4 ways for FIs to maximize the value of instant payments

By Pavithra R

The rise in digital and contactless payments, fueled by the pandemic, has heightened demand for faster payments. To meet evolving consumer expectations, instant payments and 24/7 money movement are becoming the new normal. However, the benefits of instant payments extend beyond consumers to provide businesses with seamless, low-cost and hassle-free payments made possible by new technologies. 

Fiserv, a leading global provider of financial services technology solutions, has outlined 4 important ways by which Financial institutions (FIs) can maximize the value of instant payments for their business customers.

1, Reduce friction and costs with request for payment

Request for Payment triggers convenient, secure digital payments directly from bank accounts. Unlike traditional direct debits, Request for Payment transactions are real-time, suitable for ad hoc payments and can be received and sent through multiple channels. Request for Payment can be the core of a payment transaction. It ensures reconciliation by both parties.

Request for Payment and instant payments enhance business-to-business and business-to-consumer digital transactions. For businesses, all the information needed to reconcile a transaction is contained within a Request for Payment, including the invoice or purchase order number, payer account information and the payment method. Businesses can use this information to automate reconciliations. For consumers, by initiating a payment separately in a different app, people can receive, pay, track and store bills and invoices in a single place through a payment initiation device such as a digital wallet or an API. 

2, Embrace Open Banking

For Request for Payment to succeed, FIs add services that combine it with instant payments and open banking APIs. That can create more flexible, convenient and secure payments. 

Open banking provides the mechanism for third parties to become the owner of the relationship with the FI’s customer, providing them with a range of innovative services and reducing friction and costs. Third parties are not a threat to FIs but rather a way of delivering services and ecosystems that are at the center of accountholders’ financial lives.

3, Understand the context of data

FIs are realizing the potential of the rich data that comes with 24/7 instant payments. Understanding and using that data requires a payments platform that supports data normalization across all channels and touchpoints. A best-in-class platform should enable artificial intelligence (AI) and machine learning for information analysis, decision-making, and monetization.

When data is normalized, with context for how it was created and used, it becomes value-generating information that helps FIs manage liquidity, offer new services and expand their customer base.

4, Optimize flexibility for growth

The variations and complexities of payments pose a significant challenge for FIs that operate on legacy, product-focused systems rather than modern customer-centric technology. Payments are a complex service involving necessary regulations, risks and costs. They are a core part of FIs’ value proposition and should be owned, managed and controlled by banks and credit unions (CUs). But many FIs view payments as a service they provide to support other areas of their business.

FIs can change that by outsourcing through a payments-as-a-service solution. Costs and risks decline, staff members are more effective, and FIs become more agile, tactically and strategically. While FIs still provide services to account holders, a trusted technology partner manages behind-the-scenes complexities.

When FIs incorporate additional services and payment options, they meet the holistic requirements of businesses and consumers. As instant payments become the norm, those services and options help banks and CUs maintain a healthy revenue stream and gain a competitive advantage.

Also, read The Future of Digital Banking Report 2021