The age of banker’s hours may finally be ending.
Drew Edwards, CEO of Ingo Money, and Jon Briggs, head of KeyBank’s commercial product and innovation in KeyCorp’s payments business, told Karen Webster in a panel discussion that there’s been a great divide between the experiences digital-only customers and businesses enjoy and the experiences treasury bank clients have enjoyed when interacting with their financial institutions (FIs), and when it comes to moving money.
Digital-first consumers and businesses are used to getting and sending money when and where they want and likely bank with a digital-only FinTech. Treasury bank customers? They’ve been living financial life according to those banker’s hours, namely, when their banks are open, which means money moves from 9 a.m. to 5 p.m., Monday through Friday. Send a payment too late on Friday afternoon, and you’ll wait till Monday for the transaction to proceed, or to get funds to settle in one’s own corporate account. Saturday, in this environment, is the same as Monday.
But in an age where money moves instantly, Saturday should be the same as Monday — but with a twist. Treasurers want to be able to move money in and out of accounts without losing days in the process, without having to interface with bankers or walk into the branch setting. In just one example, a restaurant that wants to pay staff and pay out tips — and keep staffers happy — is stymied when its cash flow is interrupted through the weekend and payday must follow a strict weekly or bi-weekly schedule. Regardless of the vertical, all companies want to improve liquidity.
“What we’re seeing is that when it comes to the accessibility and the ability to move money, it’s increasingly important for it all to be instant and 24/7,” Briggs said.
Digital Payments at Treasury Banks to Gain Traction
There has been a lot of press lately about larger banks enabling RTP, a new network rail owned by the large banks. Although real-time payments have been available through the past roughly six years, Edwards noted, RTP is relatively “brand new” versus the many years that push to card, ACH, wire and even digital wallets have been around.
There are plenty of instant rails in the market and more to come, but the adoption of them requires the larger treasury banks to enable digital experiences where recipients get the opportunity to “choose” instant and digital. The pressure has been on with the emergence of PayPal and Block, which have catered to the cash management needs of small- to medium-sized businesses (SMBs), where some of these smaller businesses may not need the full suite of services via traditional FIs.
The greenfield opportunity is there, though, as Edwards said, especially for the larger banks and their treasury clients, the ones with the most complexity, the most transactions, the ones with “so much meat on their bones” — to benefit from digital, instant options built into the treasury bank services.
That’s no easy task, given the fact that, as Edwards said, treasury banks have proven to be a “hard nut to crack.”
They’ve been with legacy systems that are akin to fortresses built to battle fraud and foster stability. Bringing treasury banking fully into the digital age entails building out digital connectivity between clients and recipients and adopting real-time payments orchestration.
It’s what happens before and after a payment that can make the difference, said Briggs, and providers must make sure that every transaction is safe and sound. To that end, over the past several years, through Ingo’s disbursement offerings, KeyBank enterprise clients have been able to pay out guaranteed funds in real time.
Meeting the Consumer
“You need to be able to meet the end consumer no matter where they are,” said Briggs, who added that doing so “takes technology and innovation that is built on a scaled platform.” The joint efforts between banks and FinTechs have enabled clients to move away from the paper check. He recounted one example in which a joint Ingo/KeyBank client in the insurance space had seen 90% of its claims filed in the hours of 9 a.m. to 5 p.m. Once the real-time digital payments functionality had been in place, moving beyond the confines of traditional ACH and wire rails, 90% of the volumes were done after 5 p.m. — and on weekends.
“We’ve transformed a customer experience by leveraging Ingo’s technology safely within our treasury offering to do something pretty neat for a client,” said Briggs.
End consumers can still opt to be paid via “slow” rails or be paid in paper checks — but many consumers will want to be paid right at the moment the option is offered, said Edwards.
The instant payment landscape is no longer the purview of what Edwards called the “FinTech banks.” Now the more traditional players are catching up, embedding digital experiences into existing bank systems, and it will take just one or two of the other large banks to get on board to move the needle toward true ubiquity.
Banks no longer must ask the sender what method to use for payments. Instead, the recipients can decide on demand how they want to be paid for any given payment, Edwards said.
Payments, he said, “will be more centered around the objectives of the client — and whether their customers need their money now or they don’t.”
The path toward a fuller embrace of instant payments lies with robust fraud and risk management. The conventional wisdom is that faster payments wind up enabling faster fraud. Edwards recounted that the fraudsters are waking up to the vulnerabilities inherent in instant disbursements. There has been a growing trend of insider fraud, where employees compromise corporate systems and data and steer funds to themselves. The traditional FIs tend to have more robust anti-fraud checks and balances in place.
Looking ahead, although the initial low-hanging fruit lies with the speed and convenience of real-time digital payments experiences, including instant disbursements, Edwards observed that “banking is about more than just an account and payments. Treasury-grade clients understand that so much about a banking relationship involves lending and credit and cross border and other services that all must come together for faster payments to really be magical.”
