Mercantile Bank is using a new instant payments manager from digital banking fintech Q2 to assist with facilitating real-time payments for business-to-business transactions via The Clearing House and eventually the FedNow payments rail.
Q2’s Instant Payments Manager will help the $4.9 billion, Grand Rapids, Mich.-based bank manage workflows of real-time payments within business-to-business (B2B) transactions and provide Q2’s bank clients with messaging capabilities, such as requests for payment and receipt confirmation messages, according to a release from Q2.
The payments manager will help relieve B2B payment issues, including ensuring invoice information stays coupled with a payment and resolving payment delays faster, Debbie Smart, senior product marketer at Q2, told Bank Automation News, noting the instant payments manager connects to third party service providers who then connect directly to the networks.
“We really wanted to focus on an area that saw a lot of pain in the industry, with commercial payments and specifically B2B payments,” Smart said. Q2 aims to provide banks with products that allow the customers to transact over the new rails.
As more banks get ready for the July launch of FedNow, commercial uses of the payments rail will surface and business uses will become more common, Gartner Analyst Debbie Buckland previously told BAN.
FedNow “is just going to become a way of doing business and not just for consumers, because every great idea that happened on the consumer side eventually transitions over to business,” she said. “We’re all individuals, we have our needs and ways we’d like to do things, and why shouldn’t we be able to do them on the business side of the house as well?”
FedNow commercial use cases include paying bills, sending bills or invoices for payment and loading prepaid cards, according to the Federal Reserve website.
Addressing B2B payments issues
The real-time payments rails are addressing areas of friction in the B2B payments space, John Byl, senior vice president of product development at Mercantile Bank, told BAN.
According to a 2022 Digital Payments Survey from the Association for Financial Professionals underwritten by J.P. Morgan, 33% of B2B payments in the United States and Canada are still made by check, and 54% of respondents said lack of payment speed has driven adoption of digital payment methods.
B2B transactions made by check cause issues in guaranteeing that funds will arrive in a timely manner to businesses that need a payment to be verified. The adoption of real-time payments will relieve these issues, Byl said.
“Timing in sending and receiving payments has [been a pain point] on this, due to delays in the mail,” he said. “Because of the real-time payments rail being a credit push only, it’s guaranteed funding for the business that’s receiving that payment.”
Mercantile Bank is aiming for B2B payment capabilities to be in the pilot phase with clients by the fourth quarter, Byl added.
The bank joins the host of banks aiming to allow use of the FedNow rails for its clients, to compete with U.S. Bank, Wells Fargo Bank and Michigan State University Federal Credit Union, which are among the 110 pilot program participants in the FedNow launch, per the FedNow website.
