Alijah Poindexter 00:03
Good day, and welcome to the Buzz, a Bank Automation News Podcast. I’m associate editor Alijah Poindexter. Recently I spoke with Boyce Adams, senior vice president at payments fintech AvidXchange. I spoke to Boyce about how banks, large and small, are innovating their tech investments, along with along with how FedNow will change the payments landscape for financial institutions. Okay, we’re good. All right. All right, wonderful. Well, we can just jump right into it here, boys, once again, thank you so much. I think a good way to kind of frame this discussion to get started off here is, you know, the first 2022, a lot of people had a lot of predictions. I’m curious to know, when it comes to the payment space, especially the automated and digital payment space, I’m curious to know, which predictions you had that have come true. And then which are still sort of waiting for their moment, if there are any, you could speak to?Boyce Adams 00:33
Yeah, no, like, in the last couple of years, or even last year, as we kind of all thought about what the innovations would be, and frankly, what the world would look like, I think we all had no clue that we’d probably be I mean, potentially, on the trailing end of, of the COVID pandemic, potentially, with, you know, a global war in Europe and a lot of instability across the energy markets. So I don’t think we all would have predicted where we are today. But if you really look at the ecosystem of FinTech and banking and finance in the US, I think, you know, we’ve all talked, we’ve been hearing a lot about, you know, digitization of payments, different payment, Rails, Blockchain, kind of integrations. And so, if I had to, really, I think we’re seeing progress on all of those fronts, but I think when we really look at, what I see is, is happening in kind of coming, probably accelerating faster is, is kind of the the evolution to cloud banking, and API’s, and really, really more for, you know, API’s or the the limiter of of kind of an API type of integration is the systems that you’re trying to integrate. So we’ve seen a lot of integrators out there that are tying together just disparate systems within the banking sector, a lot of the core banking platforms are continuing to invest in better ways to, to integrate, and for fintechs, to integrate and live better in a banking ecosystem, which obviously will directly impact the customer and the consumer and provide them better products and services. So I think we still have a long way to go on on securely, integrating a lot of fintechs and in banking systems, but if there’s been one thing that I’ve seen kind of the acceleration on is, you know, kind of that banks being very open and, and aggressive towards, you know, leveraging cloud, and SaaS based infrastructure, which, which probably wasn’t as prevalent in the past, and continues to accelerate, you know, integrations of systems. I think we even saw it, you know, in the last two days with President Biden’s signed to his executive order on cryptocurrency and looking at the Digital dollar, and, you know, so I think we’re still a ways away from I think anything more formalized or widespread use, so to speak, but, you know, but we’re continuing to see the march towards, you know, data digitization of transactions and you know, consumer behavior.

Alijah Poindexter 03:25
So, you know, when you look at the extremely long list that is always growing of, you know, payment tech and payment innovations in the space, are there any that you can like maybe predict or that you see becoming as commonplace as just, you know, mobile banking, or digital deposits, or an automated, you know, lending solution? What’s like, what is the technology in the payment space that you that either you’ve worked with, or that you’ve seen in the space that you can see not just a niche use case, and not just a, you know, either a consumer or business use case, but something that will kind of cohesively impact everybody in the Digital Banking and Financial space?

Boyce Adams 04:04
Yeah, I mean, I think, um, I mean, I with consumer and business, they’re, they’re two different sectors, obviously. But like, I think abroad, abroad connection that I’ve seen in that we see from from an exchange perspective, is, you know, the payment Tech, I think, is one thing because like, we want to provide the the end, use consumer have a payment, the option to choose how they want to get it right. And there’s plenty of use cases on why somebody would want to receive a an ACH or real time payment or something like that. There’s certain use cases for, you know, a virtual credit card or maybe even there’s certain use cases even today, as hard as it is to bleed for for checks, right. And so, but I think the, the connection points to How those people or businesses receive the payment? That’s really not the hard part. The hard part is how do they reconcile that to their system? So for a business, how do you go post that transaction into your, your ERP or accounting system, in cases where you might have, you know, multiple different, you know, if you’re just a subcontractors example, someone working for an individual, you know, like, managing your business and getting paid and getting out invoices and those sort of things, it’s a very hard thing to do. So I think where we’ve really seen that evolution, the pain is, you know, the payment makes things really easy, and, and convenient. And we need to continue to invest in better ways to do that. But like, the pain is in the actual transaction, and actual, you know, call it invoicing or payment presentment. So I think we’re gonna see a lot more certainly energies that we put in on how to make that a smoother process, but also, you know, more broadly like, and that goes back to the integration of systems, right? Like, if my payment systems not integrated my accounting system, then I’m not really getting a benefit from that. Right. So like, how do we kind of keep tying that ecosystem tighter together?

Alijah Poindexter 06:22
So a lot of, you know, the the major payment, you know, technology innovations, a lot of it is coming from demand being a consumer demand, or commercial demand, or just the ecosystem and environmental demand. But a question I’ve heard raised a few times, especially recently is specifically for the financial institution or the bank, or the credit, you know, the Forward Thinking credit union, when they’re looking to implement new payment technologies and services. Is there any way for them to create, from your perspective, this is kind of just like a, you know, is there any way for them to create a new revenue stream? Or is this sort of just a response to consumer demand? That sort of robbing Peter to pay Paul, that might not be the best sort of idiom to use? But you know, what I mean, where, yeah, you know, there’s not actually any new profit being generated, but you are streamlining, you know, the process internally, and externally. So I’m curious to know, if you have any insights there?

Boyce Adams 07:16
Well, I know, financial institutions like to do two things, and one is to better serve their customer and two is to generate non interest income, which is even more important in the in the right environment that we’re in. So but but I think generally, like, you know, right, it just depends on the type of payment flow, but I think that the financial institutions are going to be really focused on what hearing what their customers want, and need, how can they present that in an integrated fashion like, right, like, single sign on to their banking platform? I know, you know, there have been a lot of development in kind of in app type of things. But but in reality, you know, you start to go kind of more upmarket, into the treasury management type of products. You know, I think it remains to be seen, right? Like, I mean, we know how banks make money from, from wires, there’s a fee associated with it, and you get a, you know, a get a customer gets a benefit. But there’s only a limited use case. So how they can leverage, you know, in what real time payments or, you know, other type of payment flows, how they can kind of monetize that, whether it’s through the actual transaction, or some of the other value added services, I think that’s really where they’re going to be spending a lot of energy is how do they, you know, wrap around other value added services that they might be able to charge for, around, you know, new types of ways to pay bills and, and do transactions. So I think it remains to be seen, but I don’t know if, you know, two years from now, we’re in real time payments, that, that they’re gonna be able to charge $25 For that, like he might be able to today for a wire, you know, so.

Alijah Poindexter 09:06
So on that real time, though, that’s a good segue, obviously, into this next question, which is a big question. You know, when fed now, obviously, fed now is in it’s in a pilot, but when fed now fully rolls out in 2023, I, we put a lot of talk about, okay, what technologies will this will this facilitate? We, you know, we’ve had a lot of discussion on that side. But I’m curious, from your perspective, just what will be the positives and negatives of the full rollout? You know, what should banks and financial institutions, what should they be aware of? If you know, because fed now was coming in it is coming quicker than I think a lot of people are really kind of forecasting.

Boyce Adams 09:43
Yeah, I mean, I think that financial institutions are really going to have to understand kind of what’s the population of transactions that this is going to be a use case for right? And you know, not, you know, real time payments is great. But the most important part about a transaction in my opinion is, is, you know, the quality, the security of that transaction, of course, and like what kind of data is that transaction sending across? So we, you know, I kind of talked a little earlier about, you know, remittance details, if it’s a business payment is, you know, reconciling that transaction, you know, what kind of line item detail is in that if, you know, as an example, like if I get if I get 100, real time payments a month to my business account, and there’s no way to distinguish between similar amounts, and which has been applied to this account. So I think there’s some real questions on on, like the use case, and I think the financial institutions are really going to have to kind of do some analysis to figure that out. But But there’s no question. I mean, it’s a positive development for for the industry. I mean, I think it goes back to, as well as I don’t know if, I mean, we’ve seen other types of real time products. I mean, you know, of course, you know, I mean, you know, I use L personally, sometimes, I mean, it’s a great product, but it doesn’t work for everybody, not every banks using it. And so, you know, but for businesses in particular, like, you know, and even the banks that that we work with that use, you know, our applications directly like that, they want to send a secure payment, and send a lot of data with that payment, that the fact that it’s real time, or may take one to three days to clear, you know, then you start into like, working capital, what are my payment terms? You know, do I really, I don’t really, you know, there’s an, the vendor would like to get paid in one day, but they’re used to 10. So maybe threes? Okay, so I think there’s going to be a lot of that, particularly on the business payments side. But no question, I think it’s going to make, you know, Faster Payments quicker, more accessible, and it’s going to be a good thing, but is it going to replace in in, kind of cannibalize every other payment type, I’m not quite certain that that’s going to be the case. But I think we’ve got a little bit to see how that goes. And then, you know, you kind of put into put on top of that the, the digital dollar and some of the crypto and blockchain and so I think there’s, by that, assuming it rolls out next year, I think there’s going to be a lot of competition in the next couple of years, to how we how we all send and receive payments.

Alijah Poindexter 12:36
So when you take a look at the, you know, like the majority of financial institutions, and maybe we can exclude the big banks, because the big banks, again, they just have so much they have so much in the way of investment capital and so much in the way of manpower and and that, that it’s not really applicable, they can kind of do what they want to do and become the leaders. But when it comes to the majority of you know, financial institutions and banks, which are community banks, regional banks, Super Regional Banks, where do you see them? Mostly, like when they’re innovating their payments sort of stack? Where do you see them innovating on? And then is there a difference between what a lot of them are innovating on and what you from your perspective, what you think they should be innovating on, if that makes sense?

Boyce Adams 13:21
Yeah, no, I mean, I think we’ve seen, I mean, particularly just your your community of regional bank, right, is going to be more investing into different type of FinTech applications that help power their their solution set. And there’s really good reason for that. Because at the end of the day, the core business is still writing loans, managing people’s money, moving money. And so I think, even in 2022, and, and when I started in this business, you know, 20 years ago, banking is still such a relationship based business, particularly at the Community Bank. And it is so foundational to the way that that they operate, and they need to operate and they need to serve their communities. And, you know, we saw that in the last two years with, you know, a lot of the COVID relief, PPP money, you know, that was being administered by community banks. And so, you know, the first call that a business or persons probably going to be making, you know, in an area of uncertainty is, you know, you’re going to partner with your local bank. So having that relationship is super critical. So, I think like, you know, we’re seeing you know, community banks invest in you know, different types of payment solutions, solutions like ours that help businesses, you know, pay their bills, hey, handle their kind of invoice management, things like that, but I think they’re gonna be in continuing to invest in better ways to serve their customers, right, like, you know, I think we lost heard for many years, and I’ve seen different data to support in not supported, you know that branches are going away and all this kind of stuff? Well, you know, I think what I see is like, you know, community banks are continuing to invest in branch branches. Not only because it’s a, it’s a billboard, on the side of the community, but it’s also a place for, you know, people to congregate and build a relationship. And so the branches looks totally different. But you’re starting to see, you know, a whole different approach to that. But for the most part, I think they’re investing in tools that, you know, help service their customers, you know, 24 hours a day and provide that better level of service. And that better level of kind of choice, right

Alijah Poindexter 16:08
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