Insights on instant payments, compliance challenges, and strategies shaping the future of financial institutions.
Amanda, to kick things off, could you share a bit about your career journey and what inspired you to lead SWIVEL?
Early on in my career, I started out in different fields and industries and quickly discovered I really loved organizing and solving problems, which led me into project management. Later, I began working on the technology and scaled operations sides of the house. My time at Microsoft taught me a lot about globally scaled operations. It also gave me my first experience in the payments industry, which I then continued my journey over to Dropbox and Facebook when I moved to Texas.
I fell in love with payments technology, scaling operations, understanding the compliance side of the process, and how to leverage user feedback to shape a product’s user experience. Until the mid-2000s, online checkout was mainly clunky and difficult; no one was really focusing on ease of use. It was tough, but I became passionate about this during my time at Facebook, helping to create seamless experiences.
I came to SWIVEL because I love to build things and solve problems. While Facebook was great to experience from a peak scale and operations perspective, SWIVEL is younger in that journey and being able to help build and grow the company has been both exciting and rewarding.
The demand for real-time payments is growing rapidly. What do you see as the biggest challenges for financial institutions and other sectors, like education, in adopting instant payments?
I think the two biggest challenges most institutions and enterprises currently face with instant payments is understanding the ecosystem and finding the right partners to help them navigate it. We have these two rails that don’t currently talk to each other, from the Federal Reserve and The Clearing House. Institutions know they must have ‘send’ and ‘receive’ capabilities for these rails in some form, so everyone’s either all in on one rail or one part of that journey. But then at some point down the road, they realize they did all this work and they’re only going to be able to capitalize on a very small percentage of it.
Additionally, I would also say enterprises need to really understand exactly where they can best use and implement instant payments and where it adds the most unique value, rather than trying to plug instant payments into every payments flow they have.
Specifically, financial institutions should think outside the box of just account-to-account (A2A) transfers, and also consider opportunities related to their commercial and treasury services. Most banks and credit unions have a lot of these services where instant payments can add tremendous value – things like payroll and taxes, where you want the money to be sent right away and timeliness of that transaction is very important. In these cases, action adds value for their clients if they can get the payroll there a day early and institutions, in turn, can then leverage this as a benefit and competitive advantage.
Many organizations are eager to adopt instant payments but are concerned about ROI and operational readiness. How can they navigate these concerns effectively?
There’s a lot to consider when it comes to navigating instant payments. A2A transfers are one example where institutions will need to be on 24x7x365. Furthermore, there are rules with these rails around when exactly they have to be online and what type of operational burden and responsibility they have in the process. Those take time and expertise to understand and are another reason why finding the right partner is so critical.
Organizations must really think about how they’re monetizing this space in a way that doesn’t end up getting them into trouble with junk fees or other regulatory issues. Institutions that are only focused on A2A won’t be able to monetize on that forever due to regulatory shifts around fee rules. However, there are other areas such as wire transfer fees, where institutions can find opportunities to monetize but also deliver cost savings for their clients, and finding that sweet spot is where they should target.
Could you explain the specific Send/Receive requirements for FedNow and RTP, and how organizations can smoothly transition from batch to real-time processing?
For organizations on the receiving end, it’s relatively simple. They must have a system or a partner who is “listening” to the Federal Reserve or The Clearing House for those received signals 24x7x365. While it’s not a huge operational or technological lift, it does mean an organizations’ systems cannot be down during certain times of the day. They need to be able to operationalize requests for return, yet no one is required to honor a return when it comes to instant payments as that money is sent and is final. However, you do have to issue back responses if a financial institution or an originating sender sends a request for a return (for example, if they found fraud). Thus, organizations must be able to respond to those requests and must also have some operational readiness for looking at that transaction, followed by deciding whether they agree or disagree with the assessment, the reason why, and if they’re going to let them claw back that money. And to complicate matters, there are a lot of different codes the Federal Reserve and The Clearing House have set up when it comes to those requests for returns, and understanding which to use at what time can be key.
For the sending side, organizations must have a strong fraud program in place to understand not only how they’re going to look at each transaction, but also what risk logic and controls should be in place. Is it a new account?
What’s their balance? How much have they sent? Is there a limit, and if so, what should it be? What type of account are they sending to? Is it a new contact or somebody that they’ve sent money to before? How your organization wants to handle all of the various scenarios must be answered to truly protect an organization’s platform.
Financial Institutions also need to think about their marketing approach and account holder engagement. Unfortunately, this is often an afterthought for many organizations, but it’s vital for engaging and educating clients on the risks related to instant payments. Stressing the value of two- or multi- factor authentication and placing better controls and locks around their accounts can help protect them. Institutions must also be very clear in their disclosures to help avoid some hard lessons for both sides.
Regulatory and compliance considerations are top of mind for many institutions. What should organizations be aware of in terms of state convenience fees, CFPB, PCI, Nacha, and other regulations?
The shifting landscape around fees is something all organizations absolutely need to keep a close eye on. There’s been a lot of recent scrutiny on junk fees and many long, ongoing discussions about convenience fees; specifically how they’re often hard to interpret when it comes to what’s a collection or paying a debt versus a service charge. Adding to this, regulations can vary from state to state as well as different card brand rules that don’t always match. It can quickly become very complicated. Organizations really must ensure they’re putting aside the time to truly research all these requirements and find a partner who can help them understand and navigate the landscape.
A common issue we often see is the confusion around when and how you can charge a convenience fee online. For example, while you are not allowed to charge a convenience fee on a recurring payment off a debit card, many platforms do so, and they can end up in hot water with the card brands for it. Another fairly common problem is that many organizations don’t realize they are not allowed to charge a variable fee for convenience fees by a percentage of the transaction, yet many do so as card processing can be such a significant cost to their business. That’s why it’s so important to understand these rules (or find a partner who does) and then tweak your system so that it stays within the bounds of them.
How does instant data visibility play a role in the success of real-time payments, and what benefits does it offer to organizations?
Data visibility is a big reason SWIVEL has invested so much in our Connect2Core platform. Knowing how and where to implement instant payments so they gather the most information, while also dipping into an institution’s core data in real-time, can give valuable insights, but the process should also be connected to a risk engine that can vet and apply the right logic around what transactions are allowed versus what’s not. This could be anything from the age of the account, the balance of the loan, or even daily, weekly or monthly spend limits.
Delivering real-time data back to the clients is super important as well as having real-time fraud monitoring, which is a critical piece of infrastructure for our own platform.
Can you discuss the advantages of taking an end-to-end transaction approach, and how it helps organizations realize the benefits of faster payments without fully committing upfront?
Providing that end-to-end solution bringing together all the different integrations means institutions will be able to recognize significant cost savings. At SWIVEL, we really focus on providing as many solutions as possible to address the numerous payments needs financial institutions and organizations have and what opportunities can provide them with a unique value. This is important as institutions work with many, often disconnected, vendors that don’t share a lot of data, making it harder to get a holistic view of what’s going on to make strategic decisions. But when institutions can see their entire payments flow, not only can they make better decisions but also find opportunities that may have been missed.
These insights help guide institutions on where instant payments can provide the most value, as well as determining whether they’re ready to be fully on FedNow and/or RTP. It also reveals how they can deliver instant-like experiences without the risks of instant payments. By providing institutions with that end-to-end experience and dipping into the core, we can execute changes right away but move the money later and do it in a much safer way. It also allows banks and credit unions to benefit from cost and operational savings while offering their account holders a real-time payment experience.
What strategies can organizations implement to support the diverse and changing payment preferences of their users or account holders?
Organizations must ensure they are continuously engaging with and getting feedback from their users and account holders. Understanding what they’re looking for, what’s important to them and what they’re experiencing is critical. Often, customers and members may not necessarily understand the technologies behind these experiences but knowing what issues they’re trying to solve or what they’re struggling with can give key insights into how organizations can develop their strategies to best meet these needs and demands. The financial institutions that do that well are the ones that are and will succeed.
Using data to show customers and members that you understand how factors like the economy or different life stages can affect them, while offering relevant programs and services, can strongly strengthen those relationships, building trust and loyalty. Organizations need to develop technology tailored to their account holders’ specific needs, rather than trying to fit or, worse, force them all into the same box.
How do you envision the payments landscape evolving, and what steps is SWIVEL taking to help clients stay ahead in this rapidly changing environment?
The industry’s digital platforms are going to continue to evolve and grow at a brisk pace. The significant transition we’ve seen over the last five to 10 years alone is likely to keep going. People don’t want to write checks anymore, instead preferring to use ACH to pay their bills. And while most people may not know their ACH routing and account numbers by memory, many often do know their debit card number.
Consumers are becoming much savvier when it comes to leveraging technology for payments and the industry is responding in kind. Many card brands and institutions are now offering the idea of a digital card, which allows users to create a digital card for specific sites or vendors, helping them to mitigate risk, track expenses and better understand and control spending. And institutions should be spending time thinking about how their account holders are engaging and interacting with other platforms so they can ensure they are providing the best experiences.
At SWIVEL, we’ve added Apple Pay and updated all our platforms with a fresh, user-friendly and accessible UI that is WCAG compliant to promote greater inclusivity for everybody moving to these digital platforms. We’re focused on our APIs and software development kits (SDKs) that enable our platform to plug into other software and solutions, not just home banking or collection solutions that financial institutions are using. This allows institutions to bring together all their technology and vendor partners seamlessly to create a truly holistic approach for meeting their account holders’ needs and expectations.
If we look at the payments landscape, as consumers get smarter and more tech forward/first, they are increasingly moving away from legacy payment systems like ACH and checks. The modern consumer prefers real-time experiences, yet they are aware of threats like fraud, creating an opportunity for institutions to address these concerns and support them on their financial journey.
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