Pub. 17 2020 Issue 3

18 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S A s we approach the final quarter of 2020, I find myself contemplating the significant changes in the payments industry. This is a dynamic period for bankers with opportunities for new bank services that can enable greater engagement and retention with customers and increase deposits. I decided to take a tally of recent accomplishments, and hope- fully add some clarity to the evolving payments landscape as we consider our business plans for 2021. One recent trend is the mainstream- ing of Person-to-Person (P2P) pay- ments. Early innovators in this space include PayPal, Venmo (owned by PayPal), and Cash App (developed by Square). This category of payments is estimated to be $1 trillion in the U.S. It allows users to send one another money virtually immediately from their devices through a linked bank account, debit/prepaid card or stored value bal- ance. In this space, the game-changer appears to be the expansion of “Zelle” by Early Warning Services to a growing number of U.S. financial institutions. Zelle is an interesting undertaking, as it's not actually a newpayments network, but a platformusing existing infrastructure such as online credit authorizations via Visa andMasterCard plus the ACH network for settlement. In the first six months of 2020, $133 billion was sent via 519 million transactions through the 924 participat- ing financial institutions. Although the service was initially launched to enable financial institutions to compete with Fin - Tech P2P services, it is quickly expanding to allow businesses to complete electronic disbursements to consumers for payouts or reimbursements. NACHA is engaged in a multiyear effort to establish Same Day ACH (SDA) as a viable faster payments option. As the name implies, a settlement is measured in hours, not minutes, which is now the standard with P2P solutions, and occur throughout the business day. A new third SDA window will be established in March 2021 to enable payments submit- ted at 2:45 pmMT/1:45 pm PT to result in good funds with the payee at 4:00 pm MT/3:00 pm PT. This solution provides a greater window of availability during the business day. It is expected to expand usage by business users in the Mountain, Western and Pacific regions of the U.S. Emergency disbursements and faster collection of payments via the ACH seem to hold broad appeal for business users. In 2Q 2020, SDA volume climbed 37% over a year earlier, with 81.6 million payments. The average dollar amount of an SDA payment increased by 33% in the second quarter, compared to the first quarter of 2020, as the allow - able SDA transaction size increased to $100,000. As a low-cost payments network with a 50-year reliable track record, we believe businesses will continue to look to the ACH for both consumer and business applications. The latest addition to the faster payment scene is Real-Time Payments (RTP) from The Clearing House. This may be the most interesting recent devel- opment because it’s the first entirely new payments network in the past 40 years and enables payments settlement in mere seconds. This network is built on a plat- form that uses an international standard for messaging and has the same under- pinnings as solutions in the United King- dom and Singapore. This is a credit-only, “push payment” platform. The Clearing House is owned by 25 of the largest banks in the U.S. and has committed to being operational in the network. This “big bank” orientation of The Clearing House has made some com- munity institutions hesitant to imple- ment the solution. Independent banks, retailers and credit unions actively By William J. Schoch, President and CEO, WesPay THE 411 ON FASTER PAYMENTS