Mark Majeske is the senior vice president of faster payments at Alacriti (Off-site), a financial technology company that has developed a comprehensive payments platform, Orbipay Payments Hub (Off-site), to support money movement and payment services for banks and credit unions.
We spoke with Majeske about the early implications of the FedNow® Service for Alacriti’s clients, and how these banks and credit unions are integrating instant payments into their payment offerings.
Q: Can you describe Alacriti’s payment solution and how the FedNow Service fits into this offering?
A: “The Orbipay Payments Hub lets banks and credit unions automate payments in a central hub that connects their payment rails – whether they are traditional rails or instant payment rails like the FedNow Service. Our hub does the heavy lifting and takes the burden off the financial institution for the day-to-day processing. We work with banks and credit unions to meld into their current processes, including integrating with a financial institution’s core providers, whether the organization works with one main provider or has separate providers for each rail.”
Q: With the FedNow Service now live, can you describe its impact on the payments industry?
A: “One of the first things I’ve noticed is the invigorated interest in instant payments. I like to say we’re going from a revolution to an evolution. In the beginning, there was a focus on education because banks and credit unions couldn't immediately picture a new instant payments rail as part of their offerings. But the conversation has shifted from what instant payments are to how financial institutions are going to use them.
“I’ve noticed that many of our customers were waiting for the FedNow Service to provide functionality for banks and credit unions to be both a sender and receiver for instant payments. As a service provider, we support banks and credit unions with use cases for sending instant payments. Right now, we’re looking at ways to create products or overlays that financial institutions can use as part of their online banking and mobile apps to make that process easier.
Q: Speaking of use cases, what are some examples of how the banks and credits working with Alacriti are using the FedNow Service for their customers?
A: “I always start with loan disbursements when talking about use cases I see most. Loans are a competitive business, and if a credit union allows customers to apply for a loan online but takes five days to deliver the money, it’s not a great member experience. It’s a big reason loan disbursements are migrating to faster payments.
“Payroll is another one we see for obvious reasons. If you are a rideshare driver, for example, and can get paid at the end of your shift, it’s a great benefit if you need that money to, for example, pay your bills on time.
“From a business perspective, companies are moving toward making invoicing a more digitized experience. It's not just about the money moving, it's about the data moving as well. Billers also are using instant payments, because they want to send requests for payment online and in turn, give the receiver the convenience of paying it online.”
Q: We hear customers mention instant payments supporting transactions traditionally sent over wire; have you seen this in the market from your perspective as well?
A: “Yes, I see a lot of real estate transactions, for example. One of our financial institution customers was using wire, and now they're sending the funds required to close on each house through instant payments. Instant payments can also help mitigate fraud. The industry has seen a lot of ‘man-in-the-middle’ fraud where a fraudster redirects the sender to another account during the wire process, and instant payments help negate this with instant confirmation of settlement.
“The same evolution is happening with auto purchases. We've always wanted a turnkey solution for purchasing vehicles on a Sunday when your bank is closed. With instant payments, you could go to your bank’s mobile app, apply for the loan, get approved for it, put in the vehicle identification number (VIN) – and the funds are sent to the dealership. It means you could be driving off the lot with your new car on Sunday. That's the kind of thing we're seeing – an iteration where the bank is sending the funds to the dealer with instant payments. Ultimately, these instant solutions are solving real pain points and greatly improving the customer experience.”
Q: What’s your advice for financial institutions new to instant payments and weighing the options to work with a service provider?
A: “I encourage financial institutions to go back and survey their customer or member bases to understand what customers want from payment offerings. Instant payments are a tool, and each financial institution's portfolio is different. The next thing is to look at the current fraud system in place. Many financial institutions have fraud systems that do a great job for ACH and wire, but processes may need to change in an instant payments environment.
“Financial institutions should include their current or prospective service providers in these considerations – we are here to help as partners. But first, take the time to understand your own organizations and what changes are needed in terms of back-end processes and settlement. That will help you define a set of questions when speaking with a service provider and allow them to evaluate exactly what’s needed to support your organization.”
Pioneers of Now represent engaged financial institutions, service providers and organizations in the broader payments ecosystem united by their commitment to early adoption of the FedNow Service (Off-site), which launched in July 2023. This is part of an ongoing series of Pioneers of Now features (Off-site).
