Faster Payments Should Be Part of the Credit Union Playbook: White Paper

With the evolution of faster payments domestically and globally a report by Javelin Strategy & Research in conjunction with PSCU helps credit unions better understand the complexity of these new payments.

“As payment modernization continues to gain momentum, credit unions can and should have a seat at the table,” Vladimir Jovanovic, manager, Innovation at St. Petersburg, Fla.-based payments CUSO PSCU said. “Faster payment methods are accessible to credit unions, with more options becoming available in the near future. The time is now for credit unions to build definitive plans to go to market with these new payment methods, focusing on the needs of current and future members.”

The white paper, “The Credit Unions’ Guide to Faster Payments,” discusses the classification of faster payments, payments modernization, use cases and international trends, while also sharing insights into credit union membership and approaches to adoption. It addresses the importance of debit card usage, age demographics and the adoption of new payments and technologies. The paper also addresses fraud as an important component of any faster payments strategy.

The report detailed speedier fall into three categories:

1. Faster payments are those that post and settle within 24 hours.
2. Real-time payments post in under 60 seconds but can take 24 hours to settle.
3. Instant payments complete the posting and settlement in a continuous cycle, with all activities occurring in less than 60 seconds.

The paper noted how payment modernization is a global movement that continues to gain momentum, and credit unions can actively participate in the payments renaissance in the United States. “Faster payment methods are accessible to Credit Unions, with more options becoming available in the near future.”

Other key aspects of adoption include:

• Extending faster payments beyond bill payment and P2P activities.
• Journey mapping and the aspects of organizational involvement in developing and supporting a faster payments strategy.
• Adoption of the required fraud solutions capabilities to support faster payments.
• Organizational standards and accountability and ownership.
• Continuous monitoring of the member experience.
• Planning for the needs for future membership.
• Creating an adoption plan and a roadmap to success.

The United States payment participants have been publicly coordinating efforts since 2012. The white paper explained, “The mission of the Faster Payments Taskforce was to identify and assess market needs and methodologies to implement a safe and ubiquitous payment method accessible by everyone.”

In late 2018, the Federal Reserve Bank requested comments from the industry on a national gross settlement and liquidity system that would address several key concerns —accessibility, pricing, and liquidity. In August 2019 the Federal Reserve made an announcement of the launch of a national real-time gross settlement system, FedNow. The white paper acknowledged, “To deliver a national system by 2023/2024 the industry will need to make significant investments in the Federal Wire system, core DDA interactions, and build interoperability between systems. The extent of the development is still unknown as the Federal Reserve continues conversations with industry payment providers and builds the technical requirements.”

The paper suggested credit unions cannot wait for an operational FedNow payment system and can begin acting and incorporating the various different methods of faster payments now. “The FedNow system will not be the only solution which financial institutions need to connect into, rather payment hubs which can accept multiple faster payment methods will be needed to meet all of the market use cases,” the report said.

According to the white paper, three ways credit union membership will see faster, real-time and instant merchant payments: disbursements, bill payment and mobile payments. Disbursements represent the most immediate impact, with mobile payments gradually coming aboard.

The white paper detailed the expansive nature of use cases for faster payments. It noted depending on their charter and focus, credit unions can easily identify practical implications of modernized payment methods. Modernizing bill payment, person-to-person payments and merchant payments will be the primary drivers of change for credit unions, as the speed of payment and ease of transacting with a debit product will appeal to many members. While the faster payments ecosystem is still evolving, credit unions should be prepared for the future of payments.

“The success of Credit Unions lies in the care and attention paid to their members. The relationship between credit union and member is more important than what products are offered,” the white paper presented. “The experience of the product is what matters the most. Credit Unions have a great opportunity to identify the products and services that will best support their members as financial services patterns change.”

Pleasanton, Calif-headquartered Javelin Research conducted a random-sample survey of 3,000 respondents online in March 2019 as part of the white paper.