Mahesh Raja is Senior Vice President and Sector Head of Banking & Financial Services (BFS) at Wipro.
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The July 2023 launch of FedNow, the first real-time payment (RTP) platform administered by the Federal Reserve Bank, promises greater optionality for B2B and B2C end users.
Many midtier and Tier 1 banks have already adopted Zelle and The Clearing House’s RTP system. Now, FedNow is expected to encourage additional payment providers to adopt real-time payments, leading to more widespread usage. In addition, FedNow is expected to drive changes in the end-user experience for customers of payment providers that plan to offer all three services: Zelle, RTP and FedNow.
FedNow is expected to benefit both firms and their customers, but financial executives do need to consider how adding a third real-time payments option will impact the user experience.
Understanding The Offerings: From Zelle To RTP
Zelle was the U.S. banking industry’s first response to the fintech challenge of digital transactions. Early adopters took a tactical approach, focusing on providing quick transfers across digital channels. Later, RTP went beyond person-to-person transfers, supporting more types of transactions and catering to diverse consumer and business payment use cases. RTP was based on ISO 20022 data standards, which had a huge impact on the payment environment for banks—from the channels all the way up to the network layer.
Strategically, it makes sense that the first payment transformations began in the middle and back offices with the introduction of foundational elements such as the canonical ISO 20022 data model and format translators. From here, attention shifted to changing the surrounding system interfaces, enabling real-time payments for a variety of business lines (wealth management, lending, trade finance), and eventually to resurrecting the DDA platform and preparing it for the paradigm shift of perpetual processing.
Thanks to all this preparation, organizations found themselves capable of processing several kinds of instant money movements downstream after order management. The entry points for these payments, however, continue to be segmented across the channels, leading to speedbumps in the user experience.
The UX Challenges Of FedNow Integration
FedNow will put more pressure on banks to improve user experience. The service offers numerous benefits to banks and their customers, but it must be integrated thoughtfully with existing systems to maximize ease of use. For example, there are many overlaps between the transaction types covered by both FedNow and RTP, including:
- Request for pay.
- Request for pay with remittance messages.
- Credit transfers in response to a request for pay.
- Credit transfers with or without remittance information.
- Request for cancellation of a credit transfer.
- Response to a request for cancellation received from the debtor agent.
Creating a replica of these transaction types for each of the payment methods would be highly confusing for the end user. It would also require significant overhead to support the transaction types within the bank’s environment—a challenge for payment service providers wanting to support each of the available real-time payment options.
From a customer experience standpoint, segregating the transaction menu with differentiated branding (Zelle, RTP, FedNow) would also be excessive. Moreover, because RTP and FedNow are based on ISO 20022, the data granularity demands of their UI differ significantly from those of Zelle. To ensure a smooth user experience, banks need to take a fresh approach to channel UI.
Establishing A New UI Paradigm
New entrants to the instant payments journey—and mature players as well—will benefit from examining their channels and developing a UX strategy that allows them to create a rich data payload without sacrificing the customer experience. The exact changes will vary, but there are some best practices to consider.
For example, it makes sense to differentiate peer-to-peer (P2P) and business real-time payments. Fraud protection on P2P payments should also be very strong, with various event-driven fraud alerts embedded, such as:
- Name match alert during payee registration.
- New payee addition.
- Credit and debit confirmation notification to the sender.
- Change of token alert.
With FedNow in the mix, it is imperative to redesign the user interface for B2B real-time payments to support a seamless linkage to remittance information when originating a request for pay and responding to a request for pay.
Firms can increase their competitive advantage by capturing the large amounts of structured and unstructured data associated with payments. Capturing supplementary information when originating part payments on a request for pay or against a request for cancellation can also significantly reduce the number of investigative messages.
Smart assistance features can also enhance the UX and build brand reputation for payments servicing firms. Such features might include:
- Favorites for repeat transfers.
- Cognitive comparison of the payment amount with the amount due on open invoices.
- Duplicate payment warnings.
- Auto-creation and review queuing of payments to meet early payment discounts on invoices.
- Interlink messages associated with a transaction to create an end-to-end view of the progression.
- Display of payee credit confirmations.
Finally, it may be helpful to make channel UI forms agnostic to the payment method by attaching a smart router that sits behind the channels and supports the intelligent routing of payments. The router would examine the attributes of a payment request and decide if it should be processed via Zelle, RTP or FedNow while also translating responses from the chosen network in a manner legible to the sending customer.
FedNow will likely drive the proliferation of instant payments in the U.S. and accelerate the payments transformation journeys of many U.S. players. Redesigning digital channels to deliver the best possible user experience will be a critical piece of this puzzle. The lessons learned today through the integration of FedNow, Zelle and RTP will be crucial to navigating the next wave of payments transformation expected to arrive in 2024 and 2025 with the introduction of high-value wires.
Businesses can get ahead of the curve by regularly evaluating their user journeys and taking the necessary steps to ensure a smooth, supportive and adaptable user experience.
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