The opportunity to go to the drawing board to build something new from the ground up does not come by often in any industry. In the payments industry, it’s been more than 40 years since the last major innovation – Automated Clearing House – was implemented across the country. In today’s marketplace, it’s no longer just banks that compete for transaction services. Now, FinTechs and other non-bank payment providers have found niche ways to improve the user experience by offering more convenience, transparency, perceived speed, and other value-added services.
In recent history, banks have been widely restricted in their service offerings by the inefficiencies of old technology and legacy payment systems. The Clearing House’s Real-Time Payments (RTP) initiative provides the opportunity to reset the stage by providing a new platform and framework for the next generation of banking products and services.
When developing our strategy around RTP, we at BNY Mellon realized we had two options. The first was to wait for others to build, develop, test, set standards for, and prove the value of RTP – and then, to join others in following the model laid out by the market. The second option was to take the lead and work toward being at the forefront of payments technology, using RTP’s new features and benefits to differentiate our bank from the competition. The client need was apparent and the choice was obvious, so we dove straight in. From day one, we have been working with The Clearing House, other early adopter banks, and our clients to define the system capabilities, operating rules, and best practices, and to identify use cases, while also problem solving for something no one has done before.
Both approaches presented some basic benefits and challenges. By developing a brand-new payments infrastructure for our bank and clients while simultaneously collaborating on the industry’s offering, we have encountered many unknowns. As with other areas of the business, banks cannot rely on industry standards, because those standards don’t exist yet! However, with every challenge comes an opportunity.
As we have seen in other countries that have implemented similar networks, those companies that take on these new challenges early are those that benefit once the dust settles.
In this case, that opportunity was for BNY Mellon to look at these challenges, work with our clients to say, “How do you want this to work?” – and then say, “OK, that’s what we need to build.” The deeper we got into these discussions, the more use cases became apparent. One major revelation during this process was that although there is considerable value in an immediate final payment, a great deal more value lies within the message types and the ultimate end-to-end experience of our clients, their business partners, and their end clients.
BNY Mellon has spent the last two years working with our internal development team and clients to pursue one common goal: to provide early access to a full suite of payment services to this real-time 24/7/365 payments network, with full message functionality – and to do so without requiring a significant investment and effort for our clients. BNY Mellon needed to leverage our own investment in our payments infrastructure to enable our clients to plug and play as they see fit and to extend these services throughout their business model.
When a bank or a business analyzes their options to execute RTP, there isn’t one solution that works for everyone. There is an endless array of internal systems, formats, processes, and other considerations that can make each of our client’s needs unique. When you tie that in with hundreds of potential use cases across your various clients, it becomes apparent that the flexibility of any RTP solution is going to correlate almost 100% to its success. To provide flexibility and the ability to customize, BNY Mellon opted to provide clients with a gateway platform that allowed them to take an à la carte approach to selecting from a variety of core service offerings and components that make up the entire solution.
For our bank clients, this type of design allows them to draw the line where our service starts and stops and what components from a technology and service offering they want to manage or outsource. The solution provides everything from core processing of all RTP payments and message types to enabling them to choose between building their own online platform or using BNY Mellon’s white-label RTP screens, which they can integrate with their own through a single sign-on solution.
BNY Mellon’s user interface for payments is already designed and ready to provide an end user with dynamic functionality for every RTP message type, including requests for payment, acknowledgements, requests for information, and requests for return of funds. In addition to the payments technology that makes this possible, one of the most important aspects of the services is the expertise and resources of our operations area. As an owner bank of The Clearing House and direct participant in this network, BNY Mellon can enable other banks to utilize the fraud monitoring, liquidity management, and operational expertise that we require for our own service model.
The common theme that we have seen play out again and again is that by providing clients with a gateway solution and API services to our payments processing, payments tracking, and other core services, the benefits of these systems and networks are pushed much further down the chain than they ever could have been in the old batch processes. Whether we’re talking about a bank’s mobile application, a corporation’s accounting system, or an insurance company’s website, the ability to integrate RTP, requests for payments, or acknowledgements into those screens and experiences finally puts U.S. payments in a competitive position with the rest of the marketplace.
As we have seen in other countries that have implemented similar networks, those companies that take on these new challenges early are those that benefit once the dust settles. Through continued client engagement and industry collaboration, we have seen unprecedented speed of change and acceleration in how we are able to collectively launch a payment system of this magnitude. Because payments are at the center of every economic transaction from global trade to local small businesses, this will significantly change the way we conduct business and interact with one another. Those companies that see it as an opportunity and embrace the change and focus on the entire business model, not just the transaction-level service, will be those that continue to push innovation and succeed in this new era.