EH: Welcome to TMI’s Treasury Cast I’m delighted to be joined today by Cyrus Bhahawalla, Global Head of Real-Time Payments at JP Morgan. So, we’re going to talk about the evolution of instant payments and how Treasurers can benefit from them. Cyrus welcome thank you so much for joining us here today. Great to have your expertise on this, so tell me where Treasurers actually stand with real time payments are they embracing them. Is there still a bit of a kind of cultural maybe barrier around people thinking that they’re still just for retail and B2C rather than the B2B area what’s your views?
CB: Yes, firstly it’s a pleasure to be here and thank you for having me. It’s a great question I think one that’s probably been asked the better part of the last decade or so as we’ve started to see real-time payments evolve in the different markets that it’s been live in. And the way I generally answer the question is breaking it down into 2 different ways that a corporate organisation and indeed the Treasurer of the organisation can think about the products and the used cases. I call them kind of front of house and back office. So front of house is really where I think RTP helps a corporate improve their customer facing product whether that be a consumer experience or corporate experience. But with RTP’s 24 by 7 nature or data or indeed it’s real time speed improve a customer facing product and then there’s obviously the back office for the real treasury discussion. Where you talk about liquidity and cash flow benefits the 24 by 7 availability also plays a role in that specifically and I think to answer your question where do Treasurers stand it depends different regions different paces but also whether or not they’re looking at both front and back office. And very much so you know if I take a spin around the world in North America the usage from corporates has steadily increased significant interest but there is a challenge in very fragmented and the complex financial eco-system we have here with 7 or 8,000 banks. But we are seeing a greater interest in as more and more networks get added to the US eco-system think of Fed now and the significant interest that has come from Big Box Retailers, both E-Comm and in person. Europe different adoption rate because of regulatory impetus whether that be the threat or the reality of a regulator. I think even of the UK back when they launched over a decade ago now they were not mandated to adopt Real Time Payments. They merely needed to adopt something that was better than T Plus 2, I think very good foresight for those institutions that decided Real Time was the place to be, but that has obviously impacted Treasurers ability to get engaged. It was a little early frankly I think for some of those treasurers to really engage I’ve heard stories of Heads of Cash Management, Heads of the Institutional Banks needing to slow down payments. Because a utility company might receive a payment on a Sunday afternoon or a Sunday evening but not be able to do the cash application to the customers account until much later on the Monday. So I think there’s a different scenario happening in those markets. And then for APAC quite similar stories for Treasurers adoption of RTP legacy payment types not quite as prevalent there industrialisation has happened at a much later period of time. We also see significantly less card particularly credit card presence both in APAC and [inaudible 03:57]. And so as a result of those two things RTP has been more valuable to Treasurers in the C2B space and the collections space. And it adds a lot of appeal over other payment types that they may have in place because of its irrevocable nature being more similar to cash in those many cases under bank networks or markets I should say.
EH: Yes absolutely, it definitely has moved on and you know the Pandemic has obviously helped that as well. But I think mindsets are changing and you mentioned the Real Time collections and that’s obviously very attractive for people. But one of the things that is moving Instant Payments on as well is the advent of API’s. So Cyrus tell us a little bit about what’s happening there and what’s possible in Instant Payments now that API’s are kind of becoming more popular.
CB: I think it’s very simply if you think about Real Time Payment networks they tend to connect banks to other institutions you know whether they be traditional banks or other types of financial institutions it connects them in these Real Time environments. But what we have to remember is in order for us to send and receive payments we generally have to have a customer of some kind on either end of the transaction. The first boss I ever had used to tell me famously that it takes two to payments. And if we forget about ensuring that at the corporate or consumer customer needs to interact in a similar Real Time manner. What we do is we create a really gold plated fast networks between the banks and then we drop the ball when it’s comes to integrating with our corporate customers in particular. And you know in some legacy markets like the UK, API connectivity was not as prevalent at launch and I think it would be fair to say in combination with some other innovations that have occurred since then, it’s limited the total number of used cases that can be rolled out if you’re engaging on a more batch or periodic multi-[inaudible 05:42] basis. And we’re seeing markets around the world that have had RTP for quite some time re-platforming for this purpose. Whether that be the central infrastructure or whether that be an industry push towards there corporates there is a move towards that API in particular alongside our advanced portal capabilities create that Real Time connectivity and extend it to the corporates. I think what that does is it enables a host of what we call attended used cases, so think about a consumer actually being on their phone executing a payment, it’s a conditional payment. The famous story of my power being turned off or maybe it’s just to get a good physically shipped right so in separate instances some of them most powerful used cases albeit complicated to are around just in time shipping large manufacturers. And without things like API’s you slow down those just in time interactions. And the same applies here in the US in particular a big used case area is on-demand payroll in particular. So whether that be for gig economy workers or whether that be for traditional payroll employees who would like more flexibility to access their wages more frequently than every 2 weeks which is the traditional payroll cycle. And so I think that is a good example of how API’s are changing what’s possible with payments and indeed instant payments because it’s extending that instantaneous connectivity and interaction and it’s kind of that simple.
EH: We’ve kind of gone through a lot of the theory and you’ve given some used cases there but I’m wondering if there’s any maybe sort of anonymous client examples of how JP Morgan has worked with some corporates out there to leverage the innovation that we’re seeing in payments and API’s at the moment.
CB: Yes absolutely and some our clients are so proud of the capability that the RTP has enabled indeed many cases it being revenue generating for them, they’re quite happy for us to mention their names which is fantastic. But for the purposes of this you know I think the most successful and most exciting used cases we’ve seen our clients leverage focus on where it’s a customer facing improvement. They’re improved their product and they are actually able to generate revenue from that capability. So an example of that is our first RTP client here in the US was PayPal. And we actually allow instantaneous wallet draw downs or wallet withdrawals for a merchant to be able to send to their current or transaction accounts outside of their PayPal wallet. So PayPal obviously charges for this service but it’s a significant growing used case. We see volume increase on a regular basis and you mentioned Covid at the beginning of this. Obviously actually that had a significant demand for this capability as more folks were a little bit more cash poor. I think what was most interesting was we still haven’t seen a dip, we actually, to today our current volumes exceed both our pre-Covid and our Covid RTP volumes across every individual client. What that means is that we saw a huge spike in usage for this particular capability at the time of Covid but it was sticky enough and customers enjoyed the experience enough that they’re willing to continue paying for it over the long-term. And I think that’s a huge statement in of itself that consumers when exposed to the benefits of Real Time Payments value it and continue paying for it. Similar story with gig economy clients I think with platforms like Grub Hub where we help drivers and earners pay outs, similar to the PayPal story but again applying a much more instantaneous Real Time flexible way to extract money out of a platform. And then we’re working on all kinds of exciting things I think in the future, if we start talking about that Payment on Delivery excites me quite a bit because of the used cases are very transparent. Working with large distributors, breweries many of them actually stock up their truck and they go to their mid-tier, small-tier sized customers and they don’t exactly how much they are stocking until they arrive, they measure and they refill various different cabinets. That then ultimately even extends to industries like the Gas and Fuel industry where large trucks will fill up underground tankers underneath gas stations, petrol stations if you excuse my Australian accent. And even there we’re seeing a capability for RTP to do what’s called payment on delivery. So we create an end to end eco-system that leverages both RTP and in cases request for payment and we’ve launched this in some markets already under different guises and different names. But effectively allowing a just in time invoice delivery and payment system. Previously that was a multi-day in some cases in the Gas industry multi-week paper based form process. Which just doesn’t meet the same need, the commercial need is real time, we need to get those packages delivered, we need to get the gas in, in real time and the money moves 5 to 7 days after that due to paper process and because, it’s not just the payment system is not necessarily quick. Because we don’t have an ability to enable digitisation of the payments process across different entities. Because the payment moves across entities the data can as well and that’s where we’re seeing things like automated invoices for those bill of goods moving with the payment. And so I think those are some of the exciting new used cases with clients we’re working with right now.
EH: Yes, very cool stuff going on, it’s always good to hear lots of innovation. You mentioned requests to pay there, how do you find interesting request to pay because I feel like I’ve been writing about it for a couple of years and no one is terribly interested. But I know maybe in the US it’s a different story?
CB: Yes, look it’s a good question, I think two major things, so request to pay I believe will be extremely powerful, it will be the single greatest volume driver we have ever seen in the RTP network in the US specifically. And keep in mind it is live in other markets around the world but with more limited usage right. The RTP by nature being irrevocable is a credit push only mechanism. What that means is that if you want it as a corporate to collect funds, say at a point of sales, say at ecommerce, say for a bill or an invoice. That is very friction filled if the expect the consumer to populate all the routing and payment information which tends to be how it works today if you are not doing a direct debit. And here in the US the direct debit over ACH mechanism is a little different than it is in other markets around the world, you don’t require a mandate, you don’t need a paper or electronic mandate and that’s what people are more protective of their bank account information here in the US as well. It’s certainly something I had to come to grips with when I moved to the US. That particular environment for us in the US I think significantly drives the benefit of request for pay and we’re working with a number of clients. We’re actually launching our first pilot client live transactions in a month from now and we are seeing huge amounts of interest in this particular capability. And in ways that I think are really inspiring if I had written about request for pay over the past 4 or 5 years. We probably would have spent the majority of our time talking about bill pay, because that’s where everyone wanted to focus on, it’s the big volume. The reality is that is going to be a harder nut to crack for a whole host of reasons, but there are used cases between us today and bill pay that I think are extremely attractive to the types of clients who are already attracted to RTP. The traditional legacy clients you asked me earlier about what API’s enable. They’re still wrestling with the fact that ERP platforms do not directly ingest ISO 200/22 RTP transactions in many cases. So that is the limitation is a challenge in of itself. Getting those corporates to be able to then be able to do that for RFP which is very similar from a messaging perspective to RTP means those ERP platforms need that integration. It’s only we at JP Morgan Chase are working on and building our own receivables integration platforms between us and our corporates to do that because the ERP systems are just not there today, but I think that is also part of the challenge with request for pay in the US has always been thought about in many ways about bill pay.
EH: Yes, I agree.
CB: And bill pay has this inherent challenge with our legacy corporate clients. So I try to think about a slightly bigger request for pay opportunities.
EH: Yes, interesting stuff. Coming back to a topic that you mentioned in passing earlier, you touched on the data that obviously comes with instant payments. How are Treasurers coping with this influx of data that they’re now getting you know 24/7 essentially?
CB: Yes, no it’s a good point I mean a couple of things come to mind I told you the story about the UK based corporates who actually asked their cash management provider to slow down payments. I think it’s a combination of both the data itself and the speed at which the information is received. So for me a big focus is going to be on our platform work that helps the corporate ingest this data. The format and the scheme itself is something we can manage, there are slightly different RTP ISO 20022 schemes around the globe. We claim and we say it’s a global standard but there are regional nuances and differences. And even in the US where we have multiple payment systems, we have multiple messaging schemes in those systems. That’s totally fine though from my point of view, it’s a banks job to absorb those changes we have a single global API for our clients, so they don’t need to integrate with 17 different countries if they would like to go live in 17 different markets, we can do that in one big hit, with a single integration, with a single API. So I think that is a big way we can help Treasurers cope with the data, it’s how they ingest it. And then there is an element of how you can harness it, yes I think that is a more strategic long-term goal, purely because we first need to work out how we ingest it and put it in the right places across the ERP platform, billing systems, customer information files, you name it this data needs to be spread across a corporate organisations eco-system and that is not easy. So we focus very much on organisations eco-system and that is not easy, so we focus on that very up front piece at JP Morgan. And how you can harness it further down the chain, we’re already seeing clients use the additional data for there own fraud account takeover capabilities. So I think ISO 200022 lets you carry more information about ultimate the senders and receivers in a payment chain where it’s more complicated than point A to point B. And we can support our PSB service provider clients using those kind of fields, that’s how we’re seeing Treasurers really get benefit at this point in time enabling used cases for PSB’s, improving fraud, improving detection and protection capabilities. And then we’re seeing that data probably most importantly supporting (a) reconciliation already for our clients, just using a very, very simple end to end ID. It doesn’t need the 50 to 100 times of additional data we can carry compared to an ACH. Just that one field is incredibly powerful because you can customise it, as our clients you can customise that part of the field and that’s giving them phenomenal power because it’s part of their critical processing path. And I think from there, from reconciliation it can go onto how can we enable request for pay so that’s the ability to carry machine readable data in my mind that could end up being a much more enhanced version of bill pay.
EH: Yes, that makes sense, okay. So you’ve given us a few kind of glimpses of visions of what might be coming down the pipeline, but what else do you think is progressing in instant payments. What other kind of innovations do you think we might see coming down the line.
CB: I think the in short term request for pay is definitely a big focus for us and I think that’s consistent across the globe and what I would add to that is the appearance of consent mandate services to also enable you know more debit like functionality. In some markets like Malaysia they’re using centralised consent services particularly to enable direct debits across the real time payment system. So there’s nuances and flavours in request for payment management. Obviously cross-border real time payments is another big topic many different technical pilots. I think for us the big focus here is working out how we leverage our phenomenal global footprint. It’s the biggest global footprint of any transaction bank on the planet. So I think for us working out how we leverage that to provide our clients with cross border RTP capability is piece number 1 for us but also making sure that we work with each of our industry partners to avoid further fragmentation. The risk of building 17 different cross border RTP’s integrations is that we just create further confusion both domestically and globally. So I think for us with that position of having such a large global footprint we need to use that to drive co-operation and collaboration at industry level and it’s something we do on a daily basis. And then in terms of where do I see it progressing, you know I see innovation is the opportunity for us to collaborate with our clients now in a way that we couldn’t before, previously we were selling payments, commodities, services, moving cash from point A to point B. And in many cases it was a bit of a friction point in overall customer experience and I believe that RTP actually helps us remove that friction point and the phrase I use is exposes us to a broader business transaction. So what does that mean, I use the used car sales example so previously if I were to go and buy a used car in a private sale, I’d probably have to get a cashiers check or I’d have to get cash or something like that in order to facilitate the payment. With RTP consumers have a 24 by 7 real time payment mechanism that allows to make that actual transaction and instant confirmation of good funds on both sides. So you’ve removed the friction part of that experience but what else do you now get exposed to because you carry a lot more data as part of that transaction. Think about the fact that you could easily carry sellers information, buyers information, VIN information of the vehicle, registration information. All of a sudden you realise that when I buy a car I also generally get insurance of some kind, I’d probably DMV or equivalent registration, I might have finance on that vehicle, certainly possibly provided by my financial institution. You could actually embed all of those capabilities and use the real time payments network to remove the payment friction as well as to carry that data which would then enable an end to end platform. Think of an auto trader organisations, they could easily take their existing customer and use RTP to further enhance it. Both due to the speed of the payment but also due to the data the platform can transfer. And that’s what I mean by innovating with Treasurers, I don’t think this is the time for us to be thinking about purely migrating transactional volume. It’s a time for us to look at where we can actually help our clients with their customer interactions. Payments is no longer about moving money it is about being able to improve the customer experience.
EH: So final question Cyrus, I’m going to put you on the spot a little bit, I know it’s difficult to focus on one thing but if there were a single element of real time payments that you would urge Treasurers not to overlook what would that be and why?
CB: It’s a very good question and it’s specifically aimed at Treasurers, I would say this is not about putting an old train car on a new train track for one of a better analogy. Okay, most successful used cases we have seen across the globe and in markets we’ve been operating in for many years the successful used cases have not been the migration of flow from one payment rail to another. We’ve actually generated wholly new payment transactions, whether that be because batches have been split into individual transactions or just payment occasions that were not occurring prior to the RPT. I would urge Treasurers to not think about RPT as purely another payment rail, I would urge them to think about how RPT’s advanced capability can actually think about generating a new train car for a new train track, instead of just migrating volume. And I think that’s possible with RPT, it’s not necessarily possible with every other payment mechanism out there.
EH: Cyrus thank you so much for joining us today it’s been a pleasure having you here.
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Global Head of Real-Time Payments, J.P. Morgan
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