February 23, 2024


The adoption of real-time payments has become pervasive, and as a result, financial services firms need to better manage any operational challenges that may arise.

In a recent PaymentsJournal podcast, Reid LutanenExecutive Director of the American Faster Payments Council, Tony CookExecutive Vice President Payments Operations and Real Time Payments, FirstBank, and Cheryl FitzgaraldAs Program Director for BHMI, he delves into what it takes to prepare organizations to support real-time payments.

payment log

How to Prepare Operations for Real-Time Payments

payment log How to Prepare Operations for Real-Time Payments

The State of Real-Time Payments

Payment methods have changed dramatically in just a few years, with real-time, remote and digital payment methods becoming the norm. “A lot of people are engaging through the Fed, clearing houses, and the Faster Payments Council to understand what faster payments are and how it might affect them,” Luhtanen said.

“We recently conducted a Quick Payments Barometer survey and approximately 90% of respondents said they were implementing (real-time payments), had implemented or would implement it within the next two years”

According to Luhtanen, businesses are looking to leverage the new technology to pay payroll, finance loans in real time and pay bills.

Cook said the main benefit of real-time payments is getting money to customers faster. “At FirstBank, we started with the ability to receive real-time payments, but we see huge benefits from just starting with that.”

“If you think about all the big opportunities, especially in areas like payroll or the gig economy — and the ability to defund wallets — we’re excited about the opportunity there and our customers being able to get paid faster. We’re really Some other core strengths to get excited about are just overall 24/7 availability,” He said.

“The majority of BHMI’s clients are large processors and financial institutions that process on behalf of banks, credit unions and merchants,” Fitzgarrald said. “Over the past five years, we have seen a dramatic increase in the use of real-time payments. Our clients are offering a wide range of new real-time payment services to their retail, corporate and business customers. This ranges from simple account-to-account payments to more complex commercial payments.”

Opportunities and challenges coexist

With the introduction of any new technological advancement, there will inevitably arise some issues that need to be addressed. While there will always be early adopters eager to try out the latest innovation on the horizon, bad actors will also be around, just as eager.

“Whenever there is a new payment technology, some of the earliest adopters will be those who are trying to steal money from other people,” Luhtanen said. “To figure out where the best line of defense is, where you need to deploy layers of defense , there is still a lot of work to be done. Working together on this will be critical.”

So, what steps can financial institutions take to ensure they can effectively implement real-time payments? It all depends on where your organization is at the moment.

In terms of the operational changes that FirstBank is implementing to support its move into real-time payments, Cook said, “There’s definitely a lot that has to be put in place on the operational side from a take-only standpoint, and it’s probably not as complicated as you think about it. We also No large-scale or significant operational changes or upgrades were identified as being required, such as bringing in a large number of staff to provide 24/7 support. This is really an extension and extension of what we have done to support other payment channels.”

Liquidity management, fraud prevention, and compliance — in addition to customer and employee education — are key factors in the successful implementation of real-time payments, Cook said. But while many companies are willing to jump on board and implement real-time payments, there are significant hurdles to overcome first. Many people already find themselves facing some of these obstacles.

“One of the biggest challenges we see companies face is how to overcome their reliance on legacy systems that were designed decades ago and were not designed for real-time payments,” Fitzgarrald said. Ability to match the situation.”

How to support real-time payment

The adoption of real-time payments will only continue to accelerate globally, but as mentioned earlier, a strategic plan is imperative before deploying real-time payments.

“What are you trying to do with your business? How can faster payments really impact you and give you an edge? There are plenty of people out there who can help connect the dots on the solution provider and smart service provider side,” Luhtanen explain.

“Identifying those trusted resources to bring in as partners is critical to developing that strategy and figuring out how to bring it all together from a financial institution’s perspective,” he said.

According to Cook, in addition to implementing software solutions and other necessary technological tools, we must not forget about one of the most important resources in the fast payment puzzle: people.

“What is important for the adoption and onboarding of real-time payments is employee education and awareness,” he said. “Internal staff are used to how ACH wires and checks work, and it’s hard to understand some of the fundamental differences.”

“Focusing on these fundamental differences and making sure there’s a broad understanding, as well as mapping out all the possibilities for the future of real-time payments and innovation, is a very important part of making sure your team understands.”

But it’s also important not to forget the role software plays in enabling real-time payments.

“Software is at the heart of every payment, and at the heart of every company’s payments business. So software plays an important role in modernizing payment operations for real-time payments,” said Fitzgarrald.

looking to the future

Starting to use real-time payments will certainly open up many opportunities for businesses, banks and customers. What remains to be seen is what the impact of real-time payments will look like. For example, according to Luhtanen, retail businesses may be used to operating 24/7, but not necessarily to receiving continuous settlement payments throughout the day. Luhtanen recommends developing guidelines and best practices.