Among the things to be discussed:
- Payment always follows something, what are the 'killer-apps' that will accelerate usage for instant payments among consumers, recurring billers, retailers and other stakeholders?
- How do FedNow, RTP and other instant payment schemes change the business model for expedited direct bill payments, Pay-By-Bank decoupled debit, Account-to-Account transfers (A2A), Business-to-Business invoices (B2B), Peer-to-Peer (P2P), same-day payroll and new greenfield applications?
- Why send/receive capabilities for instant payments are important for banks, retailers, recurring billers, fintechs and disrupting new entrants in the value chain?
- What will jumpstart the slow adoption of Request for Payment (RfP) and why?
- How to mitigate the heightened risk of fraud with instant payments.
- How FedNow, RTP and other novel instant payment approaches are creating opportunities for retailers, subscription and recurring billers to bypass card networks, reduce interchange fees and reshape payment ecosystems with Pay-By-Bank and Electronic Invoice Presentment & Payment (EIPP).
- What role recurring billers and retailers' advocacy will play in driving consumer and business adoption of instant payments at the edge of the network, particularly for Gen Z, Millennials, small businesses and disrupting fintechs prioritizing real-time cash flow solutions.
Transcription:
Richard Crone (00:09):
Gosh, you could not be luckier. Pinch yourself. This is the stage of rock stars on this topic and so unlike other sessions, if you have a question, if you got a comment, if you got a reaction, raise your hand. Mary Ellen's going to give you the mic. We don't want to wait until the end on the questions. We want to jump right in. In fact, we'll have Elena kick things off.
Elena Casal (00:34):
Sure. Good afternoon everyone. And yeah, please feel free to raise your hand or ask a question. We are here for all of you and hopefully sharing a little bit of insights and stories, but as well as answering questions you might have at the clearinghouse. We power the RTP network as all of you hopefully know and experience maybe as senders or receivers. The biggest thing I want everyone to walk away with today as financial institutions, as vendors, third party service providers, maybe as corporates and businesses themselves, all of you have a place in the real time payment space. All of you have volume that you can actually be sending today if you are not. And it's just really that discovery of finding out what makes sense for starting the send journey, which is very much what we're focusing on at the clearinghouse this year.
Richard Crone (01:25):
So Elena, don't hold back. There's a spot at the table if you want to play.
Elena Casal (01:31):
There's definitely a spot. There's, there's many spots. There's about 9,000 of 'em for all of you as financial institutions. So we will,
Richard Crone (01:38):
Up to 9,167 financial institutions and about so many 2000 or so playing.
Elena Casal (01:45):
That's right. Yeah. We have a good group of folks. I will say yesterday was our largest value date, so we processed over $4 billion on average. Right now we're processing a little more than a million transactions a day, which is a lot, but then not at the same time. So we are on the journey of sending more transactions of working with financial institutions to do that and I'd like to through the panel today, get real-time experiences of that and understand that just because you don't maybe think about a use case today doesn't mean it doesn't exist.
Richard Crone (02:21):
Hold on to that thought about use cases now to make sure that we're representing the full spectrum. Cassandra Tucker ABNB Credit Union.
Cassandra Tucker (02:30):
Yeah, so like Elena said, I think there is a use case for everyone. If I could leave you with one thing is that you guys just need to do it, get on the network. We're a little under a billion dollar institution. If we can make it work on send and receive, I'm pretty sure everybody else in this room can too. And regardless of size or industry that your FI serves, there is a reason that you should implement and there is a reason and a way for you to leverage it and make it profitable for your organization. Provide additional value for your members and your customers.
Richard Crone (03:03):
Spot on. So Cassandra, did you start out on one side or the other? Did you start out on receive and then move to send or did you just jump all in?
Cassandra Tucker (03:11):
So our goal was when we made the decision to move into instant payments, we knew we wanted to move forward with both send and receive with both Fed Now and RTP with RTP, obviously being our primary utilization of that network, we did stagger our implementation, but our goal was to go live with both from day one. That was really important for us because the monetization around send is what is allowing us to take advantage of all of the use cases on Receive and provide that additional service to our members.
Richard Crone (03:44):
So there was money on the send side, but will you share with us what you implemented first?
Cassandra Tucker (03:49):
Receive First.
Richard Crone (03:49):
Receive first,
Cassandra Tucker (03:50):
Yep. We were live on receive for about six months.
(03:55):
Before we went live with Send, we really wanted to only be live for about three months, but life right implementations things go awry. So it took us a little bit longer than we wanted to, but we were happy with that six months. It gave us enough time to get comfortable, figure out the accounting pieces, make sure we had a firm grasp on that new rail and that new process. But it was great and we went live with Send. It was a non-event for us, which is funny. We were all geared up and ready for it and excited and then we turned it on and no one said a word, but the transactions flowed. So we knew it worked.
Richard Crone (04:29):
So it worked,
Cassandra Tucker (04:30):
it works.
Richard Crone (04:31):
I can tell you that from 16 years of longitudinal data that Chrome Consulting LLC has compiled on service interactions by use case and product that by not at least implementing receive our data shows that at least 33% of the new account deposit growth in the credit union movements at risk. If you can't receive as fast as competitors.
Cassandra Tucker (04:58):
I think send is just as valuable as receive if not more. I really do. I mean you can be on receive all day long, but unless we have more institutions sending, it's going to really create stagnation in the other use cases that are developing and implementations of things like Pay by Bank or RFP or the further we go down that path of leveraging that new network. If we don't have institutions that can't send, then it's going to limit the growth in those other spaces.
Richard Crone (05:22):
So you can't go halfway. Got to do it. So just to give, set things up for Mark, how many in the audience have implemented at least a received capability? Show of hands. Okay, good. Take note. How many have implemented the Send look around you? This is what we call in consulting a finding and how many have implemented both even less?
(05:51):
Right? So Mark with that.
Mark Majeske (05:53):
Thank you. So I work for a company called Alacrity. We're a FinTech also A-T-P-S-P. So we work with a number of different small, medium size and large banks to integrate them into instant payments. One of the things I'll share with you just to carry through the conversation is that oh, probably about 95% of our customers deploy both send and receive. They usually take a couple of months in between like Cassandra had said, but in our case we find, and I'm a former banker as well, and I look at efficiencies and when you look at the efficiency of getting the team together, putting together a budget resources to do this, it just makes sense to look at both at the same time. Even if you're not going to use Send anytime in the near future, it's better to set it up to do so because getting the group back together, it's quite costly. Plus staff who have been on the project are now somewhere else and you have to retrain. So it's not necessarily a large lift to do both.
Richard Crone (07:03):
So it's more efficient to just tackle and bite off the whole thing at once.
Mark Majeske (07:08):
That's correct.
Richard Crone (07:08):
Am I hearing that right? Yes. Matthew, play cleanup.
Matthew Friend (07:13):
Alright, so if there's one thing to really focus on in this time of massive change in payments, don't forget about consumers and take care of consumer protections, right? They are the other side of the network. If we don't take care of them and understand what the implications are for faster payments been on panels, do faster payments equal faster fraud. They do right? Addressing scams, addressing disputes just because it's a new rail. When you're putting these same higher risk and retail use cases on that rail, consumer expectations are the same like it or not. So we need to make sure we account for it because if we don't, we're going to lose consumers. It'll take longer to grow and develop and we're run into larger challenges as an industry that is not what we need. Trust is important.
Richard Crone (08:02):
Wow, go ahead.
Cassandra Tucker (08:04):
I just said trust is important.
Matthew Friend (08:05):
Trust, yes.
Richard Crone (08:07):
Right. And I think you need to consider the source of what you're hearing. This is Matthew Friend, the head of alternative and new payment rails from the biggest bank in the galactic empire, JP Morgan Chase, which the American banker reported three weeks ago that out of concern for consumer safety and fraud blocks now the fastest growing transaction type. And that is social payments on Zelle, which is really kind of a real-time network payment as well, if not factored that settlement risk being factored. And so the fraud aspect is really taken to heart. So hold on. Anybody got a question? A reaction, a comment? Mary Ellen's ready?
Elena Casal (09:03):
I have a comment
Richard Crone (09:04):
Please.
Elena Casal (09:05):
I know you didn't ask me that question,
Richard Crone (09:07):
But Elena's ready.
Elena Casal (09:07):
So I am ready. To Matt's point and in general, I think in payments we all know and in general we want to take care of our customers, right? Corporates or consumers, we want to make sure they're protected, treat them fairly regardless of the payment rail that they run regardless of the application or app or whatever. We always want what is best for them on what we experience on the RTP network is as the clearinghouse, we're very deliberate of what we offer, how far down the chain do we offer it? And as part of the payments journey when we're looking at shifting volume from debit instruments to a credit push instrument, there's a lot of conversations that have nothing to do with the payment itself, but all of the experiencing around it being chargeback disputes, regulations, clarity, transparency, and so just whenever we talk about fraud, I just always want to keep in mind it's not specific to one Rail or another. We're looking to help our customers experience payments the way we need them to in a protected fashion.
Richard Crone (10:23):
I'm sure Cassandra wants to weigh in on that as well.
Cassandra Tucker (10:26):
Yeah, I think fraud protection is super important. I mean to Matthew's point earlier, if we lose our customers or our members trust, we're out of the game. And so with faster payments, faster fraud, but it's still manageable. And I had said this earlier, but find me a payment rail that doesn't have any fraud. There isn't one that exists. Fraud will happen. It's something that you have to measure and manage and if you go into it and you approach it the right way and you look at how you're going to serve your members, when that inevitably happens, you have a plan in place for that and you layer your fraud approach, it's still completely doable. There is a way to approach it as long as you're looking at how you tackle things like account takeover. So for us, we have a layered approach to mitigation. We're on send our primary use cases A to A so our member is doing a transfer from their account with our organization to another account at another organization.
(11:21):
Whether that inevitably ends up being for bill pay or for investment or brokerage or just because they need to move money between their accounts, that is our primary use case. And so we start with a piece of tech that helps catch on the biometric side that really allows us to have a better idea when account takeover is happening and it can take action to block or limit that session. And then we have limits MFA and then real-time fraud monitoring on instant transfer specifically that again have decision capability. So if it triggers, it's going to block that transaction. And while that may be friction for the member, it's intentional friction and it's important to have that and it's still a real time decision. It either worked or didn't and if it didn't, then that money's still in their account, they can try doing it another route. And while we do see some false positives on that, it's well within the limits that I think we're comfortable with. We've had less than 300 rejections on send and we've done over 3000 send transactions the last three months. So we're comfortable with that and we're not having a negative member experience. We're working through it and just adjusting our model as we go.
Richard Crone (12:29):
So Cassandra laid out these specific things that you can do to protect, to mitigate that risk. Mark, what kind of functionality should FI be looking for in addition to that? To have these protections against the fraud and to make the program work effectively?
Mark Majeske (12:48):
I think we found from a fraud perspective that it's better to layer. So for instance, most people who have a system in place already for ACH and wire find that it's not going to be adequate necessarily, for instance, payments. And the reason is you have to have a decision in milliseconds, a score to work off of. The other thing that I'll mention is, and what I've seen is that it has to be very proactive. What you want to do is identify the fraudulent transaction before it occurs to protect your customer, your member, and the institution itself. The other thing is that what I found was very effective for a number of years is layering. So we look at transaction analysis, we look at individual, and that's the individual sending and receiving. And we also look at device management, which is really, really quite effective when you put all three of 'em together. So that's something that we look at as a gold star type of approach.
Richard Crone (13:51):
Look into the biggest bank of the world, what kind of re-engineering policies and procedures are different here than the other payment rails that you are managing.
Matthew Friend (14:03):
It is interesting as you think about the receive side because it is easier and send is more complex and more risk. So to quote the immortal raw base and DJ Easy Rock, it takes two to make a thing go right? You need both sides of the network, right? There's two sides of the network that have get together and the send side is more complex, it's more sophisticated, and you've got to think about it, there's a lot more at risk, right? So to answer your question, Richard, the first thing that we really need to think about, especially as we move from basic low value, well not even low value, lower risk use cases into higher risk transfers and ultimately even into more commercial transactions, we need first and foremost much more rigorous onboarding.
(14:51):
We have got to really understand who are our customers, what are they doing? What are the use cases, what are the industry segments? Is it one time, is it recurring? Is it to a digital wallet? All of these aspects need to be taken into account as you onboard a customer. And then for these new networks that needs to be published into the network, receivers of these transactions need to understand what they're going to get. So when that merchant ID shows up, they know what it's for. Because not every transaction is the same. It's very different. Paying your electric bill versus very different in funding your account on Super Bowl Sunday and trying to place an immediate bet, these two transactions are not the same. We can't treat them the same. We need to make sure we have better quality and much more rigor coming into the network and we manage and maintain it.
(15:41):
So it's one of those things where you may not love the card networks, but it's one thing we should look at and really appreciate the rigor that they put into onboarding, making sure who's originating transactions, who's accepting transactions, why are they doing it so we can have much more enforcement, we can build a better fraud and risk management tools as we go into it and we have the data to have a better customer experience. You can much more easily manage disputes. You can auto-populate all of these items that come to it. So we just have to start at the very front door and not take for granted, oh, they're already bank authenticated, it will all be fine. We've learned that that does not work.
Richard Crone (16:26):
To Matthew's point, Liv's coffin from Visa did share in the prior sessions that disputes are up 30%, which interestingly aligns with the growth of adding net new influencers, creators, and micro merchants on TikTok, which the whole segment is growing by 40% annual growth rate and the vetting is all done completely through artificial intelligence. So I don't know if there's a correlation there, but to your point, there is something to be learned between the two networks, time out. So is there anybody that wants to react, ask a question, come on board. You don't have to wait until the end to participate. I have question. Good. This is the interactive part.
Audience Member 1 (17:16):
Casandra, sorry,
Cassandra Tucker (17:16):
Put me in the hot seat already.
Audience Member 1 (17:18):
I know I'm definitely going to put you in the hot seat just because your size is a little bit smaller than mine, but I am intrigued as to why you jumped in. So basically when you were saying you need to trust, were you letting groups of people at a time that were niche specific or you just turned the whole thing on?
Cassandra Tucker (17:40):
We turned it on.
Audience Member 1 (17:41):
Okay.
Cassandra Tucker (17:42):
But we did the work, right? So we did a ton of work leading up to that. We reviewed our member base to see what our average transaction amount was. So that helped us set our limits. We looked at what we were seeing from a wire volume perspective because wires are super inefficient, at least for us they are. It takes multiple people to process 'em. The member has to reach out to a frontline rep. And at the time we weren't allowing direct integration from online banking to our wire provider. We're changing that mentality now, which is funny because it took us so long to our institution never wanted to consider that initially from a risk perspective. But after we turned on real-time payments and they're like, oh, this is okay, now we're going to actually do real-time wire integration next year. So we looked at it, we figured out kind of where we wanted to set our limits.
(18:29):
We wanted to cannibalize just a little bit of our wire business on purpose, that small dollar wire business, we pick up what we weren't getting anymore at all. And then we really just dug into the data. We looked at what are our current losses on ACH origination. Because at the end of the day, the liability is pretty much the same. Whether you're sending money out via a CH through online banking or whether you're sending it out via RTP, the buck still stops where it stops. So it doesn't change any of that profile from the risk perspective. So we're like, okay, it's not really that more risky, it's just a quicker risk. And we knew that we wanted to take advantage of the receive use cases, like earned wage access for our membership and things like that. And so it's expensive. I mean it's reasonably priced, but for a smaller institution it's a pretty penny.
(19:22):
So how did we afford to implement those rails through a third party service provider and do that in a cost effective way? And that was honestly through send. So we monetized the send side of the use case and provided it in a to a, I mean Venmo, PayPal cash app. They've trained every user out there that you pay for the speed of an instant transfer. So why would we not charge for it when they are clearly successful in that space just looking at their earnings. So I mean people are comfortable doing it. And so yeah, we jumped in and we also did a full database scan before we went live through our new fraud provider that was going to be scoring our real-time transactions. And we were able to take a look at high risk individuals before we even went live to make sure that we had kind of vetted some of that out or reviewed those accounts and figured out those false positives.
(20:22):
And it helped us get a good feel for the fraud system too, which was new for us. But yeah, so I mean we just did it. We turned it on, we piloted it with internal staff usage only for about 30 days. And then after that we turned it on for our membership. And it was funny because we were moving a couple of us out of our pilot package into our regular retail package so we could test it after we turned it on for our membership. And in the amount of time it took us to do that, which was less than five minutes, we already had transactions live on the network. And I think that was probably the deepest breath I've ever taken. And I was like, oh my God, it worked. It's working. People are using it because you fight that fight internally that says, Hey, we need this network. And they're like, are people going to use it? And then they did and I was like, this is awesome. And the volume's just been a steady rise ever since. We're really satisfied with that decision.
Audience Member 1 (21:15):
Elena. And then next question, can you talk about the current dispute process from the clearinghouse perspective? What does that look like?
Elena Casal (21:22):
Sure, I can start maybe from an FI perspective, Matt, Cassandra, you can add. So as the clearinghouse work as a market infrastructure, so we are definitely different than cards networks. So when just like a CH and wires, we are, the industry is bound by Reg E and OC four A. All of the regulations that apply for financial institutions. So for RTP transactions as a credit push, it is pushed, it is irrevocable. And if there is a case for, we have a process for unauthorized meaning the receiver can say that it's an authorized credit that they received, the financial institution can then push the money back through a process. But it is not like the card process where a case is open within the network and it's addressed, it's responded back to us. We are notified through that process just so we can manage to see if something is outside the bounds of our normal basis points that we have, but it hasn't been to date. We are working very closely with financial institutions and the partners and regulators and whatnot to figure out what is the right liability framework and dispute framework as we move to request for payment. This really trying to move some debit instruments over to the credit side knowing that there's going to be a liability shift, knowing there's a responsibility shift. So we're working on that. We have a liability framework for request for payment and then the payment itself.
Richard Crone (23:06):
Did that answer your questions? Anybody else panelists react to this topic? Please Mark another question. Oh,
Audience Member Evan Goldstein (23:14):
I'm sorry.
Richard Crone (23:15):
Please go ahead.
Audience Member Evan Goldstein (23:17):
Hi, Evan Goldstein from Visa. Mark, I have a question for you since you've been involved in this for quite a bit of time. In terms of RTP and real time payments as opposed to the RTP brand, how have financial institutions, especially at the smaller and say medium sized, like community sized banks taking up the concept of real-time payments and are they equipped to deal with all the issues around that?
Mark Majeske (23:42):
Yeah, I think there's a lot of mystery behind that because there are a lot of assumptions that are made. The assumption is that the integration's going to be difficult. I have to change my internal processes. I haven't done 24 7 transactions before as an institution. And so what we try and do as a partner and we consider ourselves partners with our customer is to work with them to figure all that out. So we have a formal process, we go through where we anticipate what the core is. We happen to be able to integrate to different cores. So it doesn't matter what core you have, we can work with you. And so what we do is we integrate to that core. We make it easy on the institution. So in the course of a transaction, it's really what alacrity will do is go into the core. If a transaction's been sent, we pull the funds from the customer's account, put it into the bank gl, and then we run the transaction through to the clearing house.
(24:46):
So what the bank typically does is they'll do reconciliation each day. They'll respond to requests for return of fund messages, but we try and make it very, very easy. What generally happens is most people will start with receive, right? But remember there are use cases for receive and there are use cases for send. So what Matt's bank has done is they created a lot of use cases that Cassandra's customers can use, can utilize. So that's the received part. So there are many other institutions that are creating use cases and on day one it's surprising when they do integrate how quickly everyone starts using them,
(25:38):
Right? On the send side that takes a little longer. You have to figure out what your fraud prospect is going to be, what your procedure or strategy is going to be, and then build a use case. What we're starting to see is a lot of different use cases. So when I look at alacrity customer activity we are seeing the most is wallet transfers, payroll, gaming, crypto. A lot of people were buying crypto with it. And also finally in a very big area that's just grown recently, is brokerage transferring funds to your brokerage account. Once we started seeing that it grew exponentially, the only other thing I'll say is keep in touch with your customer because you're really building capability for your customer or member. RTP is not a product, it's a capability. What you want to do is promote those things, those products or services that you can create that make your customer's lives easier. That's what you're delivering. So I always like to keep track on that in terms of make sure that people are thinking about it.
Elena Casal (26:54):
And I was just going to frame maybe from what we've learned too, just echoing Mark in a little bit. So about 90% of our financial institutions are community banks and credit unions. As you can imagine, that's most of the population and most of 'em are receive only and they're on a journey to send in different capacities. More so than anything else we've learned that partners such as alacrity and others are really an extension of the financial institution. So they cannot do anything without their partners on the send or receive side. And so the send journey could look different depending on maybe their modern bank like the mobile app versus online banking versus business online banking versus an API versus a file upload. So we have worked at those organizations and their partners third party service providers to whatever that sweet spot is. We try to anchor that to enable the community banks and credit unions to experience it in their own world.
(27:59):
The merchant settlement is a great example and I think it's a good clarification of your receive use cases may be different than your send, but your customer is the same. So your small businesses want their money faster and they probably want to pay out later. And we always say with purpose and position, so it doesn't need to go out faster, it just needs to go out when the client needs it to go out to pay something and take advantage of whatever bilateral party agreements there are. And so that is applicable to large, medium, and small financial institutions. I just wanted to frame the majority of financial institutions are definitely the small community banks and credit unions, and a lot of them are on the send journey now because they want to respond to requests for payments. So they want to transform instead of having a debit poll where there's control but no control having a request for payment come in and then their member or client can respond at the time they need it to be paid out.
Richard Crone (29:05):
Matthew?
Matthew Friend (29:07):
Yeah, I'd like to just add on to Cassandra got us started in a really good one in that it's a great prove it use case, right? I think for every institution, and it's highly underutilized right now in the market of that instant bank to bank transfer, when we, as we've turned it on and we look at our numbers, of course, 99 plus percent of all customers if they're on there to make a bank to bank transfer, and you can do it right now, they're going to click right now, fees come into play on it. But of course that's what everybody's going to choose. But it's a great prove it use case to get your institution going. And then on the way to some of what Elena is talking about in Mark here of there's these account funding use cases that we're solving problems for customers right now.
(29:56):
When you want to fund an account and you make that decision to fund it, you want to do it right now. So whether it's funding a brokerage account, funding a cross-border account, a gambling account, a crypto account, these are use cases that are not well served by ACH, sorry, Elena, not well served by debit card as well. And so they really sit in the middle where there is high demand, there's volume there and it fits well with the instant payment use cases. And so what we've tried to do and spend time with Elena and others in the industry is recognize what's that proper risk journey? Because there's demand there, there's value in increasing opportunity. Once you have instant, you wonder why you didn't have it in the first place. But where are we solving problems and how are we just taking the thoughtful steps on the journey to enable consumers get the right experience while balancing the risk that we know is out there? Everybody's going to be coming forward to being together as an industry, doing it thoughtful, building the right rules and tools and processes is what any of us would expect as customers and certainly as any of us as regulators as well would ultimately expect.
Cassandra Tucker (31:08):
And to your point on that, when we looked at building our use cases, the first thing was what problems can we solve with this new functionality? What are our members facing that we can improve upon from an experience perspective? And this is an enabler for all of those things, whether it's getting earlier access to their payroll, we serve the underserved, we have a low income designation within our credit union, and so being able to cash out your payroll and not have to wait two weeks for that, that's a huge impact for them. And we're seeing massive adoption on the receive side for earned wage access. And it's funny because the use cases we're seeing on the receive side, our top counterparty banks that we're getting transactions from are completely different than our top five on send. And so when you're looking at building your use cases, understand that they're different. It's not a one size fits all approach. And I mean for people, payments are a really personal thing. How you move your money when you move your money, where you're moving your money. I mean it's deeply connected to how you live your life every day just as a person and you manage your finances. So making sure you have the tools for them to have control, access and convenience, it's a game changer for them and I think it's a huge enabler for access and almost equality in some ways of giving them more functionality.
Elena Casal (32:40):
Sorry, just go ahead. A lot. Where I would definitely start as a financial institution for those of you that are looking at your journey is talk to your CFO and your finance group. They have to deal with payments all the time and they have to play the game of figuring out when to send something out and what the receiver's going to do. There's a lot of volume, different sizes that are really related to bank liquidity transactions of just being able to manage your own cash as a company where financial institutions are a company too, and you guys have payroll and you guys have utility payments and you guys have also just liquidity management. And so sometimes it just takes saying that to remind yourselves that you have your own finance teams that have to manage payables and receivables.
Cassandra Tucker (33:32):
Yeah, all the agility that you're giving to your customers. Take an advantage of that too. Don't be afraid to be your own customer in that sense.
Mark Majeske (33:40):
One thing I wanted to also mention was that different organizations, different FIs have different portfolios of customers. And so what I'm finding in my analysis at alacrity is I have some clients that are doing maybe 4% for micro loans. So their customers are going out and getting micro loans and getting the cash brought in. Some have 4%, some have 47%. So that's proof to me that each portfolio or each institution is different. And it's important, as I may have said earlier, that you connect with your customers to solve a problem, fill a gap, but figure out what the right one is for you.
Richard Crone (34:26):
Let's go back to this idea of fee for speed that Cassandra implemented. There is a willingness to do it. I can tell you from again, our Chrome consulting LLCs Benchmark best practices database in the evolution of biller direct payments. One of the products that came out even before RTP and Fed now was this idea of an expedited payment where you were charged a fee based on how close you came to the actual due date. Meaning if you're three days out, it's five bucks, two days out, 10 bucks, day of it's 30 bucks in some cases. Certainly the proprietary auto lenders were the ones that led this charge. It's now the number two largest source of income for the lenders in that category. What are the applications, what are the use cases and what's the fee structure for building this as a monetized business?
Cassandra Tucker (35:26):
I mean, I can speak to that a little bit. We kind of followed the model of Venmo, PayPal, and Cash app, right? I mean it's a percentage based fee is how we approached it. We modeled that out 10 different ways to see what felt right. We looked at what our average transaction size, what that percentage would equate to for that transaction amount. We set a minimum, I think our minimum's like two bucks for our minimum fee just to make sure our cost per transaction's covered and we're not going to lose at the transaction rate. And then we set a max fee cap and it just lives within that wiggle room.
(36:06):
We had some pushback internally about why would anyone pay for this? And I'm like, people pay for it. I pay for it anytime you give me an opportunity to cash out instantly on Venmo, I'm doing, I'm a millennial, I want it. I want my money, I want it now. I want to just be done with it. And I like that instant gratification and I'm not alone in that. And our members, I think, have shown that they're fully comfortable with it. We've done over 3000 transactions on send, and we've had less than 20 members call in and ask for a refund on their fee.
Richard Crone (36:36):
We have the three minute mark. If there's any other questions or reactions or participation, we invite it. Now we have one right there.
Audience Member 3 (36:47):
Thank you for the panel. Very good. What I want to ask is, we have several rails and who ultimate decides which rail? I mean, it's the customer that will say, I want this or that, or is the industry that's going to coalesce to one particular rail and if we maintain many rails as we do have now, how do they speak to one another?
Matthew Friend (37:13):
That's a long answer.
Mark Majeske (37:16):
Yeah,
Matthew Friend (37:17):
It's a great question. But you have to just say it varies in certain scenarios. For example, small business, sometimes they're more sophisticated and certainly on the commercial side and they're offer the rails and people will make their own choices. Sometimes, as again, as I said, for transfers for us, do you want it instant or do you want it in two days? So it really, I think, varies by scenario in making that choice. I like your question about where are rails going in interoperability. It's a big question ultimately for resiliency of making sure that you have failover in those capabilities. So should something ever, God forbid, happen, right? People will still have a safe and secure and trust payment system. So that's a key part for interoperability that has to be out there. But apart, I know it's always just been a focus in this country, your own competition, you have different rails that drive this and everybody just doesn't get the same flavor, which is vanilla and all you can eat really focused on competition between different rails, sponsoring innovation, driving different services, better price points across the board. So it is a great question you asked, but there's a lot of different parts to it. I hope I summed it up. I'd offer if there's more to add.
Cassandra Tucker (38:39):
Go ahead. Oh no, you go first, Mark.
Mark Majeske (38:40):
I was just going to say that what we're looking at is something I call the FedEx model. So if I'm a customer, I come into the bank, I don't ask for a rail, right? Because in honesty, most people don't understand and know what they are. If I told you, oh, we have RTP, now you're going to say, well, what's that and why do I care? Right? So user experience is key here. So if you were to come in and just tell me what you want to do to today and it's Saturday and you want to move money to a friend domestically, then I would put in front of you the options. I wouldn't call it RTP, I wouldn't call it instant payments or I could, but the point is, deliver on the promise, fill the gap, make it easy for me. Tell me what it's going to cost and confirm that transaction's been done. Do I really care how it was sent or what rail was used? Not really. And I'm not going to see wire or ACH on the Saturday transaction. Don't show it to me. Confuse me. Right? So keep things very clean, very concise, and fill a gap for your customer who wants to send money.
Cassandra Tucker (39:50):
And that's how we, oh, sorry. Nope, go ahead.
Mark Majeske (39:52):
We have time.
Richard Crone (39:55):
All of our panelists are active on LinkedIn. You definitely want them in your network. Send them an invite. I want to thank them for participating today. They'll be here through the afternoon. Good job. Thank you.