Since person-to-person payments became accessible to community banks roughly a decade ago, many have adopted the third party technology as a bank-branded service. Last June, a new P2P network hit the marketplace. Called Zelle, the service is an evolutionary step in P2P in terms of transaction speed. Owned by a conglomerate of some of the largest banks, the network has also been made available to community banks through partnerships with FIS, Fiserv, and Jack Henry and Associates. Steve Shaw, Fiserv’s vice president of strategic marketing and electronic payments, talked about the evolution of P2P, how it works and what’s coming next for the technology.
Q. How has P2P changed over the last few years?
Steve Shaw: When P2P first emerged the idea was that it would be a great opportunity for people to split the dinner check or pay the babysitter. That was the mentality of the use case. As P2P launched we found people using it for higher value transactions, like paying the landscaper, sharing utilities and rents, or people sending money to their kids in college to help pay tuition. So the dollar amounts and use cases became more impactful to consumers. As smart phones became ubiquitous, P2P started to take off. While people continue to use P2P with the original intent, over time, consumers have taken it in a much different direction.
Q. If I’m a community banker considering adopting this service, what do I need to know about its security?
S.S.: One of the key values of a bank-centric P2P service versus a third party like PayPal is that the service is part of a trusted relationship consumers already have with their community bank. It’s not something they have to download, a different app to use, or use technology coming from a source they are unfamiliar with. If P2P is provided by a bank, all the security protocols already in place from a digital banking perspective are there. The guarantees customers already have with their community bank are part of the experience. I think that’s what drives a lot of people to use P2P through their bank. A security-conscious individual will be drawn to this service if offered through a bank.
Q. If my bank has decided to offer P2P as a bank-branded service what is the process to it put in place?
S.S.: Since Zelle was launched, there has been a huge push from a branding perspective. The key message behind it is that consumers can get this service at their bank. As this gets deployed at the bank, consumers can log into the bank’s web site and see a message such as, “Send money with Zelle.” There will still be the Zelle branding, but it will be fully-integrated into the bank’s branded mobile and online banking experience. There’s no need for a new account or new username and password. The consumer can just send money via an email address or mobile phone number. The recipient receives those funds through their bank if their bank also participates. If not, there is a website where the recipient goes to receive payment.
Q. In terms of regulation, does offering P2P add any additional concerns?
S.S.: No. Funds move over existing payment rails that have been in place for years. We leverage the ACH-ATM network or the debit and credit card rails. We do real-time validation in the bank’s core processor, which we’ve done for many years. All of it works within the infrastructure and regulatory framework already in place. It should be thought of as a new payment method, not a whole new system.
Q. Anything notable coming down the pike for P2P?
S.S.: The biggest thing we’re seeing is the move to real time. Until now, the theme has been we’ll move your money, but it will take a day or two (or three) to get there. The consumer has asked why can’t they have their money now? We’re already seeing use cases on this. Consumers have been demanding it and you’ll start to see more and more options for real-time transactions very soon.