BNY Mellon plans to use mundane but voluminous transactions like utility bills as a primary use case for real-time payments.
BNY Mellon introduced a real-time electronic bill and payment product on Wednesday, enabling businesses to use application programming interfaces to power straight-through processing, bill presentment, payment and reconciliation via The Clearing House's RTP network.
Similar to the early days of internet banking, when electronic bill payment and presentment were seen as gateways to broader use of online banking, the bans hopes recurring bills can provide the same lift for real-time transactions.
BNY Mellon already sees a demand for real-time bill payments. For many tasks, customers don't want to wait to see funds posted for a bill they've paid — especially when
As business in general becomes more digital, it's important for all businesses to demonstrate those capabilities, said Michael Bellacosa, global head of payments and transaction services for treasury services at BNY Mellon. "It's not just the image the biller projects to its clients of being innovative. It's also to send a bill more efficiently and get paid immediately."
BNY Mellon envisions recurring bills will be among the more appealing use cases; there there is a large volume of outgoing bills and incoming payments. Utilities, credit card companies, cable, internet and mobile phone providers are among the target clients.
Americans spend $2.9 trillion annually, or 20% of all consumer spending, on just 10 types of bills, according to
There's plenty of room for automation in these bills, according to BNY Mellon.
"If you look at what's out there today with business payments, it's a challenge," Bellacosa said. "There are still a lot of paper bills being sent around."
BNY Mellon is working with other financial institutions and billers to build a network for real-time bill pay. The bank is conducting tests this year with plans to scale the product in early 2022.
While consumers are doing more of their bill payments online, financial institutions have been falling behind billers in facilitating these payments, said David Albertazzi, a research director at Aite Group.
"Digital experiences are being shaped by other industries, and that is putting pressure on financial institutions to build relevant banking and payment experiences," Albertazzi said. "There is an opportunity for financial institutions to change that trend and develop engaging digital experiences that allow consumers to take control of their finances specifically for bill management and payment activities."
Many consumers cite poor digital capabilities as a reason they move their accounts from their bank, Albertazzi said. "Paying bills is definitely one of those key capabilities and should be core to a financial institution's strategy to drive client deposits, engagement and retention," he said.
BNY Mellon's rollout comes as
"Offering real-time payments is critical to be successful as we go forward," Bellacosa said. "If we're not out in front of that and providing those capabilities for our clients' customers there's going to be a problem."
BNY is working with The Clearing House's RTP network on its instant-bill-pay product, but it's also working on broader concepts with FedNow, the Federal Reserve's real-time payment rail that's expected to launch in 2023 or 2024.
BNY envisions these tests and the bill-pay pilots will inform real-time payments in other areas, such as e-commerce. "You see it all of the time, our customers' customers are looking for electronic solutions … something that is really simple and instant," Bellacosa said.
