Loraine Lawson
Good day. Welcome to the Buzz, a Bank Automation News podcast. I’m Deputy Editor Loraine Lawson and recently I spoke with Matthew Richardson, the head of product solutions at Citizens Commercial Bank. We talked about Citizen Commercial’s recent survey of 260 corporate decision makers, which found real-time payments topped their list of banking priorities. Find out what it means for banks and automation in today’s podcast.A nationwide survey of 260, corporate decision makers nationwide, you found that the ability to offer real time payment top the list requirements for the first time even more important than the ability to provide the lowest cost financing? That seems like a big shift. Why now and why is this so important to corporate decision makers?

Matthew Richardson
It is a big shift. And it really highlights the importance of real time payments in the landscape of what how these corporates are making decisions. My view is the pandemic exposed the fragility of the system that has been in place for many, many years that still relies heavily on paper, and therefore the necessity to have people in physical locations handling physical items. Because of that,

Loraine Lawson
sorry, go ahead. No, I was just gonna say it. Why real time do you think? Well,

Matthew Richardson
so I think there’s even there’s an even higher demand now than then even before the pandemic, certainly the shift to digital was happening. But post pandemic, there’s even a higher demand to want to digitize and automate processes. In in real time payments is part of that part of the way to replace paper with a more modern solution that’s built for the 21st century digital economy. And I think that part is for a corporate making a decision, they’re looking for a bank that is participating in and offering real time payments, it’s a signal that the bank is serious about enabling digital transformation and is ready for the future of payments. And that I think that’s why it weighs so heavily in their decision making.

Loraine Lawson
So what does this mean for financial institutions like Citizen commercial?

Matthew Richardson
So for Citizens, we are intent on helping our customers automate, achieve efficiency and achieve operational resilience. You know, from a business continuity perspective, Citizens was an early adopter of real time payments. And we have worked very closely with our customers for to help them understand the use cases and drive adoption, as they, you know, continue to embark on or continue their digital transformation.

Loraine Lawson
And what are some of those use cases.

Matthew Richardson
So they can vary, but any sort of, there’s B2B use cases, there’s B2C use cases, anytime where the certainty of payment or the precision of payment is important, is a great use case for real time payments, especially as the limits have gone up. It started as at $25,000 as a per transaction limit, but will soon go up to a million as a per transaction limit. So it is real-time payments, the Clearinghouse version of real-time payments has gotten more. It’s more robust or you know, it has you can use it in more situations now that as the limits are going higher, and it does offer that absolute precision of payment, you know, if you make a real time payment, that money will get there in seconds.

Loraine Lawson
That’s amazing. 85% of respondents said they want banks to provide real time payment solutions. So what does that mean in practice for banks? Are you using ACH to do that? Or how do you approach that?

Matthew Richardson
Yeah, it’s a good question, Loraine. My view is that real time payments, you know, sort of lowercase real time payments can mean different things to different people. It might mean the Clearinghouse version of real time payments, so to capital letters real time payments, but to your point to some it might mean same day ACH, and to others it might mean sell either in either with the P2P in the B2B space or the B2C space for Xcel. I think the message is that banks have to have the solutions that customers want in this real time continuum, yet, we have to be able to enable them to transact in the way that works for them. Uncertainty in the timing of payments does not have to be an issue anymore in this day and age. And our client should not have to deal with that level of uncertainty of when is the payment going to get there. And that just lack of transparency of you know, the check is in the mail. And I think our clients are starting to realize that that they do not that they can have more precision in their paint with their payments given some of these new options.

Loraine Lawson
So you found that more than half of the respondents had already implemented real time payments, or in the process of doing so that did you have any statistics on how they’re achieving that like which technology route they’re taking?

Matthew Richardson
Sure. Well, I think first off, when they look at real time payments, the Clearinghouse version of real time payments, and they they’re starting to realize that over 60% of the bank accounts in the United States are connected to real time payments, they are reachable to at least receive a payment. And there’s more banks connecting all the time. From a connectivity perspective, we, as citizens, we want to be to give our clients options to be versatile. So we have enabled real time payments send and receive. So if a client just wants to receive that’s enabled, but if they want to be an originator, that’s enabled as well. And we allow our customers to originate via our commercial online banking system, they have a relatively lower volume, they can input their payments on commercial online banking. And they can also send us a file via transmission of real time payments. Our final, the sort of third leg of the stool from an origination perspective is API, which we are working on rolling out this year. And APIs really lend themselves nicely to real time payments, because they’re sort of you can send them out kind of one by one via that API connection. So most of our commercial customers already use commercial online banking. And it’s super easy to just turn on that that new payment channel via a via system they’re already very comfortable with.

Loraine Lawson
Okay, and when you say real time payment, are they also settled in real time? Or is that something that’s handled later? Is the settlement?

Matthew Richardson
Settle? Yes, absolutely. It it gets sent and settled within seconds. So RTP is a is a legit, it’s a little bit different than you know, like, going over card rails and in the settlement is separate. With real time payments, it is a settlement system.

Loraine Lawson
And how the bank support that from a technology standpoint, like what what did you all have to put in place to support real time payments?

Matthew Richardson
Yeah, so basically, what we did it, you essentially need a back end platform to that that will connect to the clearing house or whoever the provider is, you know, fed now, you know, could be could be a provider in the future, we need a back end system that will do that. What we did at Citizens was we took a step back, knowing that real time payments was a net new payment system, the first material net new payment system 40 plus years since ACH in the 70s. We took we took a step back and assess our technology infrastructure. And we we we wanted to get away from the legacy way that banks have handled payments, which is handling it via a siloed application. This application does wire this application does Ach, those two applications do not talk to each other. Right? So we wanted to get into a more modern technology infrastructure of a payment hub, where you could have a one system that originates all these payment types just by adding clearing channels. It’s much more modern, it’s your you’ll have a much better ability to to understand your customers payments flows across their payments types. So that’s how citizens elected to do it. So not only did we roll out the new payment type in real time payments, but we modernized our payment infrastructure in the process.

Loraine Lawson 1
And when did you do that was that as of now a few years or recently

Matthew Richardson
that was we went live with RTP in 2019. So it’s been, it’s been a journey from, you know, sort of the three or four year journey to install that new technology, come live on receive, then go live on send, then add different options on how to send. And then there is still things that are evolving as well like request for payment, that part of real part of real time payments that’s going to allow it to you know, billers to reach consumers, for example, work continues to build that capability out to.

Loraine Lawson
So what do you think will be the big rollout this year that you’ll see for your customers? So,

Matthew Richardson
yeah, I think there’s a lot that’s going on, in terms of driving more volume through real time payments, like, for example, banks are moving their Zelle clearing, to real time payments to leverage the rail. And also a big push is going to be requests for payment, and getting more of more of the consumer sides of the banks to offer that experience to their consumer customers. So I’m on the commercial side of the bank. And we’re trying to offer that as an option to our billers, the corporate to build consumers, but you need all the consumer parts of the Bank of all the banks to offer that experience on their side as well through their online banking and mobile. So that will be a big push in 22.

Loraine Lawson
So Fed Now, it’s expected, I guess, within a year, right. What role will it play on the consumer side of things? I’m more familiar with the not consumer, the commercial side of the bank?

Matthew Richardson
Yeah, I think that fed now will be another option to generate real time payments when it does become available in 2023. And then, you know, banks start to connect to it. A lot of the larger commercial banks in the US have have already made a bet in it. I have invested in real time payments, and I think fed now will be similar to that. But it certainly should be a viable option for any commercial customers of banks that connect to it.

Loraine Lawson
I’m wondering how consumers and how your customers on the commercial side are supposed to make sense of all the payment options that are available. Do you have any advice there?

Matthew Richardson
Yeah, well, absolutely. And I think it’s incumbent upon us as their bankers to offer them that advice and guidance on it, it your it’s a great point, Lorraine, it is a rapidly changing landscape, it feels like everything was pretty static in payments for a long time. And then boom, we’re introducing all these new payment options and things are getting much more modern. So it is incumbent on on the bankers to make sure we’re talking to our customers, understand what their use cases are and what they’re trying to achieve, and really recommend the right choices or the right options to them. And there’s also an opportunity for the banks to provide technology, leverage technology, and sort of, you know, artificial intelligence in some of these things that some of these tools that are now available, to make it a little simpler for clients in a way, meaning, you don’t necessarily need to tell me what type of payment that you want to originate. If you can tell me where it needs to go, when it needs to get there, and with what level of certainty does the payment need to sort of settle, maybe the bank can direct the payment out using the best rail to meet the requirement that the customer is put has established for that payment. So in a way, it the landscape is getting more confusing, but the banks can simplify it by you know, don’t make saying to the customer, you don’t have to choose what the what the payment type is just tell us information about the payment. And we’ll make sure it gets there the way you’ve asked us to sort of intelligent routing of payments.

Loraine Lawson
So is that something you’ve invested in as well as an AI side to manage some of this,

Matthew Richardson
that that is something that we are actively working on being able to do that. So so right now we can we can tell a company we can tell one of our customers, you send us a payment file with all of your payments and we’ll make sure that they go in via the right via the payment type that you requested. But at this point, they’re telling us what The what payment type they want. The future of this is you don’t even have to tell us, we’ll take all the criteria that we’ve agreed to ahead of time. And we will apply the best payment type based on everything we know about the payment. And will

Loraine Lawson
that be automated? Then is this sort of manual function now? Or is it already? Well, right?

Matthew Richardson
Right now, it’s automated in the sense that customers generate the payment files out of their systems, they flow straight to the bank, and those payments get executed. So it’s not manual from that regard. But in the future, it would be theoretically simplified for a corporate, because they would not necessarily have to say, make these payments by ACH make these by real time payments, make these by wire and make these by card. Instead, they would say, here’s our here in general, here’s our philosophy of how we tackle payments, and we’ll give you a will give you a list of payments that need to be made will tell you if any of them require payments certainty, meaning, you know, a wire has a different level of certainty than an ACH does, for example, so that finality of payment is important. And then also, you know, you take into consideration, say, a card payment does the payer want to be able to generate, you know, sort of the rev share off that payment due to the interchange, so there’s those considerations as well. So, theoretically, the banks can take all that into consideration, and just execute those payments for the client. And they don’t have to worry so much about keeping up with every little change in the landscape, you know, might, it might escape their attention that the real time payment per transaction limit, you know, went up, say, for example, but the bank would know that.

Loraine Lawson
Overall, your survey also suggested as people are going back to work, their views have shifted on how they interact with and view their treasury management platforms. I thought this was interesting. 59% of them said, if they get back any wasted time for working in a treasury management platform during the week, they would spend it focusing on strategy. Do you think there’s room there for automation, the ways in which they might automate these functions or the bank could automate for them? And what else? Yeah, so what does that mean for first things like CES and commercial and how you approach technology.

Matthew Richardson
I, I’m glad you pointed that out from the survey because I thought that was a very powerful, you know, sort of response that we got from the survey, that desire to get time back to do more important things. Our commercial clients are absolutely interested in automating functions. They want to achieve efficiency, they want to ALEC reallocate their energy to more value added work like strategy. And they’re interested in the business continuity that comes with, you know, automating a process and not relying on people in places handling physical things. So we have doubled down on that audit on automation solutions over the past couple of years. And we’ve seen incredible interest in automation on both the payable side and the receivable side, the technology has really evolved in, you know, machine learning and artificial intelligence to the point where it’s creating really powerful, powerful value for our corporates, and they’re maybe with the aid of COVID. Or maybe they were headed this way anyway. But they’re much more willing to give this this evolving and improving technology a shot, and they’re really seeing the value. We’ve seen it quite a bit with receivables, automation and the way that it resonates with our clients to help simplify the complex process of it’s great you received a payment, but now you have to apply it.

Loraine Lawson
So what do you see automating in the next year for clients?

Matthew Richardson
I think that’s going to continue, I think both on the on the receivables automation side, regardless of the payment type, whether it’s a paper payment and a lot of electronic payment, regardless of how the remittance information comes in, was it included with the payment? Was it sent via an email? Is there a PDF, whatever it might be? helping our customers deal with all that in doing it more efficiently so they can reallocate time to more value added tasks will continue to be important. On the payable side, what are the steps ahead of payables including automating the invoicing process. So I think there’s a lot of opportunity there. And then as we talked about a little bit earlier that next frontier of intelligent payment routing, I think customers will be our corporates will be very interested in that. So as a way to simplify what the decisions they have to make and trust the bank to make those decisions for them.

Loraine Lawson
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