Payment innovations abound today but implementing them fully will take time, in large part due to the significant changes corporates must make to their legacy technology infrastructures. But the expectation – and demand – for faster payments is strong according to a survey from NACHA, the Electronic Payments Association.
TD Bank recently released the results of its annual commercial payments survey of mainly corporate executives, which it conducted at the NACHA Payments Conference earlier this year in San Diego. Integration of immediate payment capabilities captured first place, at 42%, as the technological innovation expected to positively impact the payments industry the most in the next three to five years. Artificial intelligence and machine learning took 20%, while 14% voted for mobile applications, 11% for blockchain technology, 9% for fraud and cyber-security software, and 4% for biometics, or making payments via means including voice, face-scanning, and fingerprinting.
The plurality choosing faster payments is unsurprising, given the established institutions promoting the faster-payment initiatives over the past few years. NACHA, for example, began offering same-day credits in fall 2016, and debits a year later. The Clearing House’s (TCH) Real-Time Payments (RTP) initiative has been under development for several years, and nine banks are currently piloting the system.
Ross McKay, a senior vice president in corporate products and services at TD Bank, said his bank has participated in the development of TCH’s system over the past few years. “We’re now in a pilot to provide corporate customers with the ability to receive payments in real-time,” he said.
In the survey, 64%, said their organizations’ use of same-day ACH was about what they expected, with 19% saying it was higher and 17% lower. Mr. McKay noted that adoption of same-day ACH has proceeded largely as anticipated because most companies use ACH for corporate payroll, and the payment method is already deeply ingrained in their systems. TCH, instead, is building an entirely new “payment rail,” requiring additional time to work out bugs and minimize fraud and errors when the system has a critical mass of users and becomes a viable payment alternative.
In fact, the arrival of RTP, as well as new technologies like blockchain and artificial intelligence (AI), provide a likely explanation for why the largest portion of survey respondents, 36%, said the greatest challenge facing payment innovation today is the need for corporates and/or smaller banks to update their legacy technology infrastructures.
Not only must banks adapt their online systems to enable payments through these new systems, but companies’ enterprise resource planning (ERP) systems must accommodate them as well.
“It’s really two-way capability,” Mr. McKay said, adding that TD Bank is currently building a platform to enable corporate customers to take advantage of faster payments.
Survey respondents viewed cybersecurity as the next greatest challenge facing payment innovation, at 32%, followed by cross-border transactions at 14%, potential fintech regulations at 8%, data regulations at 6% and controversy around crypto currencies at 4%.
Despite the plethora of new payment methods emerging, and concerns about cybersecurity, most survey respondents, 84%, said payment fraud will be managed and controlled over the next one to two years, with the rest saying it will become a bigger threat. In addition, a large majority, 64%, said cryptocurrencies will not become a legitimate form of digital payment.
Nearly three quarters of survey respondents, 74%, said integrating a mobile application for business and commercial banking would improve their companies’ experience with their financial institutions. Nevertheless, mobile capabilities are not a top priority.
“Top corporate executives want financial insight when they’re on the go, but the mobile app is generally not the platform on which to make decisions. It’s a convenience factor,” Mr. McKay said.
The NACHA conference typically draws 4000 or so attendees, and the TD Bank survey received responses from 390, or upwards of 10%.