What does real-time payments really mean for corporates?

Faster Payments have changed the world for the better and many corporates are already reaping the benefits. During our recent webinar we heard from industry experts in the US, Steve Ledford – TCH, Adam Rust – Reinvestment Partners and Peter Gordon – Pay FI, on the road they took to real-time payments (RTP) and the wins that have come with adopting new technologies. We explored the drivers compelling them to adjust their business models, their adoption of new payment options, and how RTP has enabled them to accelerate their growth in this open, data-driven and real-time world.

Here are five key takeaways from the discussion:

1. Banks vs Corporates – there are some key differences around the expectations of RTP

The panel started the webinar by explaining that, although all banks and corporates are in the value chain and have complimentary goals, they do have some degree of difference.

Banks:

• Primarily want loyalty and need revenue so they can be in business
• View payments often as an anchor product which they leverage to sell services or provide value

Corporates:

• Corporates on the other hand are looking for efficiency in terms of real-time information, which is a major component around their ability to do business
• They like choice, have many different needs and want to have the right solution for the right problem

2. Payer and receiver satisfaction – the main driver for RTP?

It seemed that the panel were in agreement that although more efficient processes and reduced back office costs are important, the biggest driver behind the use cases for RTP is generally “what can I do to get greater satisfaction from both the payer and the receiver?”.

• Immediate payments are a way of making sure there is extra incentive added to do the work the receiver is doing for your company
• It is also a way of giving a better experience across the board, both for those that are doing the paying as well as for those getting paid

3. Real-time payments offer real-time opportunities

Real-time refunds and reimbursements will make a huge difference to customers. Some examples mentioned in the discussion were:

• A lot of small businesses are still using cheques for a lot of their payments which opens them up to risks and competition from bigger players – RTP could change the game for them
• Faster Payments offers a lot of benefits for employees, corporates like Uber can motivate drivers to work an extra shift because they can pay them straight away
• Insurance companies that are able to make real-time payments for claims when people need funds immediately, will have a more successful business in the long run as they will have higher customer satisfaction

4. Cross-border solutions vs SWIFT?

We are already seeing cases where banks are bridging domestic RTPs to “informally” provide real time cross-border transfers.

As soon as the industry figures out cross-border RTP (mostly around regulations) any transfers under the global limit will likely shift to the this more certain, and cheaper, transfer method.

5. For corporates, it is a game of time

Getting used to different timings of payments will be key. When is the ‘end of the day’? When you have an RTP system, there is no natural end of day. Steve Ledford mentioned that TCH create an ‘artificial’ end of day for banks, so they can expect to receive reports etc at a certain time. Recommendations from the panel were to choose the time that suits you, and make that the end of your day.

The panel debated when corporates are going to be able to stop closing books on a monthly or quarterly basis and just keep running a continuous book? The conclusion was that it won’t happen for a long time (if it ever happens), as corporates still have to do their accounting. “The key is just because you’re doing your accounting on a calendar that has been around for thousands of years doesn’t mean you have to run your business that way.”

Gene Neyer, Executive Advisor at Icon Solutions and member of the US Faster Payments Council, concluded that “you can’t just close your eyes and wake up in a new reality. You are going to live with batch and legacy while making the way into the real-time rails. Banks and corporate need to make sure they are kept together and function well.”

To view the full webinar, click here.