Independent Banker - November 2020 - 20

PORTFOLIO
can be met with Same Day ACH.
Others may desire a more instant
solution. With more than 50% of the
U.S. DDAs accessible to RTP, community
banks may consider enabling
the ability to receive these payments.
And with the planned launch of FedNow
[the Federal Reserve's planned
real-time payments rail], community
banks will have choices for leveraging
faster payments to help small businesses
succeed. "
And with history as a witness, community
banks know they can expect
the unexpected from their customers
in response to the rollout of new products.
Customers are certain to surprise
with exactly how they use the functionality
provided.
" We don't have all of the use cases
figured out, " Strasser says, " but customers
are going to figure out ways to
use faster payments. "
How to get started
So, how can an interested community
bank prepare for real-time payments?
Those who've been in the trenches say
to start with the core provider, which
serves as the connector into any new
payments system.
" Make sure you have a strong relationship
with your vendor, and you
are learning early on about this, even
if you don't intend to implement right
away, " says Dan Ravenscroft, president
and CEO at Royal Bank. " Watch
it closely, and when the timing is right,
you can act on this and implement it
within your systems. "
Thompson agrees. " Operationally,
[our provider] made this very
streamlined. It was an easy process.
We partnered with our correspondent
bank for settlement, and they also were
anxious and willing to work through
the process, and we turned it around
very quickly. From start to finish, it was
probably the quickest implementation
of any I've ever worked with. "
3 payroll challenges that faster payments solve
Faster payments may just be gaining traction, but there are already
use cases in business payroll scenarios. They include:
1. Emergency payroll. When a
payroll file deadline slips, it can
be a headache for businesses.
However, with same-day ACH
and real-time payments online,
that missed window can be
remedied immediately-with
more efficient outcomes and no
employee issues.
" Payroll is the most
important thing we do, " says
Kathy Strasser, executive vice
president and chief operating
officer at IncredibleBank in
Wausau, Wis. " If I pay my
employees on Friday, and all
of a sudden it's Friday at 3:00
and something happened
with payroll, and I can now do
an RTP and it's instant? That's
peace of mind. "
2. Gig workers or hourly
employees. With new models
of work emerging and
companies like Uber offering
" cash out " instant payment
options, a new pay dynamic
has developed-one that may
create a recruiting advantage.
" Businesses are getting creative
about employment and trying
to find people to work, " Strasser
says. " If I can offer a different
type of payroll where I pay you
every day or pay you for the
hours you've worked, that could
be of interest. "
3. Just-in-time payroll. Cash
flow reigns supreme as a chief
consideration for businesses.
With real-time payments,
employers can release pay
the exact moment employees
anticipate it, not a moment
sooner. This keeps the cash
in their hands that much
longer and supports greater
transparency into cash position
and resulting investment
opportunities.
Beyond opportunities with RTP,
FedNow sits on the horizon. With
estimates that it will be online in 2023
or 2024, another option will exist for
community banks to ramp up their
faster payments efforts. But given the
build time for that system, experts
caution against a purely wait-andsee
approach.
No matter the rail or faster payments
tactic community banks use,
by developing a strategy and talking
to providers today, they can prepare
20 Q ICBA Independent Banker Q November 2020
to capitalize on the momentum of
faster payments.
" The time to stay on the sidelines
has passed, " Phillips says. " Whether
community banks are in planning
mode or further down the line in
strategy, customer expectations have
changed. To remain relevant and competitive,
they need to start down that
faster payments path now. "
Colleen Morrison is a writer
in Maryland.
Independent Banker - November 2020

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