A Brief History of Digital Banking and Money Movement
Payments in Digital Banking used to be simple. For many years, members were limited to transferring money between their accounts, and paying some of their bills. Then, things started getting more complicated. Members asked for the ability to move money not just within the credit union, but between accounts at outside institutions. The Account-to-Account (A2A) transfer feature was born.
Next, PayPal, and Venmo gave members the option to send money instantly. In general, this type of functionality is referred to as a Person-to-Person (P2P) payment or transfer. Members embraced this opportunity with enthusiasm, anywhere they needed to pay someone instantly and the receiver didn’t have to worry about depositing a check or worrying about it bouncing. It was all that Members wanted; except they started wondering why they couldn’t do that from within their financial institutions mobile banking application.
The big banks’ answer to this was Zelle, which provides a very seamless experience for receiving money. The sender gets to send the money from mobile banking, and so everyone is happy. Except for the financial institutions that get to send the private data to Early Warning, and except for financial institutions that are more interested in pushing their own member experience and brand instead of Zelle’s.
There are also variations of P2P that run over the debit card networks, including VISA Direct and Mastercard Send. Financial institutions implementing these services get the benefit of real-time payments, without having to share their data with Early Warning and without losing control of the member experience or branding. One of the most significant benefits of all P2P payment types (PayPal, Venmo, Zelle, etc.) is that the sender does not need to know the recipient’s banking account information. They only need to know a cell phone number or email address.
Finally, don’t forget about Bill Pay! It’s not the same experience that was pioneered by CheckFree almost three decades ago. The Bill Pay world now includes electronic bills, card payments, and e-bill filing cabinets. And the cost is far more manageable now that about 80% of all payments made through Bill Pay flow electronically.
The Need for Unification
The payment world is highly dynamic and constantly evolving. But even in the current state of digital banking payments, there is a tremendous need for a unified experience. Members are currently required to think far too much about payment mechanisms instead of what they want to accomplish. This often comes with undesirable results.
One of the most obvious examples is the situation where a member wants to make a payment to their car loan. To some members, the car loan is one of their accounts at the credit union, and so they naturally think of the payment as a transfer from their deposit account to their car loan. Other members think of their car loan as a bill, and so they go to (you guessed it!) Bill Pay to make their payment. Ask virtually any credit union executive you can find about how many checks they process every day that were generated by their members using digital banking who go into Bill Pay and generate checks that are mailed to the credit union and the payments are manually processed by credit union staff. Talk about an inefficient and manual process! Not to mention expensive. The credit union gets to pay for the bill payment service, the check, the envelope, and the stamp. Followed by expenses for staff to receive the mail, open the envelope, extract the check, look up the account, and manually post the loan payment.
With continued innovation in the arena of faster payments, this problem is only going to get worse. Should a member need to understand the difference between real-time money movement over A2A, P2P and Bill Pay? Obviously not! And even those boundaries start to blur when you think about FedNow. FedNow clearly belongs inside of an A2A transfer experience, but what about P2P and Bill Pay? You would be right to answer “No”, but remember that FedNow is built on top of ISO 20022, which includes “Request for Payment” messaging (think real-time Bill Pay). Add in a directory service to mask bank account information from people sending money, and now you’ve got support for P2P as well.
In our view, the member should have to think about as little of the technology as possible. We believe that the move money experience boils down to three questions: (1) Where are you sending the money? (2) Which account is it coming from? and (3) When should it arrive? All the rest are details that the member shouldn’t have to worry about. That’s what technology is for! OK, maybe there are 3.5 questions because “When should it arrive?” also encompasses whether the money movement is one-time or recurring.
Connect’s new Move Money system is built to compress all these different payment mechanisms into a single member experience that is both visually appealing and easy to use. Remember that car loan bill payment example? Think about how that all changes if there is a single experience for moving money, and the member sees their car loan on the very first screen, when asked “Where are you sending the money?”
Another advantage towards this unified approach is the ability to schedule a recurring P2P payment with the same screens, the same experience as a recurring bill payment or a recurring transfer. Again, the member shouldn’t have to care about the mechanism. They should be able to focus on what they want to accomplish.
Implementing a single Move Money experience also aligns with future innovation and faster payments. Bill payments with a credit card? Same user experience. Bill Pay with FedNow Request for Payment? Same workflow (from a different launch point, which is responding to a mobile push notification). P2P payment over a FedNow settlement service? Great idea, but you certainly don’t want to change the member experience compared to other forms of moving money!
Caveat Emptor (Buyer Beware!)
Some technology providers have added a “Money Movement” section to their digital banking solution. After you click on “Money Movement”, you get a screen asking whether you want to transfer money, make a loan payment, pay a bill, or send money with P2P. That is not a unified Move Money experience! A truly unified experience not only encompasses all these different payment mechanisms, but even more importantly, it takes away the complexity of understanding the underlying mechanisms.
If you are interested in learning more about Connect’s Move Money experience, please reach out to us via our website. And please keep an eye out for an upcoming post about how Connect is unifying not only the member experience but is unifying the credit union’s administration and fraud management experience as well.