Hello, and welcome to The Buzz, a bank automation news podcast. My name is Whitney McDonald, and I’m the deputy editor of bank automation news. Joining me today is Al Carpetto, a lead Solutions Consultant on the payments team at Finastra. He is here to discuss how finastra is working with credit unions and community banks to prepare back end operations for the July launch of Fed now,Al Carpetto 0:24
obviously, fed now is a very hot topic in the payment space right now. Just about every meeting and conversation we have with either existing clients or prospects are focusing on fed now. And I guess one of the things I would add is, if you’re not focusing on fed now, you probably should be it is something that’s coming sooner than later. It’s it’s scheduled to go live in July, from the feds perspective. And for those of you who follow this, know that the United States is probably the last major market to get into the faster payment space. And, you know, finastra, has been involved in Faster Payments for more than 10 years. Implementing around the globe, this is now what we’re focusing on here in the, in the US. What I would say to most people is, you know, to the comment I made earlier, if you’re not looking at it, you should be number one to get educated because some of the smaller institutions still get a little confused between real time payments, which is coming from the Clearinghouse, and immediate payments, which is coming from fed. And there are some differences between the two, which over time will probably even out but in the short term, the Feds limit is around 500,000, where the real time payments is 1 million in terms of words that you can send. But the other major difference is from a liquidity perspective that there was liquidity management tool access for the Fed now service, but there isn’t for the real time payment service. So you know, from that perspective, getting yourself educated as much as you can on fed now. And the differences between the two, I think are very helpful. The other piece that I would offer to others to look at is all the planning that needs to go on behind the scenes, right. So it’s great that it’s a real time payment, it’s instantaneous. Well, what does that do for you? Right? I think from a bank’s perspective, they have to do a lot of planning around product and capability planning, right? What do these products will can be built off of a real time payment or an instant payment. So use cases need to be looked at even discussed with your clients, because clients are going to be looking for ways to use this. And there’s certain economies that will find it very useful, like the gig economy, or payroll, or there’s so many different ways you can use it, that people will be much happier to get their money faster. There’s also technology planning that needs to be done. From a technology perspective, you need to review your internal channels, the things that that touch a payment from, you know, 24 by seven operations now need to be put in place. And you know, maybe some of the larger banks have that already. But a lot of the medium size or smaller banks do not. Connectivity and bandwidth are important. And even customer facing channels, right? So you’re going to have customers that may want to access someone on a 24 by seven basis. So you’re going to be able to do that. And then lastly, I would say this Treasury planning, right, so now you have instant payments, people are moving money all through the night. So you can you can close your balance sheet, end of day, at least what you think is under day, but through the nighttime, there’ll be moving money. And so, you know, you need to really, from a treasury perspective, understand the settlement, liquidity management and the forecasting aspects of how you’re going to manage the bank’s money in the banks position. So there’s a lot of there’s a lot of little parts and pieces that need to be paid attention to. But the exciting part is that I think that people looking for this for quite some time and and even though real time payments has been in the market now for probably almost four years for the Clearinghouse. It’s the Fed that people are really waiting for.Whitney McDonald 4:19
Maybe we could get into some of those specifics. Now I know you mentioned a little bit about what what your clients and what the banks should be looking for. But maybe we could talk a little bit more specifically on how finastra works with its credit union and community banks clients to prepare for for this new payment rail. How do you prepare your back end operations and get into that a little bit?

Al Carpetto 4:44
So I touched on it briefly, but with credit unions and community banks, a big part of what we bring to the table initially is education, right, getting them aware of all the things I just mentioned, and making sure they understand how This is going to create value. You know what one of the things that I tell people when it comes to PhET now is that FOMO is real, right Fear Of Missing Out is real. Some people will say, Oh, you know, I’ll wait and see what happens. That’s probably not the best approach in this case, because what could happen as your clients are going to automatically migrate to a bank or an institution that can provide these real time payments, or these real time options. So when we meet with credit unions, and community banks, we take them through the business cases that they can potentially use for their clients, we’ll brainstorm with them. We want them to stay competitive and show value. I think what this does is it in reality can really level the playing field for the small institutions, against the larger institutions if they’re able to implement and provide that service. Right. So I think initially, we spend time on educating but then we’ll collaborate with them to help build a business case, by myself spent a number of years on the bank side, I know how difficult it is to get money, to do things within the bank, you have to build a business case, you have to get it approved by the risk committee, you gotta get approved by the technology committee. And then once you get your money, then you have to go out and, and implement and build. So when we meet with the small institutions, we educate them on that type of stuff.

Whitney McDonald 6:26
Now with with the new date announced, and I know that you did mention that, that some folks are kinda let’s wait and see and pump the brakes a little bit with this, this kind of timeline if you are ready for it. What is what does that timeline mean? How much time do people have now to get their ducks in a row? Kind of how do you kick it into high gear now that you have this date in mind?

Al Carpetto 6:52
Sure. So you know, now that the Fed has come out with a July date, you know, people are now have something to shoot for. And based on some of the comments I’ve already made, that there’s a lot to look at. And so what I tell people is that, you know, you should have started already, right? So when people say, How much time do I have? The answer is not as much as you think, right? Because the months click by very quickly, we’re in April, and the beginning of spring, and summer will be here before you know it. So what I tell people is, you know, start looking at it. Now, if you haven’t, start building those business cases, I mean, this is again, where we can add some value for them, because we will take them through some of the things we’ve already done for other institutions and kind of give them the roadmap. You know, the other thing that’s required on their end is that they’re going to need resources to implement, and they’re going to need some money to implement. So the timeline is one thing, the reality is the other people need to make sure that they have what they need to implement. And so, you know, I would just tell people don’t, don’t hesitate and start building their case as soon as possible.

Whitney McDonald 8:07
Now, kind of stepping back a little bit, and I know that I know that we talked about banks getting ready and how you prepare them. But just talking through maybe your perspective on on what this transition will entail, what fed now will bring, can we talk through that

Al Carpetto 8:27
I mean, to the market, it’s going to bring, it’s gonna bring a lot of interesting things, right. So let’s look at it from the receive perspective, people are going to get their money much faster. That, you know, the banks and credit unions will also be need to build real time reporting. So people can check their balances, make sure the money is in their account. All of this stuff is going to make businesses gain much better control of cash flow, management, improve efficiencies on their on this reconciliation processes. So there’s going to be a lot of benefits to it. And again, there’ll be other use cases that come up. I don’t know give you a simple example. Let’s say you decide you want to go buy a car, and it’s a weekend and your bank is typically closed on a Saturday or Sunday. Well, you’ll be able to get money wired or sent if you need to, to make a payment. Now, the other example to get to us a lot is the gig economy, right? These These people want to get paid, right? And they’re all over the country. They’re all in different locations, and we’re able to pay them on a real time basis now. So you know, there will be a lot of cool things that come out of this that create benefits for businesses. Now the flip side to that is people love to receive their money as soon as possible. They don’t want to get parked with their money as soon as possible. Right. So there’s lots of different factors within how you set up fed now. You could most people start with receive only just to get in the game which is great. And they migrate to receive and sent, right. So then you’re you’re able to participate on both sides of of a transaction for a client. The other, the other big thing that’s part of this is request for payment. So people can request a payment from you and get it in real time basis. But institutions that are not set up for sending can’t really take a request for payment, right, you have to be set up to be able to send. And I think the other key thing that’s going to be a big advantage is liquidity management tool, right. So you’ll be able to move money on a real time basis in and out of investment type. Vehicles. And a lot of the banks are already starting to pitch those types of services. JP Morgan, for example, just came out with something in the press about providing real time liquidity solution. So you know, these things will be out there, and more and more institutions are going to try to offer things that take advantage of real time money movements. It’s it’s exciting.

Whitney McDonald 11:04
Now, I know, I know, you already mentioned some some ideas in preparation. Any other advice? Or maybe questions that you’re hearing from your your clients as the launch approaches, maybe talking through either what your clients are asking or concerns or things that you’re hearing that that you’ve been kind of offering a piece of advice about?

Al Carpetto 11:32
Sure? Well, yeah, I would tell you, the advice that we give our prospects or clients is to utilize your partners as much as you can, right, especially the smaller institutions, they don’t have a large base of people working for them in the payment space, for example, or even in Treasury. So utilize your partners utilize people like finastra, or even the Fed, right. So if you have a Fed account, you have a Fed rep, and you should be utilizing that person to help you gain as much knowledge as possible. You know, the Fed also publishes lots of information out on their website, that I’m not sure many people even take the time to look at it. But it’s, it’s quite detailed. And it’s it’s very useful to educate people and to really get more and more understanding and figure out where the questions that you have need to be answered. And then, you know, more importantly, I would say, Build use cases, right? If you’re gonna go to get a funding for something in your bank, the people that make these decisions or approve the funding, want to know, what do we get out of this? So, okay, we can move money fast. Now, what does that mean for us? Can Can we make money on this? How will we make money? And how do our clients benefit? Right? I think that’s the ultimate goal. If the clients are going to benefit, then that’s, you want to make sure that’s what you’re driving home, so you don’t lose your clients. I mean, those those would be the things I would tell people to focus on from an advice perspective, they have they have a thick now guide, and they have a fit now Operations Manual. It’s a it’s one, it’s like 60, something pages, the other is 115 pages. So it’s quite extensive.

Whitney McDonald 13:16
Now with with fed now, of course, being the direction of the conversation and preparing back ends. I know you talked a little bit about technology at the top of the call to what what other payments technology? Are you kind of keeping an eye on in the space right now or recently.

Al Carpetto 13:34
So me personally, I’ve been paying close attention to artificial intelligence. There’s a lot of talk in the market right now you hear about chat GPT. But one of the other things that I’ve been looking at is it’s called RPA. It’s robotic process automation. It’s, it’s pretty cool stuff. It really, it’s kind of in the market as an add on to your services, right, people can come in and, you know, we can show you how to automate a process that maybe takes you a day and a half, we can get it down to hours, right. And it’s also from the standpoint of, you can redeploy your people on other things, right? I mean, you know, I never like to sell these things or talk about them. Is it like you can reduce headcount? But sometimes headcount will be reduced, but it can be redeployed, right, some areas might need more people, and I think that’s the way it should be looked at. But robotic process automation is really neat stuff. And you know, especially when you look at stuff on the reconciliation side, when you’re you’re just crunching numbers and you’re putting things on a spreadsheet. RPA can really do a lot of good stuff with that. I mean, artificial intelligence is also making its way into our software and the technology in the payment space because some of the stuff that we look at it’s, it’s, it’s like, look at your iPhone as an example. It has intuitive decision making for you We’re trying to build stuff like that into the software that people use from a payments perspective. So, I would say that technology is probably going to bring a lot of benefits, but it’s still in its early stages.

Whitney McDonald 15:16
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Transcribed by https://otter.ai