When BNY Mellon announced that Verizon had become the first corporate client to introduce the Real-Time E-Bills and Payments functionality, it marked a breakthrough for retail clients. TMI asked the bank how this solution could impact the treasury space.
The US retail payments space has long relied upon paper cheques and the country’s ACH (automated clearing house) network. But with the introduction in 2017 of BNY Mellon’s Real-Time E-Bills and Payments functionality, it marked the first major new payment method in the US since 1974. Now the bank believes the payments market will soon see more significant changes as it rolls out its solution with mobile network provider Verizon and the first retail bank to support this e-bill capability for its consumers, Citi.
This solution for retail customers uses The Clearing House’s RTP (real-time payments) network to connect BNY Mellon as the billing bank, Verizon as the biller, and Citi as the customer bank. This, says Carl Slabicki, Head of Strategic Payment Solutions, BNY Mellon, is a sign of more collaboration to come between banks.
In the treasury space, and in payments generally, Slabicki believes much of the progress to date has required cross-bank collaboration. “The RTP network demonstrates that we collectively believe the new system will bring faster, more secure payments to the market, and that this will ultimately benefit the whole economy.”
The consumer-to-business bill-pay function is a long-awaited use case for RTP. It now provides the reach and standardisation to provide the necessary scalability. And while BNY Mellon does not have a retail franchise, it does have a corporate cash management business through which it can now support receivables processing for large firms such as Verizon.
With RTP’s 24/7 configuration, BNY Mellon has been helping Verizon prepare for its adoption. “We were waiting for the retail banking community to be ready to process real-time payment messages such as E-Bills,” says Slabicki. “They needed to be able to push the request for payment message from Verizon to their retail clients’ mobile banking apps, giving them the ability to review, approve and pay, so a real-time payment could be sent back to Verizon. Citi was the first bank to enable that experience for the consumer.”
The work with Citi establishes the first commercialisation of the process, explains Slabicki. This now sets out a number of standards that he hopes other banks will follow. “What we will see in the next few months is more big retail banks start their roll-out, as some major institutions have announced they will soon begin to offer RTP-based e-billing to account holders.”
The expectation over the coming 12 to 18 months is that regional banks, smaller commercial banks, and credit unions will also adopt the standards to enable their customers. “Many of these banks are dependent on the core technology vendors, so I think these providers, many of which already offer domestic bill-pay functionality, will play a big role in enabling this capability,” comments Slabicki. With increasing numbers of banks deploying the solution, it gives Verizon more reach and scalability, but it also gives BNY Mellon greater opportunity to onboard its other corporate clients.
An application programming interface (API) provides the connectivity for the new system. Verizon’s internal billing function offers a variety of mechanisms, including paper-based billing. The new system works by making a call to BNY Mellon’s API. This pushes individual e-bills to Verizon’s customers via the RTP network. From here it progresses to the customers’ banks’ mobile apps, where they can review and click to pay.
With payment hitting Verizon’s account as available funds in seconds, an API call is pushed simultaneously to Verizon’s billing system, advising that payment has been credited, explains Slabicki. “It’s API all the way, from generation of the bill, to the retail bank and its customers, with instant payment processing all the way back to Verizon’s billing system.”
For the corporate treasurer, the chief advantage is enhanced visibility, and greater certainty, over cash flow, says Slabicki. Issuing paper bills and processing paper cheques generates a long lead time for settlement. The delay creates payment-status uncertainty and a risk that the cheque may be returned. “With the Real-Time E-Bills and Payments solution, as soon as the decision to pay is made, within seconds the biller is notified, and there is zero return-risk because it is an irrevocable transaction.”
The consumer has more control over their finances too, he says, noting that RTP offers a choice regarding payment timing, with full- or part-payment options also provided at the biller’s discretion.
Verizon and Citi have identified an initial tranche of joint customers to target. Citi is now scaling up this process. BNY Mellon is also working with Verizon to onboard more of its customers from other banks. By the end of 2021, the aim is to have 40% of digitally enabled online consumers across those banks enabled for Real-Time E-Bills and Payments.
While the system currently targets recurring retail billing scenarios, Slabicki comments that there is a “short jump” into one-time e-commerce purchases, with the possibility also of disrupting point-of-sale payments.
“The technology’s efficiency and final irrevocable nature makes it a cost-effective instant checkout facility, especially when paired with technologies such as NFC [near field communication] and QR [quick response] codes,” he notes. “We’re also looking into use cases like real-time irrevocable funding of new investment accounts with broker-dealers, enabling instant trading.”
The functionality also supports business-to-business (B2B) payments where success will require the adoption of the remittance advice standard that is embedded in the RTP network. As with the adoption of the consumer messaging standards, Slabicki acknowledges that BNY Mellon will need to work with other stakeholders for it to gain momentum in the accounts receivable/accounts payable (AP/AR) space. “RTP is part of the potential solution, but there is broader framework issue that needs to be solved first,” he notes.
The US Federal Reserve’s business payments coalition is currently running a B2B e-invoicing working group, including BNY Mellon, other major banks, several large US corporates, and a number of technology vendors. It is investigating the standards framework, and the networks and tools needed to solve the data standardisation and consumption challenges in this space.