4 Ways Payment Hubs Strengthen A Real-Time Payment Business Case

With nearly 1,000 financial institutions (FIs) on the FedNow® system and more than 82 million real-time payments traveling via the RTP® network last quarter, real-time payments have arrived. Yet, despite this adoption, nearly three-quarters of FIs (73.4%) report not being equipped to send these payments because of challenges in their back-end legacy systems.“Corporates have fairly sophisticated needs, in turning both single payments, batch payments and such, and offered through many different channels—regular online banking, mobile banking, and whether it’s a dedicated internal API,” noted Steve Ledford, Executive Advisor, Finzly. “There’s a lot that needs to be done for a financial institution to enable send.”Payment hubs offer the strategic solution to this challenge. By using a unified API, payment hubs make it easy to integrate “send” capabilities across various systems and real-time payment rails. This not only simplifies orchestration but also allows FIs to customize workflows for seamless integration. Highlighted during a recent U.S. Faster Payments Council (FPC) webinar, sponsored by Finzly, payment hubs empower institutions to quickly implement real-time payments while strengthening four key business opportunities:

Payment hubs enable corporate use cases. A recent Finzly survey revealed that 77.6% of FIs believe corporates to be the largest source of potential revenue when it comes to real-time payments.“Talking to corporate treasury people about putting the power of when to make payments and when to receive payments in their hands, that’s where we’re starting to see a lot of the value,” said Erik Van Bramer, Senior Vice President, Federal Reserve Bank.Indeed, participant polling on the FPC webinar unveiled that nearly half (46%) of FIs are either already offering or in the process of offering instant payments to their corporate customers/members, while another 35% are developing a corporate strategy.A payment hub with a unified API simplifies the integration of real-time payments into banking services. During the webinar, James Dillard, CTP, SVP, Treasury Management, Texas Capital Bank, highlighted how instant payment APIs that support both RTP and FedNow, smartly being routed by a payment hub, are being seamlessly integrated into their corporate customers’ ERP platforms.
Payment hubs allow FIs to offer rail-agnostic experiences, creating simplified, efficient payments. As more payment rails are introduced, FIs have the opportunity to simplify their corporate customers’ payment processes. This means continuing to support mixed payables files and the APIs their customers rely on, while handling necessary validations. Payment hubs enable data enrichment, including conversions to the ISO 20022 format, which leads to smart routing to FedNow, RTP, or batch rails. Payment hubs excel at managing multiple rails while hiding these complexities from the end customer, ultimately enhancing the overall customer experience.“Let’s say it’s an instant payment. It’s shooting out an API call to check eligible RTNs, and it’s [payment hub] going to make that decision. If it’s not eligible in both [FedNow and RTP], it’s going to route it another way. The level of sophistication that that is at our fingertips is really amazing,” explained Dillard.Payment hubs support the customer’s/member’s desired end result, efficiently routing transactions and allowing for more control over cash flow and payment timing.
Payment hubs tap into data-rich offerings with ISO 20022. A payment hub streamlines the processing of ISO 20022 messages by providing a centralized platform that standardizes and routes communications across various payment rails. This enables seamless handling of rich transaction data, improving operational efficiency and enhancing customer engagement through real-time messaging capabilities.While not all businesses stand ready with ISO 20022 today, in the future they will. FIs should prepare now because opportunities already abound.“ISO 20022 is conversational commerce,” clarified Dillard. “That’s the ability to message back and forth with the beneficiary in real time. For our clients that are able to leverage it, it is definitely a game changer.”
Payment hubs ensure corporates can leverage real-time payments with certainty. Until every FI is equipped to receive real-time payments, there remains uncertainty around their use. By utilizing a payment hub with smart routing, corporate customers/members can be confident that their payment will be received. Payment hubs simplify processes at every customer touchpoint, ensuring interoperability and enabling seamless transactions, so payments reach their intended endpoints—regardless of the receiving institution’s status in its real-time payment journey.“I found that if you can, in every different swim lane along the customer journey, make it easier for them, the adoption rate is going to increase exponentially,” summed up Dillard.

Above all, as the industry continues to explore real-time payments, payment hubs offer exciting opportunities to scale up solutions and adoption—and the time has come for both.

One of the things I hear when I talk to various sized financial institutions is, well, we’re not hearing our customers asking for this. I don’t think you heard your customers asking for ACH 20 years ago. I think what your customers are asking for and what they’re looking for is all the efficiencies, the value, the ease, the simplicity that they expect. You want to fix what can you offer them or somebody else will.