointing out a comprehensive product was the goal of the EPIC Platform.  “The platform is designed to allow [users] to fortify every touch point of the customer interaction,” said Barnhardt.

And it’s crucial to note that this fortification happens at blazing fast speeds, and with little involvement from the customer.

“All these things happen in milliseconds, instantaneously behind the scenes, and it only notifies them when something actually is amiss, or they need to do further review [or] take further action,” said Barnhardt. To notify customers, GIACT offers a real-time API or a portal for each customer to log into.

Barnhardt relayed that companies who used the EPIC Platform reported better operational efficiency and reduced costs related to fraud and expense to comply with government regulations.

When a bad actor does interact with the company’s system, that business can rest assured knowing that GIACT will provide a notification. With GIACT focusing on stopping fraud and ensuring compliance, companies can focus on what really matters: their day-to-day business activities.

The post How GIACT Approaches Risk Management & OFAC Compliance appeared first on PaymentsJournal.

You’ve probably heard that consumers love having choices. However, what’s lesser known is that too many choices can be overwhelming. This is especially true when it comes to mobile banking applications.

For years, financial institutions have been cramming more and more features into their mobile bank offerings. Instead of this translating into higher consumer satisfaction, the reverse has happened.

In the past year, consumer satisfaction in their mobile banking apps has declined by 15% because “consumers were challenged in completely understanding all features,” according to a survey from J.D. Power.

To understand the issues plaguing banking apps, and what the solution is, PaymentsJournal sat down with Rachna Ahlawat, co-founder and executive vice president of Ondot systems, a leading mobile payment service provider. Joining us in the conversation was Tim Sloane, VP of Payments Innovation at Mercator Advisory Group.

To help explain the problems with mobile banking apps today, Ahlawat began the conversation by going back to the beginning.

About 10 to 12 years ago, when mobile banking apps were first coming to market, financial institutions designed them as a continuation of the services offered online. And since the services offered online were akin to those offered in the physical bank, mobile apps became jam packed with features.

Ondot’s research indicates that there are about 52 features on a mobile banking app.

“That’s just too much,” said Ahlawat. “The problem here is mobile banking is a consumer app, but it’s designed like a branch in a bank.”

This is what gave rise to app bloat—an app so packed with features that users struggle to use it.

She contrasted the bloat in banking apps with more consumer-friendly apps such as Uber. With Uber, hailing a ride is easy and intuitive. Within a few clicks, the user can get the service they want.

But with banking apps, this is often not the case. The user will try to use a feature, grow frustrated when it proves challenging to understand, and call the bank for assistance. Because of this, mobile banking apps have failed to accomplish what the original goal was: reducing the amount of calls coming into call centers.

So banks end up having the extra expense of creating and supporting mobile applications, while not reducing their call center costs, “which is what they had initially hoped to achieve,” said Ahlawat.

Sloane agreed, noting that each consumer uses the app to accomplish a specific goal. Whether it’s making a deposit, doing a money transfer between accounts, or any other banking activity, “getting them to that solution quickly is obviously critical,” he said.

Since mobile bank apps have largely failed to fully satisfy customer needs, an opportunity arose for big technology companies to move in. Google and Apple rolled out card apps, which are user-friendly applications that enable users to better control their card through the app.

Instead of trying to create one app that does everything, the tech giants had realized it’s better to create multiple apps that do one thing exceptionally well.

With a card app, users can track the purchases made with their card, use the app to make purchases, receive alerts about any suspicious purchases, and utilize a variety of other features tied to the card.

Ahlawat explained that in order to compete with the big tech companies entering the space, banks should break banking features out into separate apps, rather than keep them all crammed together in one place.

Armed with vast funds, major banks and large tech companies can funnel millions of dollars into designing mobile apps. For mid-tier to small-tier institutions, keeping up with this digital arms race can be challenging.

With this in mind, Ondot created a white label solution to ensure “issuers of all sizes could be able to go through this digital transformation,” said Ahlawat.

Banks don’t need to hire hundreds of engineers to design the app, or convince their mobile banking provider to adopt features and then wait for them to be implemented.

“We have done the heavy lifting of ensuring that card is front and center in this app,” said Ahlawat. Ondot provides the institution with the mold of an app—a factory app, so to speak—that the company can then add their branding to and take to the app store for certification.

Within a few weeks, the institution will have their own branded card app brimming with easy-to-use features related to card use.

Crucially, the factory app is designed with a solid user experience in mind. For example, turning on and off your card is only two clicks away, Ahlawat explained. And users can get real-time notifications about their card usage. If the card is declined for insufficient funds, for instance, the user will be alerted, and if eligible, they can receive an offer for overdraft protections.

The emphasis on an intuitive user interface and practical features is central to what makes this approach so successful. The major tech companies weren’t successful simply because of their massive budgets. Rather, companies such as Apple realized that ease of use should be the main focus of creating a banking app.

“We are a company that believes in creating consumer products that, of course, ultimately make our lives easier,” said Ahlawat.

In its approach to designing the app, Ondot strove to meet the needs of everybody. Surveys show that all generations prefer to use digital tools for banking, said Ahlawat.

This being said, she noted that millennials in particular desire an easy mobile experience. “They prefer something that gives them the immediate sort of confirmation, and they like to use of technology to improve their lifestyle,” she said.

Sloane agreed, adding that the more active the app can be in helping the consumer complete their goals easily, the more likely it is that the consumer will keep doing business with that financial institution.

The post How to Stop App Bloat: Ondot’s Approach to Mobile Banking appeared first on PaymentsJournal.

Running a small business can be both a rewarding and challenging experience. It can be an opportunity to explore something you’re passionate about while making a difference in your community. But with this comes many challenges that entrepreneurs must navigate, from handling day-to-day cash flow to creating plans for future growth.

How an entrepreneur goes about solving challenges varies, but data from Mercator Advisory Group and Mastercard highlights how, on average, there are differences between male and female owners in their approach to solving some small business challenges.

To better understand the topic, PaymentsJournal sat down with Ginger Siegel, Mastercard’s North America Small Business Lead. During the interview, Siegel helped unpack the data, spoke about the importance of small businesses, and outlined Mastercard’s approach to help them thrive. She also offered actionable advice for aspiring female entrepreneurs.

Calling it small business is perhaps misleading because, taken together, small businesses make up the backbone of the U.S. economy. “You might say that small business is big business,” said Siegel. She pointed out that there about 30 million small businesses in the United States, employing a total of 58 million people. These small businesses combined end up contributing to over 50% of the nation’s GDP.

Given the massive impact of small businesses, Mastercard is focused on working with its distribution and technology partners to help these businesses grow and thrive, said Siegel.

She explained that part of helping small businesses consists of looking at unique challenges that different owners face, especially for female owners. For example, Siegel pointed out that of the total amount of venture funding going to companies, only 2.2% goes to founders who are women.

As a result, Mastercard is interested in better understanding this segment in order to identify particular needs or different characteristics, so the company can provide effective solutions. The ultimate goal, Siegel said, is to be inclusive of all small business owners.

As such, Mastercard is pursuing a holistic approach to empowering small businesses. “What we really mean by holistic is that MasterCard and the value propositions that we create, go way beyond payments,” said Siegel. “Our focus is on assisting the small business owner in operating his or her business more efficiently, from end to end.”

This means that, in addition to focusing on payments, Mastercard is also concerned with cash flow management, time management, and access to mentorship and expert advice.

Data from Mercator Advisory Group reveal that when asked, “what is your personal outlook to your firm’s revenue in 2019?,” women owners tend to be more optimistic about their company’s growth potential than male owners.

Siegel said findings like that are interesting and that part of explanation can be found in what motivates owners to initially start a business. She said that, on average, female entrepreneurs are more likely to start a business because of a passion for what the company does, in addition to a desire to help the greater good. Another thing that motivates more women than men is the desire to strike a better work-life balance.

“In general, women go into this journey of starting a business with a very positive mindset,” said Siegel. This could explain why they are more likely to be optimistic about growth forecasts. It’s not that men aren’t positive, she said, it’s that they, on average, prioritize earnings in the near term as the primary objective.

The optimistic approach seems to work just fine. Nearly two-thirds of female entrepreneurs say that it took them less than a year to turn their business into a reality, said Siegel.

Access to cash is major concern for small businesses across the board.

“The two things that really keep [a small business owner] up a night is their ability to manage cash flow, and concerns over their overall access to capital,” said Siegel. One alarming statistics is that the average small business owner only has 27 days of cash on hand.

She said that while female owners might be slightly more worried about cash flow issues, it’s likely because they’re typically very plan-oriented.

For example, “68% of women entrepreneurs say that they have a plan that extends beyond five years,” said Siegel. To be able to execute such a plan you need to have cash flow, so ensuring that you keep the cash coming in is crucial.

Technology is another critical area for small businesses, especially when it comes to digital technology. Siegel explained that 80% of small business owners say that their digital enablement and technology enablement is key to their ability to grow.

One major use of technology is for communication. Cellphones are used to stay in touch with employees, customers, and even to purchases supplies. This is especially true for owners that need to travel a lot for work. Siegel said that 32% of business owners travel internationally for business, making cellphones an indispensable part of their professional lives.

In general, entrepreneurs want to use technology that will save them time and make the business run more efficiently, said Siegel. Knowing this, Mastercard seeks to provide small business owners with the tools they need.

One salient challenge for small business owners is managing expenses while on the road. Keeping track of paper receipts can be a challenge—they’re annoying to collect and harder to keep organized. In response, Mastercard partnered with a company called Itemize to develop Mastercard Receipt Management, an app free to cardholders. It allows people to take pictures of receipts in order to create a digital copy, categorize the expense, and then upload the information to accounting software.

Mastercard also partners with other companies to provide other useful software at a discounted price. For example, Mastercard small business cardholders can use Quickbooks, TurboTax, and Office 365 at cheaper rates. This makes it easier for small businesses to access the tools they need to be successful.

Since running a business is a complex affair, many owners need to rely on other people for help. Most small businesses don’t have a chief marketing officer or chief technology officer, said Siegel. This means that owners often rely on friends, family, and financial advisors such as their accountants and bankers for advice and help when needed.

“When we look at the differences in gender, women specifically are seeking financial partners that actually cultivate and specialize in women,” said Siegel.  “We also find that women tend to over index a bit over men in actually leaning on financial advisors and institutions, as well as other small business owners.”

Although there are organizations focused on helping female business owners, such as NAWBO, “74% of women business owners wish that there was more information readily available about the financial side of running a business,” said Siegel. “So I think there’s a tremendous opportunity for not only Mastercard, in the work that we do to provide mentorship and networking, but also for the industry as a whole to focus on this important segment.”

For its part, Mastercard has partnered with Create & Cultivate, a group that focuses on female entrepreneur empowerment. Create & Cultivate hosts events to provide entrepreneurs with opportunities to talk with very successful business owners.

“Through our partnership with Create & Cultivate, we have developed the MasterCard Advisory Council,” said Siegel. “This is a group of very successful women that work together with us to build solutions and help small business entrepreneurs who are female thrive.”

Siegel concluded the interview by offering advice to aspiring female entrepreneurs. She implored young girls to grab on to their dreams, but understand why. She said they should really figure out what they’re passionate about and figure out if others are, too. It’s important to reach out to people doing what you’re interested in to learn more about their focus industry — not just about the benefits, but also the pitfalls. Then you can plan accordingly and develop successful strategies before getting into it, she said.

She offered all this advice because, as she put it: “We need all the women entrepreneurs we can get.”

The post Mastercard’s Approach to Small Business Owners (Who Happen to Be Women) appeared first on PaymentsJournal.

If you spend any time following the payments industry, you’re bound to have heard of faster payments. The term refers to payment methods that settle and clear faster than the traditional payment rails. From Zelle to the RTP Network to Same Day ACH, faster payments have been gaining traction recently.

And when the Federal Reserve announced its plans to launch a real-time payments platform called FedNow by 2024, the faster payments space gained further momentum.

In order to understand how faster payments are set to expand in the coming years, and which products are poised to be on the forefront of this expansion, PaymentsJournal sat down with Jack Baldwin, CEO of BHMI, and Steve Murphy, director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

Charts referenced in the episode can be found in the slider graphic above.

Murphy began the conversation by sketching out the contours of the faster payments market.

The newest generation of faster payment systems have been around for years, beginning with Same Day ACH in 2016, he explained. Then the faster payments landscape expanded in 2017 with the introduction of RTP and Zelle. Soon after, these were followed by the branded networks rolling out platforms that pushed money to accounts in near real-time, such as Visa Direct.

At first, adoption was slow, but recently, banks and payment service providers have been ramping up efforts to expand adoption, said Murphy.

There’s been a “general acceptance of the inherent value of faster payments and certainly real-time payments, as well as a recognition of the potential competitive disadvantage of not having such client solutions,” he explained.

And when the Federal Reserve announced its real-time payments solution would go live within a few years, this had the effect of clearing up uncertainty in the market, further spurring adoption.

When measured against the benchmarks laid out by a policy paper published by the Fed in 2015, it’s apparent that faster payments are maturing but still have significant room to grow. The paper identified five desired outcomes for real-time payments: speed, ubiquity, security, efficiency, and international.

Murphy explained how the current landscape has achieved speed, but has yet to achieve a desirable level of ubiquity or international reach. Security also remains an ongoing issue, although that is a problem across the payments landscape.

When it comes to efficiency, Murphy noted there was still work to be done, especially in the “tangled web involving back office integration that’s required to provide both service and financial integrity.”

In order to facilitate the adoption of faster payments from a back office perspective, BHMI—a fintech specializing in back-office optimization—offers a product called Concourse Financial Software Suite™.

Concourse was designed to provide modular solutions for the various components of the transaction lifecycle.

As the above graph indicates, there are four different segments in faster payments: B2B, B2C, C2B, and P2P. While it may appear that these segments would require different solutions to process, BHMI’s Concourse is equipped to handle all four types.

Baldwin explained that while the complexity of the transaction may vary across segments, all the segments fundamentally consist of a transfer of funds from one account to another. Since Concourse is a rules-driven platform, it can handle each transaction accordingly, even complex B2B transactions involving invoices and the resulting payments.

“We have a rules engine that is embedded throughout the Concourse modules,” said Baldwin. “As a consequence of that, we’re able to take attributes of different transactions, and logically link them together so that they form a single logical unit.”

Of course, Concourse would need to be configured differently for each type, but this doesn’t require new code or a different platform, he said.

Baldwin noted that on the above chart, Concourse fits into all the categories since it is a near real-time processing product. He used settlements to illustrate his point.

“Traditional settlement methodology is that during the course of the day, financially related transactions are accumulated into one or more holding files,” Baldwin explained. At some point, all of the transactions that have been accumulated that day are processed, a time consuming endeavor because “you’re starting from scratch to go through the settlement process.”

But in the case of Concourse, when each financial transaction comes into the system, it’s loaded into a repository, and then it’s processed all the way to completion, or as far as possible, he explained. So when the cutover moment arrives and the payments are processed, Concourse has already pre-processed everything as much as possible. This makes the settlement occur quickly, especially if there are multiple cutoff points a day.

Baldwin also noted that using Concourse can help reduce overhead costs. He said that many clients seek out the product in order to handle dispute resolution and chargebacks, as the platform seamlessly works with primary card networks to handle disputes as they arise, based on each network’s requirements.

Concourse and the Concourse repository is the tracking and audit environment of record for Zelle.

“One of the things that Zelle wants us to be able to do is to intercept every single transaction flowing through the network, incorporate it into the Concourse repository, and be able to use that repository for disputes reconciliation and research purposes,” said Baldwin.

Since the platform has the ability to combine disparate transactions together into one logical unit, he explained that Concourse is well equipped to meet Zelle’s requirements.

In fact, BHMI has a similar business partnership with Cuscal Limited, a major aggregator and gateway processor for smaller institutions that want to gain access to Australia’s New Payments Platform, a real-time network processing environment.

As faster payments become more common, companies will need to adopt solutions that enable them to offer these services to their customers. A company looking for a faster payments solution should consider products such as BHMI’s Concourse Financial Software Suite™ in order to stay competitive in the shifting payments landscape.

The post How BHMI’s Dynamic Concourse Platform Enables Faster Payments appeared first on PaymentsJournal.

With the amount of competition in the financial industry these days, attracting and keeping customers is a critical goal of any successful company. If a business wants to stay competitive, it needs to develop strategies for promoting and maintaining customer loyalty.

One area to focus on is key moments of customer tension. In these moments, customers will attach strong emotions to the experience, and remember the outcome, good or bad. Digital tools provide new ways of smoothly navigating these moments of tension.

To learn more about how companies can leverage digital innovation to improve the customer experience, PaymentsJournal sat down with Chris Harris, the senior director of Marketing at Ondot Systems. Joining us was Aaron McPherson, VP of Research Operations at Mercator Advisory Group.

During the conversation, McPherson and Harris identify key moments where a bank or financial institution has an opportunity to promote customer loyalty, and they discuss potential avenues for doing so.

A significant portion of cardholders have experienced a moment where their card has been stolen, lost, or otherwise compromised. Data from Mercator Advisory Group indicates that nearly 30% of consumers have had their credit cards compromised in some way during the past year.

McPherson explained that there are three main scenarios that play out in this space. First, the person could have actually lost their physical wallet, a scary moment that many of us have dealt with before. Or a person might notice a fraudulent purchase made to one of their accounts. Finally, an issuer might reach out to the consumer to alert them about a suspicious charge.

In all three scenarios, the consumer is faced with stress and a potentially cumbersome process of calling different banks, canceling cards, and going through the refund process. Harris sketched out solutions that would help mitigate stress and make it easier for the consumer to control the situation.

By using a mobile app, a consumer could have the ability to track the activity on their card in real time, said Harris. Through the app, they could also have the ability to shut down their card to stop further purchases, while also being able to review all charges in order to determine if a dispute needs to be initiated.

Harris explained that many banks don’t currently offer these features in one place. “Each of these capabilities is a fairly different type of feature,” he said. They might be scattered around the corners of a moble app, if available at all. Customers end up phoning a call center and waiting for an agent. Thus combining them in one place is a great opportunity for banks looking to help their customers.

When it comes to fraudulent purchases, one major problem is that customer often don’t recognize their transactions. Therefore, Harris argued that there’s room to improve the information provided to the consumer.

For example, a purchase from a vending machine might be charged under a random company name in another state that the customer is wholly unfamiliar with. But if that customer was instead presented with clean information about the company and where the purchase was made—perhaps even marked on a map– they’d be more likely to recognize their own purchases. Harris also pointed out that banks should allow customers to get alerts about their spending, allowing them to immediately review it to determine if it’s theirs or not.

McPherson agreed, explaining the issuers would benefit from these tools as well, since the chargeback process can be very expensive for them.

Another pain point for many consumers is dealing with having their card declined while trying to make a purchase. One way to improve the situation is to provide real-time information to the person, explaining why the transaction did not go through.

Harris reasoned that regardless of why the card was declined, instant communication would make the situation better. If there are insufficient funds, for example, Harris pointed out the bank could immediately offer an overdraft protection.

More important is to avoid the decline in the first place. Harris explained how declines typically occur because the person lacks the necessary funds or because the purchase departs from typical shopping patterns.

In the latter case, verifying the customer’s location would help avoid the decline. If the mobile app could use the person’s location data on their phone, the bank could determine that the cardholder is in the same location as the card.

Such a solution “enhances the customer relationship because you’re not declining the transaction, and it saves the issuer money,” said Harris.

Often times, when a customer has a card declined, they simply switch to another one. “Our research shows that two thirds of consumers have two or more cards, and a third of them have three or more cards,” said McPherson. “We’ve seen some indicators that attrition rates do go up in cases where people are declined.”

The third moment Harris and McPherson discussed was related to traveling. Many people have their cards declined while traveling overseas. McPherson noted that credit cards are more likely than debit cards to be declined during in-person purchases while abroad. The inverse is true for e-commerce: debit cards are more likely to be rejected.

In either case, there are steps a bank can take to assist traveling customers. One solution is to use mobile location data to detect when a customer is traveling and prompt them to enable spending in that location. That type of flexibility makes spend during travel much more convenient for customers and builds loyalty. For online transactions, card controls allow customer to enable or disable online and cross border transactions, providing a signal to the issuer about their spend intent.

McPherson noted that his research indicated that younger consumers are more in favor of having account controls, such as the one listed above, meaning that banks that offer them will attract a coveted consumer segment.

The final area where digital tools can improve customer experience is in the onboarding process. For many credit cards, the process of applying for a card, getting approved, and physically being able to use it can take weeks.

In contrast, the Apple Card can be set up and ready to go within minutes.

From Harris’ perspective, this streamlined onboarding process will soon become the norm. “Large banks are certainly going to be pursuing this and banks that don’t have it are going to struggle with the ability to attract new customers,” he said, noting that this is particularly true for customers who are used to doing everything on mobile phones, such as millennials and Gen Z.

He said the onboarding process is also important because a successful go of it can lead to future sales down the line. Put another way, if a customer is satisfied with how easy it was to get one credit card, it’s likely they’ll keep doing business with that company.

While developing these solutions may seem like an insurmountable task for many smaller businesses, Harris pointed that a variety of fintechs exist that will partner with small companies to develop these solutions.

Even businesses that rely on legacy systems can collaborate with fintechs to offer digital solutions befitting of the modern payments industry.

If a company wants to stay competitive, it should consider offering mobile apps that allow customers to track their purchases, easily shut down stolen or lost cards, and interact with real-time messaging about declines or travel notices. Crucially, all these features should be in one place, so in the moments that matter, customers can easily control their finances.

“The more that issuers can use that sort of technology, the more they’ll grow, and the more they’ll have competitive success,” concluded McPherson.

The post Improving Customer Experience in the Moments That Matter appeared first on PaymentsJournal.

Following the Federal Reserve’s announcement that it will create a real-time payment network named FedNow, it became clear that there were misconceptions about how faster payments impact the speed with which people receive their paychecks.

Faster payments does not mean payday will come earlier or that paper checks will clear in an instant. This belief was refuted in not one, but two PaymentsJournal articles by Sarah Grotta, director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

But it is important to make the distinction that not all paydays are created equal. With direct deposit, your money is available faster than with a paper paycheck. And there is a significant distinction between a “paycheck” which arrives electronically via direct deposit for 93% of American workers and a “paper” paycheck, which may take days to clear.

To understand where the misconception comes from and why it is wrong, PaymentsJournal sat down with Bill Sullivan, the senior director and group manager of Government and Industry Relations at Nacha, and Bill Dunn, the director of Government Relations at the American Payroll Association (APA).

During the conversation, Sullivan and Dunn also dispelled other misconceptions around direct deposit and Same Day ACH, which is Nacha’s faster payments solution.

Sullivan explained the root of the misconception was the belief that “the current pay system in the United States has a negative impact on those in our country that live paycheck to paycheck.” While he granted that living paycheck to paycheck is exceedingly difficult, the current payment system is not making it worse.

Since people believe that the current system is flawed, there’s the erroneous belief that the creation of faster payment rails will result in people getting paid faster. However, Sullivan pointed out this was simply not true.

If an employee is slated to get paid on the 15th of the month, they will get paid then regardless of which rail is used, he said.

Sullivan traces the origin of the misconception to a recent Senate bill that urged the Federal Reserve to create FedNow. In the bill’s talking points, it called out how too many Americans are paying expensive fees because their paychecks are taking days to clear. According to Sullivan, the problem is that the talking points made no distinction between direct deposit and a paper paycheck.

Dunn agreed, noting that almost no one complains that their direct deposits didn’t arrive on time. He pointed out that APA surveys consistently show that over 90% of employees use direct deposit via ACH. This means that a switch to real-time payment rails won’t make them get paid faster.

While payday wouldn’t come sooner, Dunn did say that the push for real-time payments would benefit companies trying to move away from paper checks, as there would be faster settlement of B2B payments. But he said this would benefit the accounts payable and accounts receivable departments, not payroll.

To alleviate any confusion about the ACH Network, Bill Sullivan of Nacha offered some details on how the Network operates, explaining that the Network is open for processing for just over 23 hours every business day.

“Files can be submitted to an ACH operator, which would be the Federal Reserve or The Clearing House until 2:15 a.m. Eastern Time for settlement at 8:30 a.m. Eastern Time that same day,” he said. However, the Network can only settle payments when the Federal Reserve Settlement service is open, which is between 7:30 a.m. and 5:30 p.m Eastern Time.

Since this limits the Network, Nacha has worked with others in the industry to encourage the Fed to extend its settlement hours.

Despite the Federal Reserve Settlement service restrictions on when settlements can occur, Dunn asserted that ACH payments still clear very quickly, especially when it comes to normal payroll.

He said that Same Day ACH would be helpful in times of emergency, when making a quick payment is necessary, a fact the Fed highlighted when it made the FedNow announcement. For example, 10 states have laws mandating that when an employee is terminated, they must receive their last paycheck by the end of the day.

In these situations, it’s often hard for companies to cut a paper check for the employee by the end of the day. Same Day ACH makes it easier, because most employees are already set up for direct deposit. The company simply needs to make the payment along the faster rail.

As Sullivan mentioned at the beginning of the interview, many people have the faulty belief that there’s something wrong with the current payment system in the U.S., and that it’s somehow outdated and ineffective.

When it comes to the ACH Network, the data proves otherwise.

“The ACH Network is thriving,” said Sullivan. In 2018, there were over 23 billion transactions, totaling over $51 trillion in combined value. These numbers are the continuation of steady growth: the volume of ACH transactions has increased by 1 billion each year for the past four years.

As the numbers show, the ACH Network continues to grow and evolve, said Sullivan. He explained how the Network has added new capabilities and transaction types, improved processing speed, and expanded operating hours.

Dunn agreed that more people are turning to ACH. “Overall, we are absolutely seeing employees move away from paper checks and into direct deposit via ACH,” he said.

Same Day ACH has also witnessed remarkable growth. Between the second quarter of 2018 and the second quarter of 2019, Same Day ACH volume grew by 46%.

Another misconception about direct deposits through ACH is that it costs the consumer money. Sullivan promptly refuted this idea.

“Banks, credit unions, and employers do not charge employees to receive a direct deposit to a bank account,” he said. He cited a 2016 study that found that 95% of Americans who receive direct deposit via the ACH Network are happy with it. A major part of favorability is that there is no associated fee with getting paid this way.

Dunn said that while it can be difficult to calculate the cost of individual transactions due to economies of scale (companies often make payments in large batches, thereby securing cheaper rates), it is clear that getting paid by check is more expensive, for both employer and employee.

It costs employers far more to write and mail checks than making payments electronically. And if an employee loses a physical paycheck, it can cost the employer up to $20 to replace it, according to an APA study.

Given that the ACH Network is thriving, and millions of employees are happily receiving direct deposits through it each month, any misconceptions around the Network are easily dismantled.

The post Not All Paydays Are Created Equal: How Same Day ACH and Direct Deposit Move Money Faster appeared first on PaymentsJournal.

International commercial card payments have long been an area beset with problems. Companies wishing to make cross border payments have to navigate through different rules and regulations, which often vary by region or even country. Further friction arises due to currency exchanges and other fees. Taken together, these barriers have made the use of commercial cards in international payments relatively rare.

However, where there are problems, there are usually solutions, and Boost Payment Solutions (“Boost”) is a company focused on providing them. Founded in 2009, the company now operates in 32 countries, including the UAE and Singapore.

PaymentsJournal sat down with Dean M. Leavitt, CEO of Boost, to discuss international commercial card payments, and how Boost is working with its partners to improve the commercial card payment experience. Joining us in the conversation was Steve Murphy, director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

Although the use of commercial credit cards has been increasing in recent years, they account for only a fraction of the total commercial payment flows. Of the roughly $100 trillion spent on payment flows outside of North America in 2018, commercial card use totaled only $342 billion, according to a report from Mercator Advisory Group. Framed another way, commercial card use made up less than 0.5% of the total of business-to-business payments.

“Traditionally, international payments are made by wires, ACH, and even checks,” says Murphy, author of the Mercator report. “Cards haven’t been fully utilized.”

Leavitt notes that cards haven’t been utilized as much because, in part, card networks haven’t “really dove deeply into international transactions, certainly [with transactions] utilizing the card rails.” However, he points out that this is changing as more issuers focus on business-to-business transactions.

Another reason why companies have avoided using commercial cards for international payments is the existence of currency exchange fees and an unfamiliarity with regional differences in rules and regulations. He notes that unless the payments are optimized, companies could encounter more fees.

Therefore, Boost’s mission is to optimize the payment process.

One major way that Boost seeks to optimize the payment process is by utilizing straight-through processing (STP).

STP allows transactions to be completed without the payee’s accounts receivable department having to physically get involved.

“All of our transactions are 100% straight-through processed,” says Leavitt. He explains that this means that the payment process and subsequent data exchange is a passive process for suppliers; the virtual card payment is made and settled without the payee needing to do anything. By making it a passive experience for suppliers, Leavitt says, payment acceptance will be increased.

Boost’s use of STP makes them unique because, as Murphy points out, “the level of straight through processing, even on domestic payments, is really low.”

In addition to making the process of completing a payment easier, Boost also streamlined the process of data exchange.

“The exchange of data between the trading partners is often as important as the movement of money,” explains Leavitt. This is especially true for mid to large market companies, as they often make multimillion-dollar payments that bundle together hundreds of different invoices.

Despite the need for better date exchange, Murphy notes how suppliers often receive payment information decoupled from the remittance data, which is causing a headache for their accounts receivable departments.

Boost is instead coupling the payment together with the invoice details in reports for both the buyer and the supplier.

“We are sending them the remittance report in a delivery protocol, and a format, that is either their native format or their preferred format,” explains Leavitt. “So it could be instantly, easily, and automatically ingested by their ERP or accounting system.” This makes it clear to the supplier when they receive a payment which invoice it applies to, and it makes it clear to the buyer what they paid for.

Boost also works to make sure payments are treated as domestic transactions whenever possible. Leavitt offers an example involving a hypothetical U.S. corporation with an affiliate in Brussels. When the affiliate in Brussels wants to pay suppliers in Belgium, Leavitt says, Boost will process that payment as a domestic transaction.

“We would have vaulted and tokenized in our platform a card that’s actually issued on a Belgian BIN, so that when we process that payment, from the supplier’s perspective, it will be treated as a domestic transaction,” explains Leavitt. By processing a transaction like this, Boost ensures that there are no cross border or currency exchange fees because the payment settles in the local currency.

“There really hasn’t been a one-stop shop where a payer can deliver a payment request to a whole bunch of suppliers across a whole bunch of regions globally,” says Leavitt, “and be able to process those transactions in the same consistent way where suppliers are optimized.”

Boost is positioning itself as that one-stop shop.

The post The One-Stop Shop for International Commercial Card Payments appeared first on PaymentsJournal.