To get to real-time payments ubiquity across any number of use cases, as Cyrus Bhathawalla, J.P. Morgan Chase managing director and global head of Real-Time Payments, told Karen Webster: Don’t just run the “old” payments train car on “new” tracks. Think differently and run the “new” payments train car on those “new” tracks.
To that end, the banking giant’s newly announced service has launched in pilot — enabling corporates to send requests for payment to the bank’s 57 million retail customers who, in turn, can pay those invoices immediately — represents a milestone on the road to real time.
Read more: JPMorgan Piloting Real-Time Payment Service
The Corporate Version Of A Zelle Payment Request
The natural progression, according to Bhathawalla, will be to move from its current pilot phase to full scale launch with other The Clearing House (TCH) Real-Time Payments (RTP) participant banks, and eventually move from B2C to B2B use cases, leveraging connectivity that’s already in place with real-time rails.
“It’ll be the corporate [or merchant] equivalent of a Zelle payment request,” he said.
In terms of mechanics, the service, where the first client is a yet unnamed FinTech, leverages the Chase Mobile Banking app and website to present the requests. The network, he said, is predominantly send capability. Request to pay represents a logical next step as a collection mechanism. When a consumer receives that request for payment, it will pop up in their mobile banking app.
The messages requesting payment themselves, said Bhathawalla, are data rich, opening a world of use cases beyond B2C, spearheading a transformation of the B2B space, particularly for smaller firms that have had to grapple with the paper chase and the fees tied to automated clearing house (ACH) and wire payments.
To be sure, the banks could use a technological leg up on the way to capturing more of their customers’ bill payment activity. In a separate interview between Webster and BillGO CEO Dan Holt, a majority of Americans used to manage their bills through bank bill pay; that number is only about 25 percent today. They’ve been encumbered by legacy technology.
Read more: Bank-Based Bill Pay Is Broken And Putting Direct Deposits At Risk
The conversation with J.P. Morgan’s Bhathawalla came across a backdrop where B2B beckons as a greenfield opportunity for a digital, real-time payments transformation, where paper checks and invoices dominate the B2B landscape. As many as 42 percent of B2B payments are done using paper checks.
See also: Why Paper Checks Still Factor Into B2B Firms’ Payment Optimization Plans
He told Webster that J.P. Morgan has hit the ground running with real-time payments, having been among the earlier banks to link up with TCH’s RTP network four years ago. That set the stage for sending requests for pay (RfPs) to Chase retail customers at scale.
“Most of the banks don’t have that luxury,” he said, referring to the retail customer base, and eventually “we’re going to go live to the rest of what we call ‘general availability’ — the rest of the TCH participant banks.”
Bhathawalla noted to Webster that companies can wait several days to receive funds from consumers and other corporates; using RfP, that payment can happen in a matter of seconds.
At a high level, Bhathawalla told Webster, “both consumers and corporates want additional options — they want more payment methods for different use cases and different user experiences.”
The RfP service, he said — with its eventual, natural expansion into B2B adjacencies — represents an illustration of J.P. Morgan’s technological approach that there need not be separate rails built for separate use cases or bifurcated between corporate or consumer clients.
The client solution-centric approach, marked by a single application programming interface (API) integration point (and online banking portal), will allow corporates to embrace real-time options on a case-by-case basis, with 24/7/365 functionality, he said.
A Single Network For Interaction
It’s also a way to bring several far-flung stakeholders together, he said. The consumer-to-business payments landscape is marked by a wide variety of banks, of billers with various (internal) technological capabilities (linking to receivables platforms or third-party providers) and biller directories. Connecting to the RTP network allows an ecosystem to be created, bringing all those entities into cooperation and collaboration with one another.
And with that connectivity, he said, comes the opportunity to move beyond bill payments — the old train car on new tracks — toward his desire to put new cars on new tracks.
As he pointed out to Webster, a handful of use cases are burgeoning and beckon in the B2B space. Those use cases will demonstrate how real-time payments can improve the buyer/supplier relationships that in turn can make supply chains (and cash flow) more transparent and efficient.
He expanded on a currently friction-filled interaction in which a gas distribution company replenishes a gas station’s tanks. The way it works now, the depot truck driver pulls up to the station, fills the pumps, and the paperwork between the gas station and distributor commences, with scores of forms involved.
It takes as many as 10 days for the distributor to get paid because of the paper invoicing involved, Bhathawalla said. With RfP, the supplier can send a digital invoice via tablet on the spot, with the correct dollar amount (tied to the exact amount of gas that’s just been supplied), delivered through a small business internet or mobile banking channel. The gas station can make the payment on the spot. The reconciliation is automated due to an end-to-end transaction ID that flows between buyer and supplier, between accounts payable (AP) and accounts receivable (AR) departments and back-office functions.
“The speed and the digital nature of requests for pay really starts to solve certain complicated problems,” said Bhathawalla, who added that by starting with the consumer side of RfP, “we think we can kickstart that innovation in B2B.”
Other verticals can benefit from that speed and transparency, he said, with a nod toward rent, which has been notoriously entrenched in paper conduits. Tenants receive invoices and may typically opt to make ACH direct debits every month. The landlords and the management companies would rather receive payments other than ACH (which have attendant fees) and thus have gravitated toward checks.
But as he noted, digitization can improve those economics.
“If we can replace the check with a request for payment message, then you can start to not only have the reconciliation benefits, but the speed, convenience and cashflow management benefits too,” he said.
A third industry set to be transformed by RfP: car buying. Recent earnings reports have spotlighted the growing comfort level consumers have with buying these big-ticket items online.
Read more: Data Is The Oil For Revved-Up eCommerce Car Sales
Traditionally, noted Bhathawalla, vehicles have been paid for with cashiers’ checks, ACH or wires. Those methods are inconvenient and are certainly not available 24/7 (in contrast to the always-on nature of the car buying platforms like Carvana or Vroom).
“Let’s get rid of that friction point and use request for pay for a 24/7 irrevocable real-time confirmed payment,” he said.
But it is within the actual real-time payments themselves, he said — no matter the initial use case — that the flexibility and ability to transform more aspects of the commerce experience lie. The payment messages are data rich, carrying information about buyers and sellers that can open a broader range of business transactions (while the instant nature of the payments removes credit risk from the equation).
Using that vehicle buying process as an example, he said, a J.P. Morgan corporate client — a dealership or an eCommerce firm — might be able to wrap other transactions, such as buying insurance, financing, or getting registration and title, into the mix.
As he told Webster, “We could package all of that, using the payment rails because it’s the ubiquitous network that everyone’s connected to. It’s no longer about the funds transfer. I’m now looking at the broader business transaction.”
Delving into the roadmap ahead for RfP, he said merchants, billers, and J.P. Morgan’s corporate customers will take the white-labeled service and brand it themselves.
By launching RfP at scale ahead of most of the other banks, and doing it internally with its consumer bank, he said, “we’re hoping that this is going to drive excitement and drive demand from corporates and merchants … There fundamentally is more value inside our real-time and RfP network than just moving money.”
To get to real-time funds ubiquity throughout any variety of use instances, as Cyrus Bhathawalla, J.P. Morgan Chase managing director and international head of Actual-Time Funds, instructed Karen Webster: Don’t simply run the “previous” funds prepare automobile on “new” tracks. Assume in a different way and run the “new” funds prepare automobile on these “new” tracks.
To that finish, the banking big’s newly introduced service has launched in pilot — enabling corporates to ship requests for cost to the financial institution’s 57 million retail clients who, in flip, will pay these invoices instantly — represents a milestone on the street to actual time.
Learn extra: JPMorgan Piloting Actual-Time Cost Service
The Company Model Of A Zelle Cost Request
The pure development, based on Bhathawalla, will likely be to maneuver from its present pilot section to full scale launch with different The Clearing Home (TCH) Actual-Time Funds (RTP) participant banks, and ultimately transfer from B2C to B2B use instances, leveraging connectivity that’s already in place with real-time rails.
“It’ll be the company [or merchant] equal of a Zelle cost request,” he stated.
By way of mechanics, the service, the place the primary shopper is a but unnamed FinTech, leverages the Chase Cellular Banking app and web site to current the requests. The community, he stated, is predominantly ship functionality. Request to pay represents a logical subsequent step as a set mechanism. When a shopper receives that request for cost, it can pop up of their cell banking app.
The messages requesting cost themselves, stated Bhathawalla, are knowledge wealthy, opening a world of use instances past B2C, spearheading a metamorphosis of the B2B area, notably for smaller corporations which have needed to grapple with the paper chase and the charges tied to automated clearing home (ACH) and wire funds.
To make certain, the banks might use a technological leg up on the best way to capturing extra of their clients’ invoice cost exercise. In a separate interview between Webster and BillGO CEO Dan Holt, a majority of Individuals used to handle their payments via financial institution invoice pay; that quantity is simply about 25 p.c at this time. They’ve been encumbered by legacy know-how.
Learn extra: Financial institution-Based mostly Invoice Pay Is Damaged And Placing Direct Deposits At Danger
The dialog with J.P. Morgan’s Bhathawalla got here throughout a backdrop the place B2B beckons as a greenfield alternative for a digital, real-time funds transformation, the place paper checks and invoices dominate the B2B panorama. As many as 42 p.c of B2B funds are finished utilizing paper checks.
See additionally: Why Paper Checks Nonetheless Issue Into B2B Companies’ Cost Optimization Plans
He instructed Webster that J.P. Morgan has hit the bottom operating with real-time funds, having been among the many earlier banks to hyperlink up with TCH’s RTP community 4 years in the past. That set the stage for sending requests for pay (RfPs) to Chase retail clients at scale.
“Many of the banks don’t have that luxurious,” he stated, referring to the retail buyer base, and ultimately “we’re going to go stay to the remainder of what we name ‘normal availability’ — the remainder of the TCH participant banks.”
Bhathawalla famous to Webster that corporations can wait a number of days to obtain funds from shoppers and different corporates; utilizing RfP, that cost can occur in a matter of seconds.
At a excessive stage, Bhathawalla instructed Webster, “each shoppers and corporates need extra choices — they need extra cost strategies for various use instances and totally different consumer experiences.”
The RfP service, he stated — with its eventual, pure enlargement into B2B adjacencies — represents an illustration of J.P. Morgan’s technological method that there needn’t be separate rails constructed for separate use instances or bifurcated between company or shopper purchasers.
The shopper solution-centric method, marked by a single utility programming interface (API) integration level (and on-line banking portal), will enable corporates to embrace real-time choices on a case-by-case foundation, with 24/7/365 performance, he stated.
A Single Community For Interplay
It’s additionally a solution to convey a number of far-flung stakeholders collectively, he stated. The buyer-to-business funds panorama is marked by all kinds of banks, of billers with numerous (inside) technological capabilities (linking to receivables platforms or third-party suppliers) and biller directories. Connecting to the RTP community permits an ecosystem to be created, bringing all these entities into cooperation and collaboration with each other.
And with that connectivity, he stated, comes the chance to maneuver past invoice funds — the previous prepare automobile on new tracks — towards his want to place new automobiles on new tracks.
As he identified to Webster, a handful of use instances are burgeoning and beckon within the B2B area. These use instances will reveal how real-time funds can enhance the customer/provider relationships that in flip could make provide chains (and money circulate) extra clear and environment friendly.
He expanded on a at the moment friction-filled interplay through which a fuel distribution firm replenishes a fuel station’s tanks. The way in which it really works now, the depot truck driver pulls as much as the station, fills the pumps, and the paperwork between the fuel station and distributor commences, with scores of types concerned.
It takes as many as 10 days for the distributor to receives a commission due to the paper invoicing concerned, Bhathawalla stated. With RfP, the provider can ship a digital bill by way of pill on the spot, with the right greenback quantity (tied to the precise quantity of fuel that’s simply been provided), delivered via a small enterprise web or cell banking channel. The fuel station could make the cost on the spot. The reconciliation is automated on account of an end-to-end transaction ID that flows between purchaser and provider, between accounts payable (AP) and accounts receivable (AR) departments and back-office features.
“The velocity and the digital nature of requests for pay actually begins to unravel sure difficult issues,” stated Bhathawalla, who added that by beginning with the patron aspect of RfP, “we expect we will kickstart that innovation in B2B.”
Different verticals can profit from that velocity and transparency, he stated, with a nod towards lease, which has been notoriously entrenched in paper conduits. Tenants obtain invoices and should sometimes decide to make ACH direct debits each month. The landlords and the administration corporations would reasonably obtain funds apart from ACH (which have attendant charges) and thus have gravitated towards checks.
However as he famous, digitization can enhance these economics.
“If we will exchange the verify with a request for cost message, then you can begin to not solely have the reconciliation advantages, however the velocity, comfort and cashflow administration advantages too,” he stated.
A 3rd trade set to be remodeled by RfP: automobile shopping for. Latest earnings stories have spotlighted the rising consolation stage shoppers have with shopping for these big-ticket gadgets on-line.
Learn extra: Knowledge Is The Oil For Revved-Up eCommerce Automotive Gross sales
Historically, famous Bhathawalla, automobiles have been paid for with cashiers’ checks, ACH or wires. These strategies are inconvenient and are actually not out there 24/7 (in distinction to the always-on nature of the automobile shopping for platforms like Carvana or Vroom).
“Let’s eliminate that friction level and use request for pay for a 24/7 irrevocable real-time confirmed cost,” he stated.
However it’s throughout the precise real-time funds themselves, he stated — regardless of the preliminary use case — that the pliability and talent to rework extra points of the commerce expertise lie. The cost messages are knowledge wealthy, carrying details about patrons and sellers that may open a broader vary of enterprise transactions (whereas the moment nature of the funds removes credit score danger from the equation).
Utilizing that automobile shopping for course of for example, he stated, a J.P. Morgan company shopper — a dealership or an eCommerce agency — may be capable to wrap different transactions, corresponding to shopping for insurance coverage, financing, or getting registration and title, into the combo.
As he instructed Webster, “We might package deal all of that, utilizing the cost rails as a result of it’s the ever-present community that everybody’s related to. It’s now not concerning the funds switch. I’m now wanting on the broader enterprise transaction.”
Delving into the roadmap forward for RfP, he stated retailers, billers, and J.P. Morgan’s company clients will take the white-labeled service and model it themselves.
By launching RfP at scale forward of a lot of the different banks, and doing it internally with its shopper financial institution, he stated, “we’re hoping that that is going to drive pleasure and drive demand from corporates and retailers … There essentially is extra worth inside our real-time and RfP community than simply shifting cash.”