Nacha’s Smarter Faster Payments conference in New Orleans highlighted the growing momentum behind real-time payments, emphasising their transformative potential across commercial and technological verticals. Yet, amid this digital shift, sessions also acknowledged the enduring relevance of traditional rails like wire transfers, ACH, and even cheques - each facing its own modernisation challenges.
In one session, the business case and ROI for connecting to instant payments rails was discussed, where speakers heralded the strategic importance of real-time payments. Commercial use cases such as payroll and disbursements remain, as well as support with API connectivity. Bridget Hall, leader of real-time payments, Americas, ACI Worldwide, explored these use cases and introducing tax returns as an interesting part of the real-time payments conversation.
Hall said: “It’s not necessarily about paying your taxes faster, although you want to make sure you’re paying on time.” Melissa Ashley, president/CEO, Corporate One Federal Credit Union, added that providers have come a long way and for a credit union to complete transactions same day is progress, nonetheless. “It’s not like other implementations, not converting from something that you already know. You’re doing it for the first time. I think folks are really focused on making sure that all your teams know what to do: operations, accounting, IT, and compliance.”
Jim Colassano, SVP, product development, The Clearing House, explored how the focus is now on ensuring banks can send and receive instant payments because of the advanced user experience that real-time provides.
“When I’m sending money to my brokerage account and two seconds later, I see a pop up in my brokerage account. No one needs to explain to me what’s going on in the background. That’s an experience I want and we encourage banks to start doing that because your customers will see that value. We’re starting to shift our message to get banks on board more actively as senders, as well as receivers,” Colassano said.
Mark Ranta, senior manager, payment technology transformation, Ernst & Young, added that readiness is “by far the number one factor that pops up.” Busting a couple of myths, Ranta said that “this is no longer a multi-year project in the more traditional sense, if you’re going through a FedWire or ACH implementation. It’s moving from an 18 or 36 month project to a handful of weeks and months. The efficiency of making a decision, getting ready, going live is significantly shorter even from a few years ago.”
However, a panel held just a couple of hours later, discussed the resilience and relevance of core payment rails, including wire transfers, ACH, and cheques, despite the rise of new technologies and entrants. Further, wire rails are needed to modernise and improve transparency, while ACH's adaptability remains and the potential for faster payments is apparent.
The main point that was reiterated was that cheques and cash remain relevant and there is importance in maintaining public trust and adapting to evolving consumer preferences. Allison Shonerd, managing director, head of global clearing, Bank of America NA, answered an audience question about the Federal Reserve’s announcement that they would extend the net settlement service over the weekend and the opportunities and challenges that processing seven days a week could bring.
On this, she said that “on the opportunity side, I think that it speaks to that desire to become more towards 24/7, so increasing availability and giving banks more windows to process wires, increase throughput, address, for instance, payments originating from clients and their needs for their business hours. When we are asleep on a Sunday morning, still being able to give them that fast flyer payment that they’re looking for.
“While from a business and client value perspective, there’s great opportunity but there are certainly challenges from an operational standpoint. How are you managing fraud, sanctions, all of those services that are part and parcel of the wire flow in those hours. Maybe they’re not necessarily supported today, so we make sure that the whole infrastructure underpins capabilities,” Shonerd said.
Devon Marsh, managing director, ACH network rules and risk management, Nacha, continued and said that “from an ACH perspective, we looked at the possibility of a fourth same day window and part of the concern we heard was around weekend settlement and exposure. There is settlement risk in making things available over late Friday afternoon, so we’ve deferred further consideration.”
Tony Gerevics, managing director, operations industry relations, JP Morgan Chase & Company, concluded the session with the view that as a bank that operates both the ACH network and an instant payment network, a challenge emerges with respect to what the right routing is for an activity, whether it’s recurrent or non-urgent. He also reiterated that the industry must not forget that cheque and cash remain efficient methods of payment.
“Cash is a type of instrument that is held in times of financial crises such as a hurricane or earthquake, because that is an immediate settlement. That’s the original instant payment, the ultimate instant payment.
“There’s lot of things going on in the cash space, logistically and from an automation point of view, but neither are going away in the near term. There are augmentations and opportunities to leverage cash as alternate payments, and the fact is that we’ve never gotten rid of a payment rail.”