By: Jon Budd, CEO, Juniper Payments, a PSCU Company

Consumers are now growing accustomed to on-demand and immediacy – a convenience and expectation accelerated by the pandemic. You can binge an entire season of a TV show commercial--free, have your favorite dinner at your doorstep in minutes, or have your groceries delivered to your home — all with just a few clicks. However, this culture of immediacy has not translated to all areas, like traditional banking, where it still can take days to transfer funds from one bank account to another. 

As an example, when closing on a home, typically you make all purchase arrangements within set business hours Monday through Friday. Maybe the “buyer” says you need a new sump pump (from experience) in your old house, won’t sign off on the inspection and it’s late on a Friday afternoon. Your new house purchase is contingent on collecting the funds from the sale of your house, and any delay may bump the closing to the next week, potentially jeopardizing both deals. This is not an uncommon scenario. Buyers and sellers want good and immediate funds before the keys are handed over, and the processing windows of a “wire” limits this commerce.

So why has the banking industry been so slow to catch up with the expectation and demand of immediate transactions? While instant payments have existed for about a decade, the technology has not been readily available or accessible for credit unions to implement, at least not without high costs and extra resources. Many will point out that the rest of the world is ahead of us in this area. While this may be true, many other countries are driven by government mandates and do not have thousands of financial institutions (FIs) like here in the U.S.

The good news is that the ability to adopt and deploy this technology is rapidly evolving, spurred by innovation, a spirit of open banking infrastructure and access to APIs. Now is the time to explore and understand the use cases and how these new payment rails can help grow your business and also better serve your membership base.

Simplifying Banking Processes through Technology

When looking to send or receive funds, the payment rail part of the transaction, or the “how,” is not usually on a consumer’s radar – they just want to know when their money will transfer, that it’s secure and when they can spend it. This “hidden and how” portion of a transaction is ripe for change and more transparency.

Consumers are increasingly less inclined to conduct business within the traditional bank-based payment systems, which can be perceived as being cumbersome, and even outdated — especially by younger generational cohorts. According to the PSCU 2022 Eye on Payments study, the number of members reporting a mobile wallet as their most preferred way to pay has tripled since 2018. When asked what payment methods respondents would be likely to use in the next six months, more than half of respondents said a digital payment solution such as Venmo, Zelle or PayPal. Of course, these represent apps and services that rely on traditional banking rails to complete, but again, this is not and should not be a concern of a consumer.

Enter Instant Payments and the new rails. The Clearing House introduced real-time payments several years ago. FedNow, The Federal Reserve’s version of “instant payments,” is launching this summer. Instant payments provide greater speed and control for consumers and businesses, and can be made and received 24/7, 365 days a year. Good funds (credit only) can be transferred from one account to another account at any participating FI, and it happens within seconds. What are good funds? Money that can be withdrawn or spent immediately upon receipt; no memo post, not pending — that money is yours. It is final and irrevocable, similar to a wire. This is exciting and scary at the same time; nevertheless, it is coming. (Future blog topics will center around the “instant payments, instant fraud” scenarios and how we are collectively working on preventive and mitigating measures). 

Credit Unions Don’t Have to Face Instant Payments Alone

The journey to develop a comprehensive instant payments strategy may seem daunting, but your credit union does not have to do it alone – find a trusted fintech partner to help.

Credit unions should aim to implement streamlined, faster wire transfer and ACH capabilities with enhanced operational efficiencies to reduce in-house manual processes, as well as to meet the immediacy expectations of today’s consumers. That’s the first step.

Partnering with a fintech can also lead to the next level — the design and implementation of a user-friendly and intuitive instant payments application that is easy for your credit union to operate, deploy and support — whether originating a transaction, reviewing system reports or managing users. 

When looking for a partner to assist in the journey to instant payments, here are some important considerations: 

• Customize your approach. Find a trusted partner to help identify the right solutions for your credit union to build a digital bridge to optimize your payments journey. Your credit union is unique, so find a partner that helps you meet your desired payment objectives and outcomes. Feel free to take it in phases. Most participants plan to start with receive only, and then send, then RfP (Request for Payment).
• Maximize efficiencies by streamlining processes. Bring in a partner to help you deploy a payment solution that enables seamless transaction flows — from origination to delivery. The ideal partner should have a cloud-based, scalable and customizable solution that automates, integrates and streamlines outbound and inbound wire processes. 
• Find a partner who knows the space. When looking for the right technology provider, it’s crucial that you select a fintech with significant knowledge of the systems and tools required, but also that already has connectivity to the Federal Reserve and The Clearing House to make the instant payments process more seamless. Your partner ideally should have FedLine connections as well, allowing the benefit of unattended send and receive capabilities for your credit union. 

Juniper Payments, a PSCU company, is one example of a fintech service provider that meets these requirements and is uniquely positioned to best help your credit union reach your instant payments goals. Juniper uses its proprietary JuniFunds solution via API(s) to provide the most complementary workflow available, which includes providers of internet banking, core processing and the Federal Reserve Bank. Juniper is also an official pilot of the upcoming FedNow Service, the new payment rail from The Federal Reserve with a planned launch in the month of July.

Major industry changes are ahead with instant payments – is your credit union ready to take advantage of the new emerging payment rails? 

Jon Budd is the CEO of Juniper Payments, LLC. Jon has been with the company for 20 years and has helped grow it into the leading third-party SaaS provider for the wholesale banking and credit union market, and now downstream to community financial institutions. Over the years, he has been involved with every aspect of the company and its market. This includes a focus on services, product development and leveraging economies of scale to help empower clients with top-tier technology and payment systems.