Name: Real-time payments and its future in the US and worldwide
Uploaded: 2024-07-12T12:56:03.127Z
Duration: 562.66
Description: Bhavana Prathipati, Managing Director, Payments Product Management at Silicon Valley Bank, talks about the key challenges banks face in adopting real-time payments, and explores the multitude of factors that can hold back innovation.

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English

{{00:00:05}}
Hello everyone and thank
you for joining us.

{{00:00:07}}
My name is Julie Muhn.

{{00:00:08}}
I'm Senior Research Analyst with
Finovate and I'm joined today by Bhavana

{{00:00:12}}
Prathipati, Managing Director, Payments
Product Management at Silicon Valley Bank.

{{00:00:17}}
Thank you so much for joining us today.

{{00:00:19}}
Thank you for having me.

{{00:00:20}}
So we were just talking about
payments off camera because it's a,

{{00:00:23}}
an exciting and ever moving field.

{{00:00:25}}
I want to talk to you a little
bit now about real time payments.

{{00:00:27}}
Sure.

{{00:00:28}}
Can you tell us, we've been talking
about real time payments for years,

{{00:00:31}}
but what makes real time payments
so exciting, especially now?

{{00:00:35}}
Yeah.

{{00:00:36}}
And you're right.

{{00:00:37}}
Real time payments have been
talked about for many years.

{{00:00:40}}
And there are a lot of countries
that have already implemented  this

{{00:00:44}}
real time payment or instant
payment rail decades ago.

{{00:00:48}}
And what makes it exciting now
is where we're at in the US

{{00:00:52}}
path to faster payments, right?

{{00:00:54}}
think about it only about
less than 10 years ago.

{{00:00:59}}
We just had a vision, right?

{{00:01:00}}
The Fed said, let's put together a Fed
faster payments task force and see what

{{00:01:06}}
our vision to faster payment looks like.

{{00:01:08}}
From there, less than 10 years,
we have two payment, real time

{{00:01:12}}
payments network in the U.

{{00:01:13}}
S.

{{00:01:13}}
now.

{{00:01:14}}
One, a private network like
the Clearinghouse, and one, a

{{00:01:18}}
public network with the Fed.

{{00:01:19}}
I think that's what's making it more
and more exciting, that we have finally

{{00:01:24}}
arrived with faster payments in the U.

{{00:01:26}}
S.

{{00:01:26}}
now.

{{00:01:27}}
yeah, it is, it certainly is exciting.

{{00:01:29}}
And tell us a little bit
about  that excitement.

{{00:01:31}}
Why is it  exciting?

{{00:01:33}}
How can it change the game for different
stakeholders, including service

{{00:01:37}}
providers and also end consumers?

{{00:01:39}}
Yeah.

{{00:01:39}}
So even with the launch of real time
payments now, I think it has changed

{{00:01:45}}
the lives of a lot of people already.

{{00:01:47}}
For example, consumers, right?

{{00:01:49}}
Consumers, they would get paid
insurance claims, for example.

{{00:01:56}}
but they couldn't get
it when they need it.

{{00:01:58}}
With real time payments, we're making
instant insurance claims a possibility.

{{00:02:02}}
People would, for example, save money
in their digital wallets, and when

{{00:02:07}}
they want to use it over the weekend
or after hours, they weren't able to

{{00:02:10}}
do that because the bank was closed,
the operating hours were closed.

{{00:02:13}}
So that's how we're making a difference.

{{00:02:15}}
And then, apart from like consumers,
when you think about like commercial

{{00:02:19}}
clients or corporates, the same thing,
real time payments, 24 by 7, 365, it

{{00:02:25}}
just makes cash management so simple.

{{00:02:27}}
They don't have to worry about
okay, will I have liquidity

{{00:02:31}}
when that check posts, right?

{{00:02:33}}
Or three days from now when
that, debit is pulled out of my

{{00:02:37}}
account, will I have enough money?

{{00:02:39}}
So all of that, very short term cash
flow forecasting goes away because

{{00:02:44}}
they can better manage the liquidity,
better do better cash management.

{{00:02:48}}
Yeah, you know what's there and when.

{{00:02:50}}
Exactly.

{{00:02:51}}
Yep.

{{00:02:51}}
Great.

{{00:02:52}}
So talk to us now about some
of the challenges of making

{{00:02:54}}
real time payments happen.

{{00:02:56}}
And also, what are some of the risks?

{{00:02:57}}
So yeah, I could go on and on
about the challenges, especially

{{00:03:01}}
as a bank, as a banker.

{{00:03:03}}
There's a lot of, technology that
goes behind enabling something, and

{{00:03:08}}
that is why it took us 40 years to
get another payment rail in the U.

{{00:03:12}}
S., right?

{{00:03:14}}
a lot of technology, a lot of operating
rules, you have to be on 24 by 7.

{{00:03:21}}
Banks don't know how to do that.

{{00:03:23}}
Banks have always worked on a
reconciliation window or a cut off

{{00:03:28}}
period and all of that, and they
have to do away completely with

{{00:03:31}}
that, which is very difficult to do.

{{00:03:34}}
There are, technology partners that
are helping the banks do that and say,

{{00:03:39}}
okay, maybe,   You have your legacy
core banking, which, you have to churn

{{00:03:46}}
every night so that it posts all of
those payments that are processed

{{00:03:49}}
during the day, but then have a stand
in core, for example, that can take

{{00:03:54}}
care of when your main core is down.

{{00:03:57}}
So those are some of the technology
issues that we have that we're,

{{00:04:01}}
as a bank, trying to solve.

{{00:04:03}}
The other issue I would say is because
of all of these challenges,  banks

{{00:04:09}}
are actually a little slower to be
a part of one of these networks.

{{00:04:14}}
And I think both of the networks have
done a really good job of working with,

{{00:04:19}}
third party software providers so that
the connectivity, at least, is  easy.

{{00:04:24}}
Banks don't have to lay physical
circuits to these networks and stuff.

{{00:04:28}}
But at the same time, I think
there has been a dearth of fintechs

{{00:04:33}}
or technology partners that can
solve some of the core problems.

{{00:04:37}}
So I would say that's why the banks
are a little slow getting on,  but

{{00:04:44}}
with the advent of FedNow last year,
it's starting to pick up again,

{{00:04:48}}
because most banks said, oh, the
clearinghouse is a private network.

{{00:04:53}}
We don't want to join that one.

{{00:04:54}}
We want a public network.

{{00:04:56}}
And which is why fed came up
with FedNow, and we do, I think

{{00:05:00}}
we heard today, 777 banks have
already, become FedNow participants.

{{00:05:08}}
But the issue is that unless all
of the, banks become a part of that

{{00:05:13}}
network, it would still be, okay,
you can send a few payments real time

{{00:05:19}}
this way, but everything else you
fall back to a, T plus 2, T plus 3

{{00:05:24}}
kind of settlement window like an ACH.

{{00:05:26}}
So that is  one of the
major issues that I see.

{{00:05:30}}
Alright, so you've touched on
some of the challenges there.

{{00:05:33}}
Now tell us some of the risks
involved with real time payments.

{{00:05:37}}
sure.

{{00:05:37}}
And one of the main risks that comes
up every time we talk about real time

{{00:05:40}}
payments is faster payment, faster fraud.

{{00:05:43}}
And, that's truly a myth, but I think as
the volumes increases, the volume of real

{{00:05:49}}
time payments on these networks increases,
will prove that it's really not the case

{{00:05:53}}
because most of the fraud that we see
today in our payments industry is related

{{00:05:57}}
to check or is related to ACH debit, where
you're pulling money out of an account

{{00:06:03}}
without that person's knowledge, right?

{{00:06:05}}
So that's where, you will see
that, yeah, fraud is a risk.

{{00:06:10}}
But, again, with the admin of so many
real time fraud detection models that

{{00:06:18}}
are coming into place, I think it'll
just be easy to integrate that with a

{{00:06:23}}
real time payment system so that even
if there is fraud, those can be detected

{{00:06:28}}
by these real time fraud engines.

{{00:06:31}}
Yeah, interesting.

{{00:06:31}}
And both of those are very old
problems we've been dealing

{{00:06:35}}
with since the dawn of fintech.

{{00:06:36}}
Legacy technology and fraud.

{{00:06:38}}
Exactly.

{{00:06:39}}
Yeah, I just mentioned in the
previous panel discussion, we are

{{00:06:42}}
building the future of payments on
technology that is like decades old.

{{00:06:48}}
And that is why we still have a lot
of technical debt, which is again a

{{00:06:51}}
risk that we will have to address as
we build more and more on these rails.

{{00:06:57}}
Certainly.

{{00:06:58}}
All right, we have time for about
one more question here, and you did

{{00:07:00}}
touch on this a little bit earlier.

{{00:07:02}}
So do you think that real time
payments will take off in the U.

{{00:07:05}}
S.?

{{00:07:06}}
We launched last year.

{{00:07:07}}
What kind of growth
curve do you see there?

{{00:07:09}}
Definitely.

{{00:07:10}}
Yes, we will, take off, but I
think what's holding us back is

{{00:07:15}}
the collaboration that we need.

{{00:07:18}}
If you're looking at innovation,
banks are going to be the first

{{00:07:22}}
ones to raise their hand saying,
don't look at  us for innovation.

{{00:07:26}}
What we're good at is regulation,
making sure we're compliant

{{00:07:30}}
with all of the rules.

{{00:07:32}}
And then, it's the fintechs that we
look at for really the innovation and

{{00:07:36}}
how to use all of the features that
are presented with these rails and to

{{00:07:41}}
innovate right to solve like problems
that we haven't solved before or whether

{{00:07:48}}
it's speed or making it safer or one
of the use cases that we're seeing is

{{00:07:54}}
more around embedded payments, right?

{{00:07:56}}
Like how can you embed something if it
is slow and has a lot of manual process?

{{00:08:00}}
You can embed something when it
is  really quick, it's frictionless,

{{00:08:03}}
and it's straight through
processing, which is everything

{{00:08:06}}
that real time payments provides.

{{00:08:08}}
But at the end of the day,
I'm going to say, yeah, we

{{00:08:10}}
have seen use cases take off.

{{00:08:13}}
There are a large merchant working
with a large bank, or two large

{{00:08:17}}
banks working with each other.

{{00:08:19}}
And these are all good, and these
are use cases that'll give us  the

{{00:08:23}}
sustainable growth that we need on
the network like a month over month.

{{00:08:26}}
We would like we'd like to see
that, that we're processing

{{00:08:30}}
more and more on this network.

{{00:08:31}}
But again, for sustainable innovation,
though, we will need partnership

{{00:08:36}}
among a large number of banks.

{{00:08:39}}
Partnership among both the real time
payment network providers as well as

{{00:08:44}}
a large number of fintechs as well,
because I don't think one fintech and

{{00:08:49}}
one bank and one network can solve
and create a use case that would be a

{{00:08:54}}
game changer, but I think a collection
of those will definitely, be able to

{{00:09:00}}
produce something that's like never
been done before, not only in the U.

{{00:09:04}}
S., but even with real time
payments across the world.

{{00:09:07}}
Wonderful.

{{00:09:08}}
All right.

{{00:09:08}}
thank you so much.

{{00:09:09}}
This has been Bhavana  Prathipati,
Managing Director, Payments Product

{{00:09:13}}
Management at Silicon Valley Bank.

{{00:09:15}}
Thank you for joining us.

Hello everyone and thank
you for joining us.

I'm Senior Research Analyst with
Finovate and I'm joined today by Bhavana

Prathipati, Managing Director, Payments
Product Management at Silicon Valley Bank.

So we were just talking about
payments off camera because it's a,

I want to talk to you a little
bit now about real time payments.

Can you tell us, we've been talking
about real time payments for years,

but what makes real time payments
so exciting, especially now?

Real time payments have been
talked about for many years.

And there are a lot of countries
that have already implemented  this

real time payment or instant
payment rail decades ago.

And what makes it exciting now
is where we're at in the US

think about it only about
less than 10 years ago.

The Fed said, let's put together a Fed
faster payments task force and see what

From there, less than 10 years,
we have two payment, real time

One, a private network like
the Clearinghouse, and one, a

I think that's what's making it more
and more exciting, that we have finally

And tell us a little bit
about  that excitement.

How can it change the game for different
stakeholders, including service

So even with the launch of real time
payments now, I think it has changed

Consumers, they would get paid
insurance claims, for example.

but they couldn't get
it when they need it.

With real time payments, we're making
instant insurance claims a possibility.

People would, for example, save money
in their digital wallets, and when

they want to use it over the weekend
or after hours, they weren't able to

do that because the bank was closed,
the operating hours were closed.

And then, apart from like consumers,
when you think about like commercial

clients or corporates, the same thing,
real time payments, 24 by 7, 365, it

They don't have to worry about
okay, will I have liquidity

Or three days from now when
that, debit is pulled out of my

So all of that, very short term cash
flow forecasting goes away because

they can better manage the liquidity,
better do better cash management.

So talk to us now about some
of the challenges of making

So yeah, I could go on and on
about the challenges, especially

There's a lot of, technology that
goes behind enabling something, and

that is why it took us 40 years to
get another payment rail in the U.

a lot of technology, a lot of operating
rules, you have to be on 24 by 7.

Banks have always worked on a
reconciliation window or a cut off

period and all of that, and they
have to do away completely with

There are, technology partners that
are helping the banks do that and say,

okay, maybe,   You have your legacy
core banking, which, you have to churn

every night so that it posts all of
those payments that are processed

during the day, but then have a stand
in core, for example, that can take

So those are some of the technology
issues that we have that we're,

The other issue I would say is because
of all of these challenges,  banks

are actually a little slower to be
a part of one of these networks.

And I think both of the networks have
done a really good job of working with,

third party software providers so that
the connectivity, at least, is  easy.

Banks don't have to lay physical
circuits to these networks and stuff.

But at the same time, I think
there has been a dearth of fintechs

or technology partners that can
solve some of the core problems.

So I would say that's why the banks
are a little slow getting on,  but

with the advent of FedNow last year,
it's starting to pick up again,

because most banks said, oh, the
clearinghouse is a private network.

And which is why fed came up
with FedNow, and we do, I think

we heard today, 777 banks have
already, become FedNow participants.

But the issue is that unless all
of the, banks become a part of that

network, it would still be, okay,
you can send a few payments real time

this way, but everything else you
fall back to a, T plus 2, T plus 3

FinovateSpring

Explainer

Bhavana Prathipati, Managing Director, Payments Product Management at Silicon Valley Bank, talks about the key challenges banks face in adopting real-time payments, and explores the multitude of factors that can hold back innovation.