Independent Banker - November 2022 - 43

" Open-loop networks put banks
in the middle of the relationship
with their customers, because they
enable customers to transact through
their bank's existing mobile app or
website, " he says. " The end result
is that banks benefit from deeper
digital engagement, higher customer
retention, increased product cross-sell
and increased customer profitability. "
Yet, while open-loop networks
largely have been the preference of
community banks over the years, a
number of closed-loop solutions have
emerged as contenders for particular
customer segments or use cases. For
example, $127 million-asset Bridge
Community Bank in Mechanicsville,
Iowa, explored a closed-loop beta
merchant value card program, where
customers could send money to a
specific retail card to be used at that
store. The community bank had a
couple dozen retailers engaged and
passed the proof-of-concept and
pilot phases, but ultimately, the
customized network didn't fit the
overarching need.
" The bottom line is that when it
comes to payment networks, the
technology sometimes is the easy
part, " says Bob Steen, the community
bank's CEO.
The P2P use case
As a common use case for closed-loop
solutions, person-to-person (P2P)
networks have placed pressure on
banks' payments programs. Providers
like Venmo, PayPal, Cash App and
others have taken transactions
outside of the banking infrastructure
to the tune of billions of dollars in
non-federally insured wallets.
" Community banks can both
acknowledge that the 80 million
Venmo users aren't going to magically
stop using Venmo overnight
and focus on enhancing their
own digital payment and mobile
" We think choice, ubiquity across all institutions,
speed and cost are all important components to
consumer satisfaction with payment options, and
collaboration with other like-minded institutions
has been critical to bringing this vision to life. "
-JOHN SCHULTE, MERCANTILE BANK
banking offerings, coupled with
robust safeguards, " says Denning.
" Community banks should seek
to ensure that when customers
open their app, there are valuable
and action-oriented capabilities
and launch points, inclusive of
money movement. "
Solutions like Zelle and newer
entrant CHUCK provide banks with
a way to do just that and remain
central to customers' payments. By
integrating with community banks'
digital banking solutions, these
options create a way for customers to
send money from their banking app
or website.
" It's not uncommon for [a
consumer] to probably have
relationships with 30 to 40 different
payment providers, " says Tede
Forman, president of payment
solutions at Jack Henry, which
in September acquired Payrailz,
the company responsible for the
payments infrastructure that fuels
CHUCK (see sidebar). He adds
that Jack Henry is trying to create
opportunities for its community
banks to have solutions that can
keep consumers within their digital
payment experience.
Mercantile Bank in Grand Rapids,
Mich., recognized the customerchoice
potential in CHUCK and
jumped on board as a founding
bank. " We imagined customers and
recipients having more choice in how
they transact, " said John Schulte,
senior vice president and chief digital
banking officer for the $5.1 billionasset
community bank. " Different
networks have particular strengths for
certain transaction needs: recurring
versus one-off, international, varying
transaction speeds or fees, fraud
controls, B2C/C2B use cases, gift
cards and more.
" CHUCK's structure allows for a
richer, more dynamic ecosystem for
consumer payments with the option
for each party to decide the best way
to perform a particular transaction. "
The impact of instant
And as new choices emerge, new
opportunities arise. For example,
instant payments will gain traction via
FedNow's launch and the increased
use of The Clearing House's RealTime
Payments network (RTP),
and these faster payments rails
will allow for creative community
bank solutions.
" These systems certainly have the
potential to bring speed, additional
data and lower cost to P2P and other
transactions, " says Schulte. " We're
independentbanker.org Q 43
http://www.independentbanker.org
Independent Banker - November 2022

Table of Contents for the Digital Edition of Independent Banker - November 2022
