5 ways to prepare for real-time payments
Publisher’s Note: CUInsight is hosting a free webinar Wednesday, July 27th titled, “FedNow Service 2023: Your Questions Answered”. We hope you’ll join us! Register here.
With the current rate of adoption and usage of networks like the The Clearing House RTP® network , Zelle® (EWS), Visa Direct, and MasterCard Send®, in addition to the anticipated success of the FedNowSM Service network launch (2023))—consumers and businesses will soon be exposed to many faster ways to move money and do business than ever before. If your credit union hasn’t gone live already, there are probably plans to offer real-time payments. Here are five ways to prepare to ensure a successful rollout.
1. Determine What Members Want
When creating new products, it’s best to start with market research to determine what problem needs to be solved or identify addressable gaps in satisfaction. Gauge what members’ needs are today while considering their needs in the next five years to ensure the faster payments option selected will be appropriate for tomorrow’s volume. It’s recommended that market research is executed in parallel with searching the market for potential solutions. Consider the business case around the offering to ensure that it’s not just a great new capability for members but also offers sustainable cost savings, stickiness—and even revenue.
2. Strategize on Member Facing Applications
Once member needs are determined, start to strategize and design potential applications that can be offered in your online and/or mobile banking or other channels (don’t forget the branch) within your credit union. These applications can be built internally (this is a good opportunity to innovate and differentiate) or may be available from a third-party service provider (TPSP) who can easily provide access to innovative new methods of meeting your members’ needs. Remember, real-time payments are more than just moving money quickly. Think about ways your credit union can partner with members to make their interaction more fulfilling. In a faster payments world, financial institutions will be expected to offer more than just money movement.
3. Plan Your Fraud Prevention
How can fraud that uses 24/7 transaction capabilities be prevented? Many fraud service providers are developing new modules and products specifically designed for faster payments. There is a need to use advanced tools to detect fraudulent activity in a faster payments environment. Fortunately, many solutions are being developed and are currently on the market, which offer amazingly fast capabilities to address this issue. One important attribute is that these systems are taking a more proactive approach to fraud detection. By utilizing advanced AI and machine learning capabilities, combined with new methods of predictive modeling, new fraud systems are being designed to react in milliseconds to assist in preventing fraudulent transactions before they occur. Credit unions can investigate their current enterprise fraud systems and update them with new faster payment modules or elect to use more product specific fraud systems that detect potential fraud at the product level while sharing data back to existing enterprise systems.
4. Identify How Your Credit Union Will Integrate With the Faster Payment Solution
Several touchpoints within a credit union will need to integrate with any faster payment capability. The more common areas include access to DDA System(s), GL, Payment Processing/Payment Operations, Regulatory/Risk, Fraud, and Liquidity management. Many third-party service providers have developed integration capabilities that easily accommodate credit unions—making the process as stress-free as possible. A frequent question is: as credit unions will be moving funds 24/7, do they need to hire internal staff to manage transactions? This is an important question to ask when searching for a real-time payments solution, as the right solution can minimize the need for additional internal resources. Other questions include: what functions will the bank have to perform daily (e.g., reconciliation, responding to Request for Return of Funds, etc.) and how will the credit union receive reports and manage liquidity?”
ALL financial institutions, large and small, benefit from real-time payments. When a credit union participates in real-time payment networks, its members benefit. This might mean faster ways of receiving their payroll, buying a car or house, moving funds to their checking account from another payments service or FI, sharing the cost of a meal with a friend, or sending emergency funds to family or friends on a weekend or holiday. The key is to keep pace, if not stay ahead, of the new payment paradigm.
Preparing for the FedNow Service launch? Attend the webinar FedNow Service 2023: Your Questions Answered featuring Joni Hopkins, Vice President, Product and Relationship Management Group at Federal Reserve Financial Services, and Mark Majeske, SVP Faster Payments at Alacriti.
