Aptys_Pima_Catalyst from CUbroadcast on Vimeo.
Transcript
Host – Mike Lawson
On the show today we have Pima Federal Credit Unions very own Celyna Cervantes, and Catalyst Corporate Federal Credit Union’s Glenn Wheeler, and Aptys Solutions Eric Dotson, they’re all here talking about the advantages and benefits of launching FedNow for credit unions and Pima is one of the first to do it.
So good stuff here from these three fine folks here. So check it out everybody it’s Mike Lawson here from CUbroadcast. Welcome to our show and on today’s program look at the crew we have here. Oh, my gosh, we’re talking FedNow, instant payments the whole 9 yards here, especially when it comes to payments. And we got a great, great crew here.
So let’s do some introductions before we dive into the topic. Right below me. As you can see, it’s Celyna Cervantes from Pima Federal Credit Union. Celyna, how are you? Good to see you going.
Celyna Cervantes
Doing well, good to see everyone.
Mike Lawson
Yeah, we’re all here. We’re all here. And then right next to me we have Mr. Glenn Wheeler from Catalyst Corporate Federal Credit Union and Glenn, how are you?
Glenn Wheeler
Great! Good to be here. Thank you.
Mike Lawson
You’re welcome. You’re welcome. And then down diagonal from me. Oh my gosh, Eric Dotson from Aptys Solutions. Eric, good to see you. How are you, Sir?
Eric Dotson
I’m just glad I was invited, but yes, I’m very happy to be here.
Mike Lawson
Well, you were included Eric? Come on now. You’re always invited, so alright guys, alright, let’s talk about the advantages and benefits of launching FedNow for credit unions. Because you can’t swing a cat these days without talking FedNow and instant payments because well it just launched what like a month or so ago.
At least the pilot program.
So we’re all in the mix and getting this going and I’m seeing all the benefits that this will bring credit unions. Not only crazy but just the financial services industry in general? So I’m going to start off with kind of the big question here. As for all three of you, Celyna, you’re going to go first. Looking at the big picture here, why are instant payments so vital to a financial institution’s success today? Why is this so important? Why are we giving them all this so much attention right now.
Celyna Cervantes
I think there’s several reasons.
One that instant payment allows US. Financial institutions, including credit unions, remain relevant and sort of catch up.
The world of payments continues to evolve. We know that both consumers and businesses want the ability to move money and have access to their money instantly, anytime of the day and any day of the year.
So although current payment methods exist now there is friction on the back end operationally. It still requires a process for the clearing and the settlement. With instant payments it removes that friction for both the consumer and the FI. With instantaneous clearing and settlement FIs can gain operational efficiency and meet the demand of their members as well.
Mike Lawson
And yeah, so important, especially in today’s instant gratification environment that we’re also used to, especially in the retail environment. And Eric, I’ll let you go first from the Aptys perspective, What do you think? Why is this so important today? Why are instant payments so important for financial institutions today.
Eric Dotson
I think the thing that people need to remember is we’re putting in place these are the payment rails of the future, right? This is the way banking and commerce, and everything is going to be done on a faster rail, it’s going to be 24/7, It’s going to be 365 so that when you need to make a purchase on Labor Day, which was yesterday, and the banks closed. Hey, this rail will not be closed. You’ll be able to make that payment. You’ll be able to pay your vendor. You’ll be able to do whatever you need to be able to do. You’ll be able to move your money, have access to your money 24/7/365 and It’s so critical for anybody heading into the future and this creates that rail for us. That’s the way banking will be and working with a credit union in the future this is the avenue that that’ll all happen on.
Mike Lawson
Yeah, indeed. And last but not least, Glenn, let’s get the corporate credit unions perspective here as for the importance of instant payments from your perspective.
Glenn Wheeler
Yeah, yeah. Thanks Michael. I think it’s a it’s a real advancement for the industry, both from the perspective of being able to facilitate the transactions and the financial settlement within say it a network, it’s a rail that was built for instant payments. There’s been adoption of sort of faster payments leveraging existing payment rails up to this point, but this is truly an offering from the Federal Reserve to provide a payments network for instant payments that puts at the foundation of it the financial institution.
We have two institutions involved from a sending perspective as well as a receiving perspective in order for these instant payments through FedNow to work. And I think that’s very important because Celyna was talking about it. It really provides financial institutions. It gives credit unions the ability to provide these services that are in demand both from a consumer and from a business perspective, to be able to offer and provide that for the most trusted of two resources which is the financial institution, the credit union and will provide the ability for instant payments for both consumers and businesses in communities and in neighborhoods that are so important throughout the United States, and it is core to what the credit unions provide as far as services to these local communities as well, yeah.
Mike Lawson
Yeah, and hold that thought because you’re next on the second question here. As are each of you. But with FedNow this is 40 years in the making and so how do you see it changing the industry, Glenn, I’ll let you go first.
Glenn Wheeler
I really think that this is going to become quickly if not already table stakes for institutions to offer. Because I think it’s part of a financial institution that offer image cash letters, ACH, card services, wire.
I think instant payment is just going to be one of those is just a matter of fact the financial institutions are going to offer, and I think there’s tremendous advantages for them to offer you. Just take it from being able to receive instant payments there. You’re going to be able to have both consumers and businesses get their money faster. They’re that right? Alone has been attractive to many credit unions as far as. Onboarding on defend now it’s you know, there’s a litany of use cases and support instant payments, but one right there from a receipt standpoint is members get their money faster for those eligible transactions. And so, I really think this this change has been coming for several years and I think the general release of FedNow is one of those watershed moments that that we’ll look back and say this is where the springboard to a lot more instant payments truly started.
Mike Lawson
And Celyna, I’m coming to you for the credit union perspective. I mean, you heard Glenn say this is table stakes now. So what’s your perspective? Is it table stakes for you guys?
Celyna Cervantes
Yeah, I think it’s a step forward in the credit union industry and for other financial institutions. I think initially for now I see it changing the way financial institutions process payments, especially with government entities, I think we’ll see the demand continue to increase.
Oh, eventually increase adoption later in the future.
Mike Lawson
There’s going to be a lot of adoption, I think, for sure. And Eric, let’s get the Aptys perspective as well. How do you see? I mean, how do you see it changing the industry?
Eric Dotson
You know it has the potential to have a huge impact. Not just at the user level, but also throughout the industry as far as which payment channels people will be using as we go down this path. It has the potential to reduce your dependence on credit cards or reduce your use of checks. If you haven’t eliminated checks already, I mean, there’s a lot of different ways that it may be impacted just from the standpoint of the way that this rail is used right, as I’ve already mentioned, 24/7 and 365. No days off. But and I think Glenn mentioned this, the immediate availability of funds is key. Right. So, if I send you $100 as soon as that transaction is complete you can draw from your financial institution, the funds are good. They’re there. And so that is a change for everybody, and it will impact what’s happening with the other payments because I think users and especially businesses, they’ll adopt this and it’ll reduce their reliance on the other channels that they’ve been using.
Mike Lawson
Oh, good point. Good point.
Yeah, I haven’t heard that take just yet.
And Eric, I’m going to stick with you on the next one here. So what are some advantages and benefits of launching FedNow today? Are early adopters going to have any advantages here? Let me get your take on that.
Eric Dotson
Yeah, absolutely.
And I think there’s two key impacts I’d like to remind my financial institutions of who’s going to be impacted by this. When you look at it, the, the tech savvy customer. Right. Whether it’s a business or a consumer, they’re looking for these payment options and so, they’re number one and then younger generations. And I hear, especially in the credit union space. They’re looking at kind of a gentrifying. Customer base and they’re trying to figure out, well, how do we get more younger users into the pipeline to replenish what’s happening in the credit unions. And this is a direct line to that, the younger generation. I’ve got kids. I’ve got six kids, in fact. They don’t know what to expect because all they use is a debit card. And then they start looking at things like Venmo, or whatever. This has the chance to bring them back in. To say hey we have a solution for you. A technology solution that keeps your money safe in your financial institution and then delivers it in the moment when you need it wherever you need it. It’s just a matter of how we simplify that whole process for them and attract them back in. I think those are the things that went from a financial institution’s perspective as an early adopter. I want to be able to bring those customers in. I want to lock those into my organization and not lose them. If I wait, I run the risk of them going somewhere else to get the service that they’re looking for already.
I think that’s the benefit to the financial institution. Let’s get those good customers. Lock them in with the service that they’re looking for already and bring in the younger generation also and there will be a huge benefit for each financial institution that does that.
Mike Lawson
Yeah, and I think to your point about If you’re not going to be using, somebody else that’s going to incorporate it. So yeah, that, to me, is incentive enough to get on this and then again get that younger generation in the door as well and Glenn, how does the credit union from the corporate perspective, how does a credit union cost justify this system? And Celyna, you are more than welcome to chime in on this one as well with Pima’s perspective. So, Glenn, I’ll let you go first.
Glenn Wheeler
Yeah, it gets back to I think that the demand is out there so financial institutions that don’t offer this service run the risk of disintermediation and I think that’s where the cost justification can come into play. Although I really think that instant payments as a payment rail is going to be very market competitive from a pricing standpoint especially as it evolves more and more. Not just volume coming in, but innovation coming in and I think the value that you get from instant payments is going to justify the participation, but also the costs associated with those transactions.
There’s cost with ACH, there’s cost with cards, there’s cost with check and there’s cost with any payment rail. But I think instant payments are going to be cost competitive, especially when you take into account the value that they’re bringing in. Being able to provide new products and services, not just for consumers but businesses as well the ability with FedNow and instant payments. But not just do the transaction in the settlement, but with the transaction being able to accompany requests for payments and the ISO standard messaging platform, which gives the ability for businesses to really automate and create new efficiencies in their back office to be able to provide transaction data. The transaction I think it’s going to be very attractive and make those financial institutions that are early adopters very competitive for those business accounts as businesses transition and see the benefits of those efficiencies.
Mike Lawson
Yeah, yeah, yeah.
So many good points there for sure, and especially if you want to track those businesses as well. So, from Pima’s perspective, Celyna, I mean as a client was talking I’m thinking you got to play the long game here, right, this is really cool right now, and the immediacy of it all is really fun, but you got to play the long game here, right? So what are you guys looking at from Pima’s perspective.
Celyna Cervantes
I mean, we’re hoping that this will reduce our costs in terms of providing different payment solutions. As Glenn shared, you still push with all payment solutions. We really see that this will be an efficient way to provide value. I mean, we’re talking on the settlement side. Everything’s processing instantly or settling instantly. That would allow us to free up resources on the back end from our accounting with that settlement and reconciliation.
Mike Lawson
That’s a good point. Good point. I’m going to stick with you Celyna on the next one. There seems to be some misinformation out there about FedNow. Can you share what you’re hearing out there? Glenn and Eric, you guys are more than happy to chime in as well, but what are you hearing, Celyna?
Celyna Cervantes
Well, initially we were hearing well, we continue to hear, they believe that the FedNow Service is the central bank digital currency.
Mike Lawson
Oh, interesting. OK.
Celyna Cervantes
So many members, non-members have inquired and that’s what the buzz is out there. We have received a lot of questions regarding is the FedNow Service safe, can they safely process their transactions and also questioning whether the government has access to their banking or personal information?
Mike Lawson
Ah, good point.
Yeah, yeah.
Glenn, Eric, have you guys heard anything out there as far as misinformation or myth busting, if you will.
Glenn Wheeler
Definitely heard those that Celyna had mentioned, those are good. And a couple more we’re hearing there’s been some feedback we’ve gotten that this is just another ACH. You know, there’s some confusion, I think, between what FedNow is versus same day ACH and what the differences are between the two. So we have definitely heard that.
Yeah, I agree that the differences between Central Bank, digital currency and FedNow there is a lot of confusion on that one as well. We also have heard a little bit of confusion about how the settlement occurs with these two transactions through FedNow. The requirement that there be a master account at the Fed to handle settlement. We’ve heard that there are financial institutions that don’t have a master account and they think they need to open one and so we’ve had to educate on the fact that now you can still use a correspondent. Yeah, kind of like you do for other services.
So, there’s just a lot, but I think that’s natural for any new payment rail that is coming out that there’s going to be confusion and some misinformation.
And so it’s incumbent on us as an industry to really kind of clear those things up sooner rather than later. So that individuals can make good decisions based on true information versus things that misinformation that they may have heard in other in other areas.
Mike Lawson
Yep, yep.
And that’s why we’re having conversations like this to kind of clear the air if you will, Eric, what have you heard out there? Are you echoing both the sentiments here?
Eric Dotson
Yeah. I’ve heard those things, you know another one I’ll clear up is hey, you’re not going to be forced to get on this. So nobody is forced to use this payment rail, it’s completely optional. The other thing that that I think isn’t necessarily a myth but there is some confusion as far as people getting mixed up between RTP and FedNow. And what’s the difference and what are the rules? Because there’s some slight differences how you need to get connected in. If you want to get connected into one or the other and sometimes people will confuse what needs to be done in order to get on the solution and that’s great thing with organizations like Catalyst Corporate, that’s who Glenn’s with, they spend a lot of time working with customers helping them to understand exactly what is required and how they can get connected into the system. And you know, it’ll take a little time, but I think eventually everyone will start being clear as far as what’s and how do they get into the FedNow network?
Mike Lawson
And yeah, and that segueways nicely to my next question. Which is for Celyna and Glenn. Let’s flip the coin here a little bit here. Why would a credit union not want to launch FedNow as soon as possible?
Celyna Cervantes
Well, that’s a tough one, but why would not want to?
But I do think that some credit unions they may opt not to because perhaps it isn’t there from their membership. Maybe for us we’re seeing, yes, our members and businesses want instant payments or instant availability. But also, there are some institutions who want to wait and let the others adopt and see how it goes. I think for us we are very grateful in our partnership with Catalyst. They helped us along the way, but I’ve also found talking to other credit unions their concern is really the internal resources, operational resources that would be required to either implement the service or to continue to support the service after it’s live.
Mike Lawson
So, there’s many reasons why not to dive in right now. You want to seriously consider this. I would think so, Glenn. What’s your perspective on why credit unions would not want to dive in right away?
Glenn Wheeler
Yeah, I think it’s somewhat like what we’ve seen with the RTP network. Which is an instant payment as well, was launched about five years ago, and so there’s been some wait and see from credit unions to get on to an instant payment network. And I think many of them were waiting on FedNow, so I think FedNow has started to increase the momentum. But I agree with Celyna, I think we have some credit unions that are taking that wait and see approach. They may not have their alignment with their resources or budget considerations for this year. So, it may be a next year consideration as they think about not just budgeting but resources. It’s 24/7/365 and that’s kind of scary when you hear about that.
I think as an industry that’s another area where I think we need to do a good job of education. Educating the automation of that process and really if you are doing it right, there shouldn’t be a significant increase in the amount of resources that need to watch and make sure things are happening, things are happening in an automated way. And so, I just think that goes back to the confusion and misconception. I think the more that financial institutions get confident in the network and in things like security and fraud and they start understanding the benefits, I think more and more financial institutions are going to go from the wait and see to adoption.
Mike Lawson
Yeah, exactly right. I’m going to play a little game of ping pong here. I’m going right back to you, Celyna. On the benefits for financial institutions using their corporate credit unions here. Because obviously you guys and Catalyst are working together on this, so I want to get your perspective on that angle of instant payments.
Celyna Cervantes
Oh, sure. I think there’s several benefits to using a corporate credit union. I think for us, we were thrilled that Catalyst offered an end-to-end solution for us to participate because they really handled all the complexities of allowing us to allocate our resources more efficiently. Yeah, from the administration’s side, FedNow transactions are all housed for us in one familiar user-friendly location. Our corporate partner, Catalyst, also helped us with liquidity considerations we had in terms of that availability with 24/7/365 days a year?
Mike Wheeler
And Glenn, the balls in your court now.
Glenn Wheeler
I’ll add to the extension of that is the Catalyst partnership with Aptys Solutions, that partnership really affords us the technology, the transaction, the settlement, the full end to end solution. Because FedNow is a reentry into the payment system. But FedNow is the rails, it’s the ability for financial institutions to have access and to connect to one another for instant payments, but you still need a processing and even a front-end solution for your member experience that needs to hold on to that. Because FedNow is just going to get you access to other financial institutions that have made the decision to sign on and participate and FedNow. But it’s with just that you don’t have anything you have to have that processing and that ability to provide Instant payments, both from a send and receive standpoint, to your customers. And that’s the piece that we were, you know, alongside Eric and his team at Aptys to be able to provide is that end to end piece that does have the connection, the certification and met all those requirements to be a participant on the FedNow network.
Mike Lawson
And Eric, Glenn has teed you up nicely for the next question. He addressed some of the next question here? So, what does the process look like between Catalyst, Aptys the Fed? And financial institutions, or credit union in this case to get FedNow because it sounds like there’s four parties and it sounds like there’s a lot of moving parts going on here, Eric.
So can you share with us kind of how this all kind of gets wrapped up in a nice bow?
Eric Dotson
Absolutely, to add to what Glenn was saying a little bit, the way I like to explain it is, you get fiber optics coming down your street, you know the city puts it in. Yeah, you’re not connected yet, not until you get that part that connects you.
So, the same thing happens here with FedNow. FedNow is in place, but you’re not connected until you get that last bit that comes to your house. And that’s where our solution, working with Catalyst helps those financial institutions get connected into the network. And the great thing is with working with a partner like Catalyst who they take everything, and they try to synthesize it and simplify it down for the financial institution so that they take on a lot of the burden to help them get trained to help them understand what they need to do. The paperwork they need to get filled out and sent to the Fed, getting all that in place so that they can get connected.
Now the one thing I will tell everybody, it’s not as easy as maybe some of the other ones because the one step you have to take is you have to get connected all the way down to your core. This is a fully automated system. There is no manual posting or manual processing involved. It has to go all the way down into your core to be able to validate accounts and to post transactions. So it requires that kind of entrance into your core. And the great thing is that core vendors are recognizing they need to be more open. They’re opening up and they’re looking to partner with others out there.
We’ve got a number of cores that we are working with on a partnership to get connected into their core so that they can go and offer faster payments to their own customers. So that’s big, I think for the whole industry to see that start to open up to see those cores start to get connected in and that’s making it easier for each financial institution to be able to step to the table and say “Yeah, I want to use FedNow, and the rails can get connected into their core?”
Mike Lawson
Yeah, there’s a lot of moving parts, but yeah, once you get them all set to go and Celyna, I want to get the credit union because you guys are like I want to say you’re the end point, I don’t want to say the end user but your members are the ones that truly benefit from this. So, what’s been your experience so far? Because you guys have already launched FedNow. Folks are using it. And so, what’s been your experience as far as working with other parties and getting it going?
Celyna Cervantes
I think the process was seamless for us. Catalyst and Aptys did all the heavy lifting to what Eric described in setting that up between now with their core. I think we were fortunate that our core provider is open. They do offer open banking so that expedited that connection. But really, Aptys and Catalyst made it simple for us. They navigated it through the implementation. We had weekly calls just to keep us informed, but very little resources on our end. We just had to come down to making so the simple decisions on what should that transaction look like when it is posted to our core and really just the testing. So we’re very fortunate and grateful that we had this partnership with them.
Mike Lawson
Yeah, it sounds like things are going quite swimmingly at Pima so far. So that’s good news to hear.
So rounding out the interview here. Glenn, how does a credit union get started with FedNow? What’s step one and Step 2? How do they get going here, like Pima and that seamless experience they’ve experienced so far, so how do they get going here?
Glenn Wheeler
Well, there are several credit unions that are doing this. They’re reaching out to us to see where they are going, where their next steps are so you know, we’ve been able to help in that education of that overall explaining to them the importance of that core connectivity as well as online and mobile banking. Because I think all of those pieces come together. But as Eric mentioned that core connectivity is very important and so we’re encouraging credit unions to come to us and help in managing that core connectivity. To let them know, maybe they’ll be this like in the example with Celyna and Pima’s core provider. They’re already connected, and so it’s as simple as an onboarding process, very much like the experience that Celyna had.
There are others where that connectivity or that capability with their core may not yet exist. But our avenues that we’re working on along with Eric and the Aptys team to make those connections. So, we’re really encouraging credit unions to come to us because we can help navigate. We can help quarterback all of that for them. We can help with the training of what the requirements are at the Federal Reserve with FedNow with all those various forms and things to make sure that they’re not turned off ACH processing, by virtue of the fact they filled the form out wrong.
You know, we can help with that. Can help with the core piece. We can also help with the settlement piece. We’re doing some things there to make that very much a seamless solution. So we’re asking credit unions, come to us and that’s why we’re doing a lot of member meetings, calls, one-on-one visits townhall meetings, to really try to get them to come to us. And, it’s not just the onboarding and the mechanics but also talking about how this can fit with a credit union’s overall payment strategy. So there’s the strategic piece as well as more the administrative operational pieces and we’re encouraging those conversations and so far, there’s been a significant increase in credit unions taking us up on that and having those conversations. Which I think is a real positive as well they should.
Mike Lawson
So, before I let you guys go. Celyna, I want to ask you this quick question here. What was your message to your members about FedNow. I mean, obviously this is a great value add for your credit union. Was there any special messaging or anything to the membership saying “hey, we can do instant payments now. “What was your messaging real quick?
Celyna Cervantes
It was a soft message. I think really what we wanted to ensure was we fully understood and had a grasp on the process. We did inform our members. We let them know that we are introducing and offering the service, we asked that they contact us for additional information. We do plan on releasing more information in the future once we turn on additional capabilities. But really, we’ve connected with every member who has expressed this to us, “Hey, we want to we want RTP services, or we want faster payment services. What options can you provide me?” So, we did reach out to those members personally. But we do have plans to further communicate the value that this service is providing for our members.
Yeah, because I think your average consumer doesn’t, when they hear FedNow, they’re like what? So I mean we all know it because we’re in the industry and we know the vernacular, all the terminology and stuff, so yeah, I’m very curious to see what credit unions are going to be sharing with their members.
Mike Lawson
So as this rolls out so good stuff.
Alright guys, I know you all have jobs to do. I don’t want to keep you too much longer, but my last question is there anything else here to add to wrap up, Celyna. I’ll let you go first. Anything else here to add to wrap up as we are still in the beginning stages of this. So, but any final thoughts on our conversation today?
Celyna Cervantes
Really just some final thoughts, if there are any other credit unions that are looking to explore, I encourage them to seek their corporate credit union as a partner. It’s a very great resource in terms of educational resources. But also like they will guide you through any implementation.
Mike Lawson
Good message, good message, Glenn, any final thoughts here?
Glenn Wheeler
Well, a couple real quick. One is we couldn’t have asked for a better first out of the gate partner credit union than Celyna and the team at Pima. I mean, she was a little kind there. You know, they were first and we learned a tremendous amount because of their working with us and always being there and available for us. So that’s first and foremost. The second thing I would add is our first transaction we have did, did go that first evening of the first day of the general release of FedNow and it came from another credit union. Star One was the credit union that sent the transaction to Pima. And I really think that that is a demonstration of the credit union industry taking on this new payment rail and that was that first one of those first transactions being a credit union sending to a credit union. That was really special, and I think is indicative of the credit union movement and the fact that credit unions work and help each other and help their members.
And I think that was a whole new era started that night for sure, so good for you guys for taking that big step.
Mike Lawson
Alright, Eric, going to let you have the final word, Sir? What’s the final word from Aptys?
Eric Dotson
I appreciate this, Mike. And certainly, one of the things that I wanted to make sure everybody knows as Celyna mentioned or trying to figure out how you want to work with your corporate credit union? But then there are also credit unions out there that don’t necessarily work with the corporate or they want to try to figure it out on their own. Give us a call and we’ll work with you and help you through that process. And then understand that this is the beginning, right? We’re at the tip here on what we’re seeing with FedNow and faster payments. And as we continue to go out and to grow and start seeing how people are using this new channel, this new service of faster payments, we’re going to see all kinds of different ways of applying this and it’s going to route this whole new industry of different types of payments that leverage this channel be able to complete that transaction immediately. And so it truly is a revolutionary type of a service that the industry is going to be putting in place and we’re going to experience change in the industry over the next few years as people learn how to use it, as they open up their imagination for different ways of doing payments and creating new services in the market. So it’s kind of exciting for everybody I think.
Mike Lawson
Very much. Yeah, very much. I can’t wait to see what it looks like, six months or a year from now, it’s going to be exciting. And the other thing is we all go to conferences all year long and we keep hearing that “r” word relevancy and this is a technology that will help your credit union remain relevant and keep you top of the list for your members and other consumers. They’re looking for something out there. So yeah, I think this is something that will keep you top of mind for folks out there. So good stuff. All right, guys, I’m going to let you get back to work. Thank you so much for your insights and your expertise and look forward to another conversation down the road as we really get rolling with this. So thank you again for your time, that was a lot of fun.