In previous posts in this series, we’ve looked at the evolution of faster payments from more traditional approaches, and at a few of the capabilities of Interac e-Transfer® that drive valuable use cases for individuals, businesses, and financial institutions. With this post, the final in the series, we decided to focus on how faster payments creates value for financial institutions every day – and thus why we put so much effort into enhancing this offering.
Obviously, faster payments reduces costs for a financial institution. Transferring money digitally and rapidly eliminates back office processes, equipment, and people – or outsourced vendors providing the same – that were required to support value transfers made by cheques, money orders, and other physical instruments. The more payments made digitally, the fewer paper-laden trucks driving from bank to bank as part of the clearing and settlement process – and the fewer assessors in basements labouring to catch fraud by comparing signatures and spotting kiting schemes conducted via physical cheques. Similarly, faster payments drives cost out of the front office as well, because customer service staff spend less and less time writing out money orders, withdrawing cash, and cancelling cheques for customers.
The reduction of the time and effort required to move money from one person to another, or from one business to another, removes the “friction” in using these financial services. To a customer, the experience is simplified. Money transfer and payment-making become easy, fast and convenient – which means they’ll happen more frequently and in greater volumes. To a financial institution, it means that focus can now be shifted to higher-value-added services that are more complicated and customized, creating more room for competitive differentiation and more opportunities to improve profitability. With the arrival of fintech competitors who are offering easy-to-use P2P payment services on mobile apps, it’s more important than ever for financial institutions to offer their customers similar functionality and ease of use at the level of payments and transfers, while offering more complex and creative services that leverage their competitive advantages in areas like risk management, capital deployment, and analytics.
What’s more, services can be built on top of a faster payments engine like Interac e-Transfer. Functions like remittance notifications, its user directory, world-leading fraud management, and the ability to set value transfer limits at a group or even per-user basis enable a financial institution to craft customized and segmented offerings with powerful features – which means that payments can be used to differentiate a financial institution even further.
To individuals, faster payments offers speed (instant funds availability), trust (through strong security and fraud management), and reach (via smartphone apps, online banking, and point of sale). Together, these three attributes drive payment/transfer volumes and frequency, because faster, safer, and easier means more transactions in more situations with more people. And with faster payments becoming second nature to consumers and businesses, this means less currency sitting in pockets and more money kept in a financial institution’s accounts – money available for lending, and for supporting the institution’s other products.
And that works out well for everyone.