Trends in Real-Time Payments Innovation

Financial service providers move to deliver integrated experiences in real-time

A radically transformed, fully integrated payments and financial services experience. That’s what consumers and businesses want, and it’s what fintechs and financial institutions are driving toward. This is also among the top priorities identified by our Enterprise Payments and Innovation Council (EPIC), a group of senior leaders representing 25 U.S. financial institutions who help to define our roadmap and focus areas based on the challenges and opportunities they see on the horizon.

Delivering on the vision for a more intuitive, more intelligent experience relies on the extension of real-time payments to every possible use case and effective use of data to create personalized, integrated financial services. Here’s a look at how that’s playing out today.

 

Financial institutions expand real-time payments use cases

While the majority of financial institutions have some kind of person-to-person (P2P) offering, capabilities and demand for real-time money movement now span every possible type of payment – from the original P2P payments to bill pay, wires, gig-work payouts, insurance disbursements and commercial payments. Making the most of connections to real-time networks is on the minds of most financial institutions, though it may weigh heaviest on those that haven’t expanded their real-time offerings yet. 

 

 

Expectations are high across all account types and use cases. Real-time capabilities are the top requirement when choosing a banking partner, say 85% of corporate decision makers in a 2022 Citizens Financial Group survey. Consumers have made clear they expect real-time funds availability, credit for bill payments, A2A transfers and payments of all kinds.

The rapid growth of our Turnkey Service for Zelle^®: Small Business product underscores the value financial institutions and their small business clients place on real-time money movement. As of December 2022, we saw a 159% increase in users and a 182% increase in transactions year over year.

Many organizations have quickly stepped up their game – so much so that more than 1,000 financial institutions are connected to real-time via the NOW Gateway from Fiserv. NOW acts as a router, a network and a gateway, connecting clients to real-time payment networks through a single integration. API-based connections to The Clearing House (TCH) RTP network and the FedNow Service via the NOW Gateway will cover more than 80% of DDAs in the U.S.

What’s next? Real-time payments are going global. EY projects cross-border payments to exceed $200 trillion by 2027, including everything from B2B and B2C to remittances, so you can expect interest in this space to be high. Collaboratives are already working to deliver cross-border payments in real-time, and to overcome the challenge of interoperability between systems in different countries. For example, Swift, TCH and the European Banking Authority are working with major banks on a pilot to determine how to make real-time cross-border payments work between the U.S. and Europe.

 

Real-time priorities extend to information and data

Financial institutions are increasingly looking to understand how they can factor real-time data and information into user experience and workflows. Prior month transaction data is no longer enough. Institutions want a clear view of consumer financial data to help them understand how, where and when accountholders receive and send money, and in what amounts, in real time.

The goal for many of the financial services providers we work with is to use real-time data to engage consumers and enrich the user experience. For example, to help people manage finances, use credit responsibly or plan for the future, an accountholder could receive alerts saying:

• “Did you forget to pay your electric bill? You usually pay it by now.”
• “House hunting? You’re pre-approved for $X. Tap here to learn more.”
• “We see you’re car shopping. We can approve you instantly for $X at Y%” 

 

Another priority is to mitigate risk and simplify the process of sharing consumer data with third-party providers. These connections require consumer-permissioned access, which many consumers are willing to give. Fiserv consumer trends research Expectations & Experiences: Fintech Adoption found that two-thirds of consumers aged 56 and under are likely to share their banking information with a third party to access fintech applications.

Despite some consumers’ openness, limiting third-party access to provide only the necessary information (and not all of a consumer’s account information) is a priority for financial institutions. Security is far and away the most important reason, but data owners also benefit from having access to data others don’t have.

Fiserv introduced AllData Connect to allow users to specify exactly who they want to share data with and what account data they want to share. A user can share with one organization but not another, and can indicate which aspects of their account (balance, deposits, transaction history, etc.) they want to make available. Since this specificity relies on consumer-permissioned, pre-embedded data, makes screen scraping unnecessary – even where the institution hasn’t already shut it down. The third party never has access to the user’s credentials, creating a more secure environment for everyone.

 

 

Integrated payments experiences begin to emerge

Financial institutions tell us integrating financial services applications into a single payments experience is one of their top priorities.

The digital banking experience has been consistently upgraded over the years, but progress has largely occurred across discrete releases and products. For consumers, this often means financial management is playing out across different apps. At best, it means a banking app interface with separate sections or tabs for bill pay, transfers, P2P, credit cards and wires – assuming all of those tabs are available.

Think of this as a convergence of real-time payments and real-time data presented to the consumer as an integrated platform experience – a hub to manage and execute all of their payments and financial routines. For example, we’re working toward an experience that presents all bills and third-party requests for payment in one place, and integrates a user’s contacts while providing a consistent experience that allows them to easily track and manage funds. This eliminates the question of how a payment is sent and enables consumers to focus on the most fundamental decisions: who, when and how much.

A platform-based approach also creates opportunities for banks to embed payment card capabilities into traditionally noncard payments, such as bill pay. According to Fiserv internal data, today approximately 80% of billers can get paid via ACH while 20% still receive a paper check. Converting paper checks to a virtual card – including bank credit cards that deliver interchange revenue back to the financial institution – allows consumers to instantly pay from their DDA or with a credit card.

 

Going forward

These examples only scratch the surface on the retail side. We’re also developing a small business solution that pulls together accounts payable and accounts receivable functions in real time and leveraging the input of financial institution partners to influence our development roadmap. This is the kind of integrated, end-to-end experience businesses – including merchants, small business clients and microbusinesses using retail accounts – have shown they are willing to pay for.

Expect to see a wide range of innovation as financial institutions, fintechs and their partners work to bring new solutions to market that help people and businesses pay, get paid and manage money in new and better ways