Independent Banker - January 2024 - 52

customers want from a payments
system: ubiquity, predictability,
reliability and high efficiency, "
Daniel Roth, senior director of
communications for Nacha, explains.
" Furthermore, ACH payments
enhance security by reducing the
risks associated with paper checks. "
USE CASES: ACH has many uses
and is particularly attractive to
community banks because it can cost
less to process an ACH transaction
than it does for RTP or FedNow.
ACH is often the better choice for
such transactions as direct deposit of
payroll and for recurring payments,
such as loan repayment and
subscription services, to name a few.
THE FUTURE: Nacha, its members
and ACH operators are exploring
additional Same Day ACH
enhancements, like extended hours
and international ACH eligibility.
PAYMENT OVERLAY SERVICES
ZELLE
WHAT IS IT? Zelle is a personto-person
(P2P) digital payments
platform that allows users to send
money between almost any two
financial institution accounts, usually
within minutes. Consumers use Zelle
to get money into their accounts
quickly, but their financial institutions
settle on the back end using various
settlement rails. Some financial
institutions are also now offering Zelle
to their small business customers.
As an overlay, Zelle is compatible
with many settlement rails and helps
provide a P2P payment solution
for community bank customers
using the settlement rail their
financial institution chooses. Zelle
is a complement to the rail system
community banks use, offering
a direct benefit for the financial
institution's consumer and small
business customers.
USE CASES: Popular use cases
include sending money to friends,
family and other trusted individuals,
such as a contractor, neighbor, a
child away at school and more.
Small businesses use Zelle to pay
gig workers, payroll for contract
employees and vendors, to name a
few examples.
EXPLAINER
Q:
Is FedNow a
central bank
digital currency (CBDC)?
A:
No. It's a payment
service that
the Federal Reserve has
made available to financial
institutions of all sizes to
transfer funds in real time for
their customers. Like other
Fed payment services, such as
Fedwire and FedACH, FedNow is
not a form of currency or a step
toward eliminating forms of
payment like cash.
It's important to note that the
Federal Reserve and FedNow
cannot access individual's bank
accounts or control how people
choose to spend their money.
FedNow is not consumerfacing;
it is only available to
U.S. financial institutions and
operates behind the scenes.
Financial institutions may
choose to use the service to
transfer funds in real time for
their customers, but the Federal
Reserve does not provide
account information or offer
instant payments services
to individual consumers
and businesses.
THE FUTURE: " We're constantly
evaluating and evolving the Zelle
Network to stay current with trends
and new opportunities to build
consumer trust, " says José Resendiz,
chief operating officer at Early
Warning, the network operator of
Zelle. " Some near-term roadmap
objectives we're working on include
leading efforts to stop criminals who
steal money from consumers through
fraudulent activities. We're also
evaluating new collaborations with
policymakers, industry and advocacy
groups on legislation and regulation
to stop criminal activity and educate
consumers about navigating the
payments landscape. "
BUY NOW PAY LATER
WHAT IS IT? BNPL enables
customers to break their payments for
purchases into multiple installments,
with the initial one due when the
purchase is made. Common BNPL
services include Affirm, AfterPay,
Apple Pay Later and PayPal. Some
BNPL plans charge minimal or zero
interest, making it attractive for
consumers unable to pay full price for
an item at the time of purchase.
USE CASES: Although BNPL options
do offer customer convenience for
necessary, large-value purchases
such as airline tickets or a computer,
for example, they can also lead to
unnecessary purchases. Consumers
also sometimes miss BNPL payments,
potentially leading to higher interest
rates than those incurred when using
a credit card.
52 // ICBA Independent Banker // January 2024
Independent Banker - January 2024

Table of Contents for the Digital Edition of Independent Banker - January 2024
