Loraine Lawson
Good day and welcome to The Buzz, a Bank Automation News podcast. I’m Deputy Editor Loraine Lawson. In today’s episode, Steve Kramer joins us to discuss how banks can use automated payments and digital wallets to reduce customer friction. Mr. Kramer is the vice president of product at billing and payments platform PayNear and he has more than 25 year of payment and product experience. We started the discussion with a look at what he means when he says payments are still very manual.

Steve Kramer
You know, it’s it’s funny, there are so many different ways payments are handled manually, you know, people have been talking about straight through processing for years, right? Oh, yeah, it should all be automated. And when you look under the covers, so much of it is not. We’ll start with cash, right? Cash is the most obvious one. And in so many cases, cash is an automated system, a manual process, collecting the cash in somehow posting in your system, usually a manual process, you know, then dealing with cash, pickup all of that. So it’s a very obvious one that still hasn’t, you know, many companies haven’t adopted a straight through process and where they really need to look is right, why shouldn’t you find a way to treat cash the way we treat them out of electronic payments, right, digitizing the cash, if you will, and that can then feed into automated processes that you already have, and start getting cash more in line with straight through processing, then then you know, it is today checks. Another great example, again, much more automated than it was, you know, back a number of years ago. But even when you look at electronic payments, you know, card payments, or even you know, electronic check ACH type payments, where people are like, Oh, yeah, that’s, that’s entirely automated. And you’ll you’ll speak to people and you’ll say, Oh, your card payments automated? Oh, yes, of course they are. And you’re great. So someone wants, you know, somebody suddenly picks up a phone? Aren’t they talking to somebody your call center? Oh, you know, yeah, they are? Well, don’t you want to move them out of that call center, a good paying customer. You know, when you talk to a lot of these folks who have call centers, they’re saying, you know, Maureen calls me and is a good paying customer. I really don’t need an agent on the phone with her. right eye. She’s good. She’s a good payer, I just want her to go pay. And again, get it back to a full automated process. So you know, again, that’s where companies need to start looking for strategies to say, How do I make it so that when Lorraine calls because she’s going to call you know, she’s called every month, we can start moving her more towards an automated process, train her show her an easy way to do that. Maybe walk her through it. You know, one of the techniques we’ve seen, right, you’re on the phone with an agent, and they can say, hey, Marina, you in front of your computer, your cell phone, you are great. Let me just send you this link, click on it, see that you’re right into the flow right now for automated payments, go ahead and make it yourself. You see how you didn’t have to give me your card over the phone? Isn’t that great? We can sign you up to do this every month, if you like. So just their tricks there even where people say, Oh, yeah, no, no, everything’s automated. You go well, is everything really automated? Right? Take a look at some of the techniques are using today to try and take those manual processes and turn them into fully automated as you were saying, for straight through processing.

Loraine Lawson
Now, are you talking about businesses? Are you talking about banks and banks, their businesses, but you get my meaning?

Steve Kramer
Yeah, no, it’s a good question. Right. In that case, especially the call center, you are talking a lot about businesses. However, you know, one of the challenges banks face here, and it’s been one of the struggles with bank and bill pay, right? Is as a consumer, you know, I go on there, do I know it posted? Do I know what’s the right account number? Do I know how much I owe? Am I confident at work? Am I gonna pick up the phone afterwards and call somebody whether it’s the bank or whether it’s the merchant to say, Did you get my payment? I just made it right. Or my bills due today? Oh my gosh, hey, bank, can you help me with this? Right? How do I do this? And then very often, that’s where the bank’s gonna go. There’s not much we can do. Right? That’s gonna be an overnight process or next day process. So it’s, again, trying to use those techniques to say, yeah, it what I described earlier is a lot of businesses, but there’s a lot of bank involvement there too, to the consumer, and anything you can do to streamline that consumer take the friction out, right, make it easier for them to make that payment reduces the chances of that consumer ultimately picking up the phone and calling to go, Hey, I got a question about my payment, right? Teach them to self serve, so they don’t have those questions.

Loraine Lawson
What do you mean, when you say banks can digitize cash? What does it mean to digitize cash?

Steve Kramer
It’s a really good question. Right? One of the problems with cash is if you think about, oh, yeah, I’m gonna have a place where people are going to come in hand cash to pay a bill. Right? Somehow you’ve got to take that cash something or someone has to take it, and then somehow that needs to get converted in a way to get to the end user. Right, so they understand that they’ve they’ve gotten a payment. So you know, I’m, I’m a merchant, you know, Marine, you’re my consumer, right? You want to go and pay in cash? Well, how do I do that so that the merchant doesn’t have to deal with physical cash, take it to the bank collected the with an armored car, whatever the merchant has to do in terms of their bank interaction, right? And so the idea there is, is there a place I can go a third party site, you know, is it someplace I go today, you know, whether it’s a retailer or whether it’s a drugstore, whatever, where I can hand them cash. And when they put that in their system, maybe by just scanning a barcode or something like that, it turns it now into everything looks automated, right? The retail has already come up in cash. So that’s a daily part of their process. There’s no additional friction there from the retailer side. And now you’ve actually taken that transaction that before was Wait, somebody, whether it’s a bank, whether it’s a retailer, the merchant has to type in something and enter it and then somebody else on the back end has to go, Oh, I see Lorraine’s payment might be entering the system. Now they’ve turned it into something electronic right, that now passes it through just like as if they went into the to the merchants website and paid for the credit card. Hey, look, that’s automated process. Why don’t I just follow that through the same process I’ve built there. But now I’m going to do it for cash. It’s that last mile problem I think you’re describing right? How do I connect that last mile of the consumer has physical cash in their hand. And yet, I want to convert that into something digital that follows the normal process. And that’s where you can use third party systems that say drugstore retail or something like that, that can actually convert that cash into a digital transaction.

Loraine Lawson
Each select a little bit about digital wallets. Can you talk a little bit about how they fit in and how things could leverage those?

Steve Kramer
Oh, absolutely. And it’s a big issue. And and we’ve seen actually, so digital wallets have been around a while, right? You think of that Apple wallet and Google Wallet. And you know, it’s all in all its versions. And consumer adoption has been slow, but steady. The last year and a half has given us all numerous challenges, or Gosh, are we going on almost two years now. It has given us numerous challenges. And one of the things we’ve seen has been a serious growth in the use of wallets right touchless consumer is living on their phone, they’re working from home, whatever. So they’re used to living on their phone. So we’ve really seen an explosion in just the adoption of wallets. One area that that has not grown as fast, but we’re starting to really see it take off is, look, I live on my phone, right? I work from home. I’m big on my phone. I’ve got my iPhone, especially other generations, you know, younger than me, right? That’s all that’s my primary internet connection is on my phone. I’m on my phone most of the day. But hey, I have to pay bills. How does that connect? Right? The biller is contacting me every month. But yet, I’m on my phone, right? And what they’re doing is they’re maybe sending me an email if I’m lucky, right? Otherwise, I’m getting paper in the in the mail, right? Which, you know, who does that anymore? Right? But so if you can start saying, Well, look, we need to meet these consumers where they are now living. And taking that transaction, whether it was paper, whether it was a reminder, whether it was an email, and converting it to this is now a digital wallet interaction. So whereas before, you know, maybe a bank, or a merchant might have sent Lorraine an email, hey, you know, by the way, don’t forget this bill is coming up, you need to pay it. You know, who’s looking at email, right? I’m leaving on my iPhone, I want something sent to my apple wallet, that gives me an alert that says, oh, I’ve got to build you. And then let’s take it a step further, right? Let me go into my wallet and say, well, there is my bill, I can see it there. And now maybe I pay it with Apple Pay. So I just say, Oh, I’m on my phone, I get no earthly idea. Let’s do with my apple wallet, I bring it right up on my phone. There it is pay it with Apple Pay thumbprint I’m done. So it’s a momentous reduction of friction for the consumer. Again, it’s meeting that consumer where they it is and this is both banks, and merchants right need to start thinking about this, that consumers living there on their phone. If you’re sending emails, or if you’re just sending paper to them about reminders. You’re not meeting them where they are, you’re putting friction in the way I get something in the mail or something an email and I go Oh, right. Let me go on my phone. How do I pay that again? Right, you know, you’re just putting hurdles in their way, digitize the whole thing, get them get them where they are right and where they’re living today and make it a seamless transaction.

Loraine Lawson
He also said that applying banks should be applying or we should be saying, I’m not sure which apply the same automated process for disbursements that you do for payments. How would that work?

Steve Kramer
Yeah, so here’s a here’s a great example, right? Let’s say I work with a bank, and I have a loan payment with my bank. And you can you can take this with a bank, obviously it works with banks, but it can even work with a mentor who’s not a bank, right? But I’m, I’m working my bank, I have a loan payment. I’m making my loan payments every month. And I’m doing it on my debit card. Right every month. I’m sending my bank my debit card payment, and I make a mistake. And one month I overpay it or at the end I do I pay more than the payoff amount by accident, right. Oh shoot. Hey, that’s You know, overpaid. Um, can you just disperse it back to my debit card? And a lot of times, you know, banks won’t do that, right? Oh, you overpaid, we’ll send you a check. And when you’re a consumer, think about that as a consumer experience, right? I’ve automated my payments to you, I’m debit card payment to you, like it gets there on the same day, right? All good. But when you’re sending me money, I’m gonna wait five to seven days for a check in the mail. And then I have to deal with a check, right? That’s not good consumer experience. So you need to think about however the consumer is paying me, I should be able to move the money back if I need to move the money back to the consumer and that same fast method. And you can think about this, you know, banks are a great example with things like overpayments of loans, mortgage escrow returns, things along that and then if you expand beyond banks, right, you can look at it. Insurance insurance claims. That way as well. Think about it from a customer service experience. I’ve actually had experienced this myself, right, you have some issue in insurance wise, you know, my case is tree hitting my house insurance adjuster comes over looks at all over estimates, the mountain says Can I have your debit card? Okay, those funds are in your bank in 30 minutes or less? What a great consumer experience, right? You’re all of a sudden the consumer is going wow, my insurance company or my bank, if I’m dealing with a loan company really does value my time and me as a consumer, right? Because they’re returning the money to me even faster than I get it to that. So that’s kind of what we mean by disbursements, you know, in the same way that you make payments.

Loraine Lawson
So what sort of technology is required to support these types of automations? I mean, broadly,

Steve Kramer
yeah. So broadly, there’s a number of different technologies out there for depending on which area we’re talking about, right for, for things like disbursements, there’s plenty of disbursement options out there, right? Visa and MasterCard both have disbursement rails that are out there today. There’s the ability to push via ACH if you if you didn’t want to do it via card. And as the real time payments network is getting up to speed right there, there will eventually be that the push to real time payments as well, the challenge and banks face this right is, am I really do I have to integrate each one of these separately, and banks and merchants all have the same issue, right? Am I? Am I gonna have to do every one of these? Am I gonna have to build out all of these separately? Or do I need to work with a payments company, you know, a company that knows that you know, and has built all this out. And that way I do one integration, and I can get this all. And I’ll take that a slightly step further to right on top of the payments are rules that can be built around it. So you can think about the description, the example I gave you, right? of, Hey, I’m making loan payments to my bank every single month. And at the last month, you know, I set up to do $300 a month, and the last month I have only $200 was due but of course my automated payments were set up for $300 a month I just overpaid the bank, why isn’t there a business rule in place that says hey, if the consumer is trying to pay, and it’s over their payoff amount, either a stop the payment, notify the consumer or pay the lesser amount if you’ve gotten the approval of the consumer upfront. And that’s just one example. Right? You can think of a number of different rules examples that that banks and merchants can build around the payment process that just again, get that friction out and make it easier for the consumer and quite frankly, easier for the bank or the merchant on the back end to not have to deal with exception cases.

Loraine Lawson
I assume that your platform does some of this right?

Steve Kramer
Yeah, yeah. painter me we do that today. Right, a quick commercial failure v. Right? we digitize cash. We have, you know, over, you know, 30,000 locations around the country where consumers can walk in whether it’s a CBS, 711, a Walmart and Family Dollar, you know, and they can pay in cash that gets digitized. Plus, we also have the platform on the backend that does all this payments, pushing the wallets, disbursements, business rules. Yeah, so we are one of the payment writers that that is absolutely capable of doing all of this.

Loraine Lawson
So let me ask you this, why are there so many fintechs entering the payment space right now? Do you think? And how does that make it for you as a FinTech? That’s in the payment space already?

Steve Kramer
So you know, they often say, you know, imitation is the sincerest form of flattery, right. But I think a lot of fintechs are entering the payment space, just because people are starting to recognize I think we recognized a long time ago that payments are changing at an incredibly rapid pace. And again, some of the things we talked about here, whether it’s wallets, whether it’s real time payments, whether it’s these real time disbursements, and then you know, pile on top of that, you know, all the payment rails that are in use today, whether it’s, you know, card, PayPal Venmo, zelle way, you know, I can keep naming them right, that the payment space is moving so quickly, that there’s so much room for innovation there. And, and that’s partly where things like that I described, right, the digitizing cash, the dispersing to a card the consumer has already pushed from integration of these other third parties is just a tremendous room for innovation right now. It’s one of the things that we pay near me really enjoy. It makes it kind of puts a smile on my face as a product guy like there’s so much room for innovation and we do that on On a daily basis, and I think that’s why you’re seeing a lot of fintechs get in the game. I think one of the other things you’re seeing, and we just saw this, I think, just a week ago. So fast now, right is the other real time payments that work the federal one, there’s the 2023 2024 time period, and they just announced bill pay is one of the areas they want to get into. And it makes sense, whether it’s a good fit or not, is probably for a whole different podcast. But it makes a lot of sense. Because if you think about Bill Pay, right? What’s the one interaction you have every single month? Well, I pay my mortgage every single month while I pay my auto loan everyday, right? These are things that happen every single month, there’s millions and millions of them every month of bill pay. It’s recurring, it’s consistent. It’s always happening. So when people are looking for not only I’m a FinTech, and I want to get in, but where can I get in that I know a consumer is interacting. Well, Bill pays an obvious fit, right? I know people are paying bills, I think the average we’ve seen is eight to 10 bills a month most households are paying that always feels low to me. I like that a lot more than that. But what a great, you know, oh, well, that’s where I want to go. I know, everybody is doing it. And I know they’re doing it multiple, multiple times a month, and a great place for innovation and removing friction.

Loraine Lawson
So how will do you think real fed now and its efforts impact fintechs in the payment space?

Steve Kramer
I think the jury is out. It’s hard. You know, I think as as we’re seeing with real time payments, right with the Clearinghouse while I’m a big proponent, I think it’s a great technology. Once a new payment Rails is hard. from many aspects, one getting all the banks on board getting everything coordinated, getting everybody timeline working. So that that’s the hard technical piece. And Gosh, that’s hard and of itself. But I think the other problem both real time payments and fed now are going to have is consumers, right? training a consumer to pay in a new way? is really really difficult. You get the what’s in it for me aspect you get in there forget aspect. Look, I’m a I’m a self admitted payments geek, right? I love payments, I I pay any way I can I try all the different payment rails. So you know, I have a wallet on my phone, I can scan at the register with the wallet and pay and go nine times out of 10. I forget, like, oh, you’re the payment is this much I read to my boss and I pull out my debit card. You know, because that’s what I’m trained to do. Right. So how do you start convincing people? Don’t be trained that way go this way. It’s really difficult without an incentive. And even with incentives still hard. I think, you know, Apple Pay for all its wonderful things. I think Apple Pay is great has earned that message. Right? It’s it’s a terrific, it’s it’s frictionless. It’s great. It’s hard to get people to use it all the time. You just don’t think about it. Right.

Loraine Lawson
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