Entering a world of Faster Payments

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1 Entering a world of Faster Payments Michael Eley, AAP VP Digital Payments Product Manager February 7, 2017 Copyright 2016, Branch Banking and Trust Company. All Rights Reserved.

2 What are Faster Payments? Opportunities B2B P2P B2C Phased Approach to Same Day ACH credits Same Day ACH debits Real Time Payments 2

3 A Global Trend in Faster Payments 3

4 Organizations Driving Faster Payments Visa s Plan To Make $10 Trillion Real Time 4

5 P2P Payments Market and Use Cases Global P2P market is over $1 trillion Mobile P2P Payments are growing and replacing traditional ways such as cash, check and bank transfers Friends/Acquaintances/Community Roommates sharing room rent Split bills for entertainment Group savings Pooling money for a cause Pay for used goods purchases Gifts on birthdays/holidays/festivals Personal borrowing/repayments Household/Family Pocket money transfers House rent to landlord Tuition fee Childcare House/garden maintenance Gifts on birthdays/holidays/festivals Pay for used goods purchases Source: BI Intelligence Report 5

6 B2B Payments Market and Use Cases B2B Payments The consumerization of the workforce is creating an expectation gap in B2B banking experiences B2B Payment innovation has lagged behind consumer experiences, driving pent up demand for solution in this space The overall shift from paper payments to digital is accelerating, and startups are just starting to step in to capture B2B customers With RTP, banks can bring new and better B2B solution to market The opportunity $550B Business cost of B2B paper checks $74B Est global savings of current shift towards electronic payments 6

7 B2C Payments Market and Use Cases B2C Payments B2C Value Add and Cost Takeout: Traditional B2C payment are slow and costly for businesses and consumers. Financial institutions that arm businesses with RTP can enable a superior customer experience and reduce operating costs. Checks CO$T The opportunity $3.9B Annual B2C checks $16B Est annual cost of processing 7

8 Same Day ACH Phase 1 Credits only Effective September 23, 2016 Availability by end of RDFIs processing day Phase 2 Credits and Debits Effective September 15, 2017 ACH credit availability by end of RDFI s processing day Phase 3 Real Time Payments Effective March 16, 2018 ACH credit availability by 5:00 PM RDFI local time 8

9 Here Comes Same Day ACH: Use Cases Market Application Payroll Employers have a legal obligation to pay employees on time. SDA can help employers and payroll processors to stay compliant with missed payrolls or payroll errors without having to revert to checks, wires, or cash. SDA can also be a viable tool for organizations with workers who are paid daily or at the completion of a task. Business-to-consumer (B2C) urgent payments Disaster recovery, urgent insurance claims payouts, and other pressing payments that businesses owe to customers may use SDA if the recipient has a checking account. Person-to-person (P2P) payments Many P2P services such as clearxchange offer near real-time delivery of funds from one consumer to another. Receiving funds within hours may satisfy many P2P users. If SDA offers a less expensive means of funds movement, new P2P providers may emerge. Bill payment Billers can more easily offer same day bill payment services on their online and mobile sites, helping customers avoid late payment fees; can charge a premium for this service. Bill-pay service providers and aggregators may find SDA a cost-effective alternative to the sameday bill payment services used in their current operations. Online payments Retailers selling online like to offer customers as many payment options as possible, including paying from a checking account. Sellers aren t going to begin the shipping process until they can confirm that they have received payment. Same day allows on-line retailers to collect funds and get products in the mail more timely. Check conversions Some brick-and-mortar stores like grocery stores are still paid by check by many customers and often convert these checks at the point of sale to an ACH transaction for faster collection. SDA speeds collection by improving cash flow and more quickly alerts stores as to checks that need to Source: Mercator Advisory Group be re-presented because of insufficient funds. 9

10 Uniting Banks to Provide a Better Payments Service Joining together, financial institutions create the optimal customer experience to win and retain customers. And ensure safety and soundness for customers! 19 CORE FINANCIAL INSTITUTIONS 76 MILLION MOBILE BANKING USERS 10

11 Early Warning s Real Time P2P Flow clearxchange TM Directory $ CUSTOMER S BANK RECIPIENT S BANK 1. Alias-based payment initiated 2. Real-time messaging 3. Direct to Bank Account 4. Immediate access to funds Customer (people, businesses or governments) initiates payment in a secure online/mobile session using only the recipient s address or mobile number. clearxchange facilitates real-time messaging of transaction information between the banks. Recipient FI sends payment notification to its customer and typically puts funds into recipient s account within minutes of notification from clearxchange*. Customer gains immediate access to funds, directly through existing U.S. bank account. *Assumes simple, one-time registration has been completed. 11

12 Expanded Reach with Fiserv, MasterCard Send & Visa Direct Fiserv will resell Early Warning s real-time P2P solution, enable FIs of all sizes to more easily access the power of the clearxchange network. Visa and MasterCard agreements will enable nearly all U.S. debit card users to send money to, and receive money from, customers of participant banks. real-time. Faster payments experience for more consumers Better experience for customers of member FIs More FIs in the network, more ubiquitous P2P solution 12

13 The Clearing House 13

14 Deploying a Real-time Payments System 14

15 Real-Time Payments Message Types and Flow Flexible Messaging Options RTP solution will provide flexible, robust messaging with options to include payment and remittance information. Request For Payment Remittance Advice Credit Transfer Payment Acknowledgment Request For Information 15

16 Funds and Message Flow: From Sales Order to Payment Use case scenario: A single business-to-business (B2B) transaction between a restaurant and its supplier illustrates the value of extensive immediate messaging. 16

17 Real Time Payments Distinguishing Characteristics 17

18 QUESTIONS? 18