Accelerating Faster Payments Success–Insights from PCBB & Fiserv

Sonia Portwood (00:06): Hello and welcome to this episode of Banking Out Loud, the podcast discussing the latest trends and developments in the banking community. I'm Sonia Fort Wood, your host for today's episode. And today we're gonna explore the evolving landscape of payments and how faster payments are changing the game. From the days of waiting for checks to clear to instant transactions, with just a tap, the world of payments has transformed dramatically. We're gonna take a deep dive into faster payments, starting with understanding what they are and how they are reshaping the payment landscape. I joined by three payments experts who will assist strategies for implementing faster payments and will also highlight the importance of getting started and the implications if you don't. Thank you so much for joining us today, and as we unravel these complexities of faster payments and provide insights into navigating this rapidly evolving landscape and banking. (01:03): Our first guest today is PCBBs own EVP and COO Sheila Noll. Sheila has nearly 30 years in banking leadership. She leads P b's payment strategy. She has served as a member of many banking organizations, including Faster Payments Task Force with the Federal Reserve Bank, the ICBA Operations and Payments committee, the Clearinghouse RTP Advisory Committee, the Faster Payments Council, advisory Board, and many others. She's also very active in banking education where she currently serves on the Graduate School of Banking in Colorado as a trustee and was a former chair of the GSBC banking alumni Board. With that, I'd like to turn the microphone over to Sheila while she introduces our other guest. Sheila Noll (01:54): Thank you, Sonia. So, all of that is just to say, I am a self-professed payments nerd or geek, whatever word you want to choose. Definitely something that is near and dear to my heart. And again, yes, I have almost 30 years in correspondent banking, assisting community financial institutions thrive in our increasingly changing environment, and there's not much changing, more than payments these days. So great topic for us to be discussing. And PCBBB has definitely continued to be in the forefront of the payment space as it relates to faster payments. We were early adopters, working really hard to prepare our financial institution respondent clients for this brave new world. And um, we've been very fortunate to have some incredible partnerships along the way, one of which is our partnership with the fine folks at Fiserv. And so I'm very excited to be joined by a couple of just really stellar individuals in the space relative to payments and all things supporting community fis. So with that, I'd like to introduce Justin Jackson with Fiserv and Paul Sullivan with Fiserv. So Justin, if you wouldn't mind getting us started with a little bit of your background, we'll start there. Justin Jackson (03:16): Absolutely. Sheila, thank you. I can't agree with you more about payments being super exciting. That's why I've, I've been in this space for a while. I lead our enterprise payments team. I've been part of Fiserv's family for about 22 years at this point, leading a number of different aspects of our business around client communications and product management and bill payment these days. The teams that I lead and, and work with most, we build the infrastructure of payments, we process huge volumes of transactions and tremendous sums of money through all different clearings, whether you're talking domestic or international, whether you're talking a CH or instant Fed now, T-C-H-R-T-P. Um, lots of different things that are happening that collectively roll up under that umbrella of the infrastructure of payments that me and my teams manage. And we partner with my buddy Paul Sullivan, who's here as well. Uh, Paul, you wanna say hi to the crew? Paul Sullivan (04:16): Yep, sure. Thanks for having us. Um, as Justin said, we're involved with the payments business at Fiserv. Overall, my role is in sales and supporting our client base and we support Justin's business, which is covering multiple segments within the industry. We, we go all the way from community banks up to large global banks and support payments, infrastructure products and some other products that are aimed at helping institutions deploy treasury services. So we operate globally. We have some resources in Europe as well as a heavy concentration in North America. Justin Jackson (04:51): So Sheila, if you're interested in talking about instant payments in particular and the development of payments over time, where we've come from, what we're doing, what's important to the market, I think you've probably got the two right people here and really excited that you had us here as part of the conversation today. Sheila Noll (05:08): Excellent. Thank you so much. I couldn't agree more. Uh, appreciate you joining us. This is an exciting time. There is so much to talk about, but maybe we start with what is faster payments? Because believe it or not, there are still those out there that are trying to just grapple with, with what is this? Or, you know, you hear faster payments, you hear instant payments, you hear real time payments, uh, what does that mean to the industry? And although some are coming quite along in that, others are still trying to figure that out. So who would like to tackle that one? Just giving a base definition? Justin, you wanna take that? Justin Jackson (05:46): Yeah, absolutely. So when I think about faster payments, what do I think of? I think of some attributes that are pretty commonly shared. I think of first of all, speed of delivery, right? It's right there in the name. It's not something that's happening overnight or in three days or in five days. This is a transaction that's going to occur very rapidly in many cases, almost instantaneously. And so you hear that term faster payments often used interchangeably with instant payments or real-time payments. Uh, many of these instant payments capabilities share another attribute in the form of guaranteed credit. If you think about a CH and how it functions, often a debit transaction could be returned. You could think that you've got money in hand and find out a couple days later, a couple weeks in some cases, depending on the rules, even a couple of months later that that transaction that you thought cleared, it really didn't. (06:37): In a lot of cases, these faster payments clearings and capabilities, the different networks that support these are delivering a gr guaranteed credit transaction that once it's cleared, it's pretty well final. There's really limited exceptions of when it can come back. The speed, the guaranteed nature, and then the 24 by seven availability of these transaction types is a third main attribute that they share. Whereas things like a CH only process in certain windows each day, or wire windows are only open for certain time periods. Most of the faster payments networks, the way they function is regardless of the day of the week, regardless of the time of the day, if an institution's a participant on that network, you're gonna be able to send and receive money with account holders at that institution. Those three attributes in my mind really set faster payments capabilities apart from what we traditionally thought of when we think of electronic or even paper transactions. Sheila Noll (07:29): Yes, couldn't agree more. That was very well explained. And I would add on what's interesting about payments in the US is that we tend not to sunset or, um, do away with old payment systems. We tend to find use cases, uh, continue to exist and certainly see that on the a CH side of things. But what's really coming to fruition really in these early days and what's to come is pretty amazing with the instant payment side of things, that that guarantee of that payment, that instant availability of those dollars, the instant settlement of those dollars is what is very unique to what we're talking about today. Would you have anything to add to that, Paul, relative to kind of how the US industry looks at payments today versus maybe where we're headed? Paul Sullivan (08:22): Yeah, so what Justin said is a, is a really good definition of the way the market is thinking of instant payments. What I found interesting when I first got exposed to it is instant payments as a concept globally has been around for years and years. The first system was deployed in Japan in the early seventies. So in the US market we're talking about things that are new and new to the, uh, institutions that are figuring out how to move forward, but many other countries have implemented these kinds of systems and they're deployed in geographies right now successfully. I think that, you know, for instant payments, the big things that are different, you pointed it out. So we introduced new things, but we don't sunset anything. But real-time payments or instant payments are, are really different. Just in mentioned a couple things. One is that fundamentally you're operating now in a different model. (09:15): You are operating 24 by seven by 365, so, so that's a really challenging SLA that is unlike anything that's come before it. There's certainty of the payment. So you know, these are good funds models. The sender sends a payment, it can't be revoked. It's a credit push model, which is very different than the the existing payment systems that are out there today. And, and also we can talk about it a little later, but the models that are in place today in the US both RTP and Fed now are based on a standard called ISO 2 0 2 2. And that affords some differences in the market and it, it opens up opportunities for the future and how the banks and the credit unions are gonna deal with those opportunities is still being thought through. But there's some really big differences between instant payments and sort of what was before it. I try to think of it as it's a new payment rail, but really if you get creative and you try to think a little more deeply about it, it's gonna be a new way of doing business and that's where people I think need to focus. Sheila Noll (10:16): Oh, absolutely. And you touched on ISO 2 0 0 22 Paul and the new format and that global standard that is evolving, I know it ISO 20 0 22 has been around for a little while, but we're now making our way again globally to adopting that standard or various flavors of that standard so that cross-border can communicate effectively. That's very important to PCBBB. We, uh, provide a tremendous amount of cross-border payment activity on behalf of our clients. So it's something we stay very close to. Um, with ISO 20 0 22, the opportunity is indeed great on what we can do with the added, uh, data rich fields and fundamentals of the standard that is being utilized. You name it from now Fedwire in March of 2025 and with Fed Now and with real-time payments through the clearinghouse and with Swift. So all of this is coming together to really build into what is exciting about the future landscape of faster payments. Justin, would you like to jump in a little bit on that topic and how the landscape is evolving and how perhaps ISO can play a part in that if you would? Justin Jackson (11:37): Yeah, I think the ISO 2 0 0 22 standard and the data aspects of that in particular are going to be one of the biggest drivers of usage of these instant payments capabilities. Uh, if you think about historically electronic transactions come into your bank, go outta your bank or your credit union, there are limited data elements available to you, right? You might have a name, you got an account number, you got an amount a date, but you're kind of constrained in what you have access to about the initiator of that transaction about why the transaction's happening. That additional data that you now can get access to through ISO 20 0 22 opens a world of possibilities of how you can use these payments differently. Think about if you could carry along all of the information about some service that was delivered along with a payment that's being made for it, and what could that mean later? (12:31): If there's any kind of dispute about what you paid for and you're going back to the provider saying, you didn't give me what I thought I was going to get, think about what it could mean for your BSA teams that are looking at incoming transactions, trying to scan for money laundering, trying to scan for of a violations and all the incremental data that could inform those teams and help them both speed up their investigations and even eliminate false positives when you've got incremental detail. Think about the fraud applications, if you know more about the transaction and the account that it's coming from and how you could feed that into modeling to better understand what's going on in the systems. We talk a lot about speed, we talk about 24 by seven, we talk about guaranteed credit. The data aspect though it might be the key that really unlocks really, really heavy usage of these systems. I mean, you know, Sheila, we haven't seen tremendous usage of instant payments yet. It's been out there for a while. Byserv actually brought one of the first domestic systems to market back in 2014 when we launched our now network and clearinghouse brought RTP in 2017 and Fed now launched in 2023. They've been out for a while, but we haven't seen tremendous volume just yet. I actually wonder if ISO 20 0 22 and its data elements isn't what creates that inflection point where we see tremendous usage start to grow, uh, out in the market? Sheila Noll (13:50): Oh, precisely. I think you're exactly right there, Justin. There have been so many, um, just needs for the financial industry to react and respond and innovate and do a lot in the last decade or two that when it comes to faster payments, maybe some wonder, is this just another thing that I need to invest in? Do I just need to react to this? What do I need to do here? And does it contribute to ROI, will it have benefit for my institution? And I think that that's what we're going to see when ISO is truly adopted. When we start to see applications hit the industry that are very specific value adds for corporates and just opportunity to friction out of the payment space and what is absolutely possible in this, in this world of instant payments that are truly global in nature, truly have attributes to help combat fraud, which is everywhere these days for, for the entire industry. (14:58): And so I think what I'm hearing, and it's certainly how I feel, this shouldn't necessarily be viewed as a challenge for the institutions, but rather a great opportunity, an opportunity to further serve the communities, to further serve, uh, their small and mid-sized businesses. So much potential is out there and so it should absolutely be looked upon as, okay, what can we do with this? Uh, what, what are the potentials? What is the opportunity versus, oh, this is just another thing we have to do. It's a completely different mindset, but an important one and one that can differentiate each and every institution if they're looking at it very strategically. So anything to add Paul or Justin on, on that topic? Justin Jackson (15:47): Yeah, I'll, I'll jump in if I can and then I'm gonna, I'm gonna tap on Paul to say something. I think you're right, Sheila. I think there's a, a great opportunity for institutions to better serve, um, their customers or members and the communities that they're part of by offering these services, right? You want to have that cutting edge capability. You want to provide the new and different services that your account holders look for you. You never wanna have someone walk in to a branch or call in or chat with a rep and ask, can I do this? And have to say, well, no, that's not a service that we offer. Um, you always want to have those capabilities. We've seen a lot of adoption of the instant payment networks from that perspective. Both networks of hundreds of institutions like Fiserv has hundreds of institutions live both on TCH and on Fed now, and then, you know, thousands on our now network. (16:39): So we've seen that, we've seen institutions embrace that idea, I can do something cool, I want to be part of this, and they launch, but it's, it's not, uh, lost on us that we also get the question sometimes the second part of what you said of, is this something I need to do? There's some institutions out there that are still wondering, is this actually important to me? Is it something that I should jump in on? And I think it's a really, um, I think it's a really obvious answer of, yeah, you need to be part of this game. Clearly I'm a little biased based on what I do, right? But I think it's a really obvious answer there. And I'm gonna tap on Paul because Paul has a good story. It's something he ran into where people were signing up for accounts with a FinTech and how that, how that affected the institutions and the impact that that ultimately has on the institutions who might be listening in today. Paul Sullivan (17:32): Yeah, so I mean, first of all, in terms of just the overall, what you're getting at Sheila is what's the business case? If I'm the bank or the credit union, I'm looking at a, a lift to implement new technology that's payments related. And the question becomes what's the user experience? How am I gonna fund this? How am I gonna operate it? So we buy a lot of research and the research we have suggests that there are new market entrants coming in, providing services to clients that possibly would've been clients for the bank or the credit union. And um, there's lots of different use cases. So in the case of like fintechs, what you see is some of them offering consumer cash outs. So I'm a consumer, uh, let's say I drive for some kind of a service or I'm in the food delivery business and I'm out there, you know, making deliveries and I wanna cash out at the end of the day and I wanna press a button on the app and I have an account at that particular service, and I wanna say, okay, send it to my, send it to my checking account at my bank or credit union when I press the button, if they're that bank or credit union is not reachable, the message I'm gonna get is, sorry, your institution doesn't participate, here's a list of institutions that do. (18:47): So really, if I'm the bank of the credit union, I need to get into that market if I don't want my members or my clients getting negative messages that I'm not part of a network. And so there's different ways the banks and the credit unions can get into the market, but overall, I think people need to be aware that many of the large banks in the country are participating and driving the market. And there are fintechs that are really important that are driving demand. And I think it's gonna be a business case that can be made around retention and, and deposit gathering as a start to go forward with some of these products and services. That's really meaningful when you talk to credit unions and community banks especially. Justin Jackson (19:28): Yeah, it blew me away the first time I heard it because yeah, when I take a step back and I think about what's happening there, your account holder is sitting at a FinTech saying, I wanna get my money out regardless of why my money's there. Maybe I received a personal payment from someone else. Maybe I wanna bet on the Super Bowl, whatever the reason is I've got cash and I want it pulled out into my checking account. My institution's lack of participation just funded an ad campaign for the competition. Paul Sullivan (19:55): Yeah, Justin Jackson (19:55): Right. I'm being encouraged by that FinTech to leave my bank and go somewhere else. Paul Sullivan (20:01): So some FinTech is putting a message out there to thousands of clients that says, your bank doesn't participate. Here's a list of guys that do. Like, that's that's not where you wanna be. That's not the use case you want. Justin Jackson (20:12): Yeah. So back to your core question, Sheila, 110% agree with you. The real reason to participate here is the opportunity that it represents to be part of the shift to real time. We don't know when the inflection point's gonna come. It could be three months, it could be three quarters, it could be three years. It's gonna happen at some point. We don't know when. Let's be part of that, let's take advantage of the opportunity. But the back end of it is, there is kind of a protective play here too, right? Protect your deposit base, encourage your account holders to make use of these services and pull more deposits in and at the same time take away that tool that the competition might be using to try to gain access to your depositors and steal those deposits away. Paul Sullivan (20:55): I think one thing I would add, Justin, our teams that are in the field, we want to be advisory and we, we get questions all the time about what's the business case and how should I think of this? And one thing we tell people is, you, you need to think about going into this in increments. You don't have to do everything all at once in three months. The banks and credit unions we work with wanna think about how do I sort of get the biggest return based on the investment I'm gonna make, have the best client experience possible for my particular institution and go in gradually in a way that makes sense for their own, you know, capabilities and objectives. And I don't think there's a one size fits all. I I think you could look at something like ISO and say, hey, this is just compliance and and maybe that's true for the next 24 months, but longer term what ISO really means is the information and the funds, transfer messages travel together. You don't have to tackle that today, but that's where the future will be is, is kind of getting into the thought about how do I participate with a minimum investment and then grow from there. Sheila Noll (22:01): I think you really just laid out, um, all of the most important arguments as to why institutions should be indeed engaged for so many reasons. So from just in response to what's happening in the market, the, the defensive play, but most definitely the opportunities that are out there and that are coming that are yet to even be determined, the number of use cases keep expanding by the day. It's, it's quite fascinating and fun to watch and so exciting to be part of that. So very much appreciate all of those thoughts. Sonia Portwood (22:39): I just so appreciate this just took a life of its own and y'all are so, so eloquent when you talk about payment, but for our listener out there, I think this was very educational, but if they're sitting there and think, well, we've gotta show up, we've gotta be a part of the game. How do I do that? What's my next step? Sheila Noll (22:57): Um, I'll start. And I would say that there is so much value in bringing people together in that conversation. Whether you've started the process or whether you're just thinking about it, there is such value in bringing people together. So that's internally you create an advisory committee that speaks to, okay, what is the best way for us to move forward as an institution? And then add to that some of your clients, they are going to tell you what their pain points are. They're going to share with you if you ask what their needs are. If you're not asking, they're going to be finding that answer as we talked about elsewhere. So have those very strategic conversations about how you can best serve your market because you can't realistically be everything for everyone. As mentioned, there are hundreds of use cases out there expanding every day. Find those use cases that make sense for your market, for your customers, for your organization, and just attack it strategically. And even if you're in the process today, continue that exercise. There's value in thinking very strategically about the opportunities here. So, uh, so don't stop with just your initial project. There's so much opportunity. Justin, do you have anything to add to that? Justin Jackson (24:17): So what I think I would add to what you said, Sheila, is I would say don't discount the necessity of participating in as many networks as you can connect to now. This has been the backbone of Fiserv's approach to instant payments. We want to connect everywhere. We want it to help every institution, every stakeholder be part of those networks. Think of it the same way at your institution. I've spoken with really big banks who aren't really that interested in Fed now because they've got a stake in TCH. I've spoken with community institutions that don't want anything to do with the clearinghouse because they fear giving data to their big competitors. No one wants to be the institution that only supports some real-time payments. Don't discount the need to be on both. Uh, we make it easy, right? When we approach this as Fiserv, we make it easy to participate in both networks. I think that that's fairly standard and I'd say, you know, really get in the game as much as you can for whatever the use case is, whatever the network is, wherever it really starts to take off, uh, tremendously. You wanna be part of that. Sheila Noll (25:24): Well said. Paul, would you like to add anything to that? Any final advice? Paul Sullivan (25:30): Yeah, I, I would say look for partners, vendor partners or consulting partners or peers in the industry that are advisory. I talk to our team about going into situations, often the bank or the credit union, they're trying to think through their business case. They, they don't show up on day one saying, I wanna buy x uh, they show up and they say, Hey, we're hearing about this. We're not sure really what it is or what it means, but can you talk to us about what you're seeing? And we try to provide examples of what peer banks are doing and what we see the strategies as being and, and how they're working and, and try to work with whoever we're talking to about forming a business case and then executing it. And as I said, I, I think our advice is go in incrementally. You don't wanna try to do too much at once. You can go in and and implement programs to start that are very successful and build off that foundation. So that would be my advice. Sheila Noll (26:27): Oh, that's fantastic. Thank you Paul. And just like our partnership with FCN and also with the payments exchange and how we work together with that, I knew this would be a great partnership in having this conversation for sure, because as we look, we're both, you know, really serving as those advisors for the institutions that we serve. So just a final, don't hesitate to reach out to your partners exactly like Paul said, your correspondent, your core providers, you name it, we're here to help. So I, I have a number of strategy calls every week and I suspect the two of you do as well with client institutions. So this has been a fantastic discussion. I appreciate you gentlemen joining us very much and look forward to the future working with you and working with the industry. Justin Jackson (27:17): Absolutely. Thanks for the opportunity, Sheila and Sonia, thanks for having us. Yeah, thank you very much. Sonia Portwood (27:22): Well, we thank you as well. And Sheila, thank you so much. I think y'all did a great job of covering the information and I hope our listeners are now starting to get excited about payments just like y'all are, maybe not quite as excited as y'all are, but uh, at least pick their interest and they learn something today. So to our listeners, thank you for tuning in. If you haven't already, make sure you check out our other episodes and subscribe. So you are the first to know when new episodes drop. Also, we are always looking for suggestions on what to cover. So if you have something in mind or you'd like to be a guest on our podcast, let us know by emailing us at bankingoutloud@pcbb.com. Until next time, take care everybody.