On the penultimate day of the AFP conference held at Nashville’s Music City Center, a panel featuring Joshua Karoly from Netflix, Cheryl Gurz from The Clearing House, and Mike Thomas from US Bank was led by Dean Nolan from Strategic Resource Management.
The discussion centered around the evolution and advantages of instant payments and Request for Payment (RFP) systems as we look ahead to 2024. Key metrics highlighted during the panel included the growth of FedNow to over 1,000 financial institutions and the RTP network celebrating its one billionth payment.
Despite some skepticism from the US audience regarding the benefits of RFP, the panel attempted to reassure them. They noted that RFP empowers payers to control payment timing, allowing payees to receive funds instantly. Various use cases were examined, including applications for broker-dealers, recurring payments, and small businesses. The conversation also tackled challenges such as fraud prevention and consumer education, emphasizing the need for a controlled rollout and the role banks play in enhancing user experiences with RFP.
The session defined Request for Payment as "a non-financial instant payment message that enables payees to request funds from payors through their respective financial institutions." Benefits of RFP were outlined as follows:
- Security: Payers have control over when and whether to make a payment.
- Precision: Payments can be made at the exact time desired, eliminating surprises.
- Funds Availability: Payees have immediate access to the full payment amount upon receipt.
- Efficiency: Data included in RFP facilitates straight-through processing for both payors and payees.
Thomas shared insights on data control, stating, “On the payee side, you’re in control of the data. On the payer side, you’re in control of the timing, so the control is in the right party’s hands.” He contrasted this with the traditional ACH environment, which requires post-reconciliation of data due to separate payment flows.
Gurz highlighted the importance of not just speed but precision, stressing that RTP networks are designed for credit push transactions that are irrevocable. She added that the focus should be on creating a seamless receivables component, noting the common challenge faced by treasurers who are primarily focused on disbursements.
Transitioning to an RFP program brings new challenges, but Gurz mentioned that technical integration is one of the more manageable hurdles. Given that banks are familiar with direct debit, a phased approach to implementing RFP — addressing both actual and perceived risks — is advisable.
The panel discussed the progression of real-time payments, which has already evolved from account-to-account transactions through various channels, with closed networks considered for phase two. The next step is the Pay by Bank feature, described by Gurz as potentially the most "risky" due to security considerations.
Karoly highlighted the prevalence of recurring subscriptions among consumers, noting that many prefer to make payments directly from their bank accounts rather than using credit or debit cards. He pointed out that existing payment rails do not offer instant fund availability, presenting a significant opportunity for instant bank payment solutions.
He illustrated how standing approvals from RFP empower customers to communicate payments directly with their banks, allowing for transparency and the option to cancel subscriptions either through the bank or the merchant. Thomas agreed, underscoring the importance of providing consumers with choice and transparency in the payment process, which could also foster two-way communication.