Our Viewpoint

Our Viewpoint

Real-time Payments: What are they Good for?

August 15, 2017

In many a conversation with banks, the discussion very quickly comes around to angst about real-time payments taking market share from the proven revenue sources such as wires and cards. Depending on who I talk to, some even point to Cash as being the cheaper alternative (although they are in the minority). As U.S. Army General, Eric Shinseki had once said, “If you don’t like change, you’re going to like irrelevance even less.” Still, it seems to me that not enough thought is being given to how they will transform behavior and what are the implications of that.

I was recently reading about Debitize which automatically transfers money between credit card and the account on every purchase. This seems to be a solution to a problem that should not exist: the customer cannot manage his account because credit card spending is not factored in, yet the only way to earn rewards and to build credit history is through the credit card.

But what if banks and merchants were able to rationalize the experience? What if loyalty was ultimately attached to the digital identity instead of to the payment silo used? Then, all payments information would be in one place and banks could offer better experience at a lower cost. As open banking (enabling both banks and merchants to jointly manage rewards/loyalty for a digital identity) and real-time payments (carrying digital identity and loyalty with each payment and executing cash management sweeps at extra low cost) join the payment hubs (all information is in one place) what will be the future of Debitize and products like it? These types of products, in fact, only exist because the current experience is so convoluted.

Here’s another example. Today, Venmo can charge $0.25 for an immediate cash out. That model will become obsolete as soon as users are able to top up/cash out their wallets for free using real-time payments. And just as the Venmo social feed can be viewed as some form of merchant advertising, why can’t a bank app post to Facebook and then monetize that with the promoted merchant? And this would further take place under the rules of GDPR (General Data Protection Regulation in EU or similar ones in other geos) –so bad actions like trolling are more difficult.

It is high time we stop agonizing over the inevitable and look to the potential of real-time payments, open banking, data richness, and governance all coming together. Are you ready to embrace the change?

Author

Gene Neyer
Head of Industry & Regulatory

Gene Neyer is the Head of Industry and Regulatory at Finastra (Formerly D+H) (www.finastra.com). Prior to Finastra, he was the head of product management at Fundtech (acquired by D+H). Additional professional experience include: Principal for NG Group, Management Consultancy focusing on Payment Architectures and Operational Efficiency; Managing Security Executive for FSTC (www.fstc.org) a consortium of leading US banks and vendors; Head of Engineering and Security for EBS; and Head of Development for US payments at Deutsche Bank and Bankers Trust. Mr. Neyer holds an Executive Master in Technology Management from Wharton/University of Pennsylvania and M.S. and B.S. degrees in Mathematics from City College of NY.

Mr. Neyer is a regular speaker on domestic and global payments business seminars and conferences, globally. He’s also written and lectured on various aspects payments, and has been published in major industry publications.

Gene Neyer