By Sean Carter, AAP, NCP, President & CEO, NEACH
In times like these where the only constant is change, having a firm footing in your financial institution’s (FI’s) strategic direction is critical to its continued success. And with digital payments growing at a rapid rate, FIs have begun concentrating on this line of business. In fact, according to a recent survey of bankers, digital transformation has emerged as their biggest business objective (64%), with real-time payments (41%) and cross-border payments (37%) clocking in as the next two focal points.
With the uncertainty of today’s market, acting on these priorities is tricky at best. That’s where a sound payments strategy comes into play. Serving as a guardrail for your payments efforts, your strategy offers a lens through which to view market developments, opportunities, and challenges. It will help establish the right next step for your institution in a host of payments decisions.
The good news? Building a payments strategy doesn’t need to be a daunting task. The following six tips offer concrete steps to take in creating a plan that complements your unique business objectives and propels your organization’s payments to the next level.
Prioritize your payments strategy as a chief component of your overall business strategy. You will want to ground your payments plans in your overall business objectives, not create a separate parallel track. As you consider how to meet your FI’s annual targets, explore how payments create opportunities to do so. For example, as you consider customer/member acquisition, determine if offering faster payments could be a differentiating factor for your institution and weave that in accordingly.
Ensure your payments strategy includes an environmental assessment; an evaluation of current/prospective customer/member expectations; and an evaluation of how it fits your institution. With such a wealth of potential opportunities in payments, it can be hard to know how to prioritize projects and which ones may be the most impactful for your customer/member base. Taking the time to analyze where you are amidst the opportunities – including real-time and instant payments, contactless payments, digital wallets, and more – will help you in selecting those which support your institution’s vision.
Incorporate your FI’s plans for faster payments. To that point, faster payments are no longer a “wait-and-see” opportunity for FIs. Consumers and businesses are demanding them. In fact, 90% of businesses expect to be able to initiate and receive faster payments by 2023, and among consumers using person-to-person payments, 70% expect funds to be received in an hour. Factoring your faster payments plans into your institution’s payments strategy will be an important way to remain competitive in the years ahead.
Consider technology provider support. Fintechs are no longer an FI’s biggest competition. In fact, FI-centric innovation accelerators are fueling fintech development in support of banks and credit unions. In addition, core providers have been open to new integrations via application programming interfaces (APIs). In short, there’s never been a better time to seek fintech partners to meet your FI’s product and customer/member experience goals.
Incorporate risk and compliance into plans. With new products and services, the potential for fraud or regulatory considerations arises. As you plan your payments strategy, cast a wide net in engaging colleagues in this discussion. Bring in your risk and compliance teams to talk through potential pain points as you weigh the pros and cons of a new payment type or strategic approach. Explore how to leverage your data and analytic capabilities to identify new ways to flag out-of-band transactions and/or authenticate accounts. In short, consider how risk and compliance factor into your payments strategy.
Leverage industry resources. You don’t have to create your payments strategy in a vacuum. Nacha’s Payments Innovation Alliance and the U.S. Faster Payments Council have produced the Faster Payments Playbook that helps walk FIs through how to develop a payments strategy. In addition, your payments association can provide education and support to help you in creating a payments strategy. Check out the resources they offer to provide additional insights.
A payments strategy will serve as a guide to keep you focused on your institution’s plans to innovate to meet customer and member needs. In today’s constantly changing landscape, your payments strategy will function as your due north, helping you to navigate the road ahead.