Want to Go Fast, Go Alone. Want to Go Far, Go Together.


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There was a plaque in my father’s office that is attributed to the late David Ogilvy, often called “The Father of Advertising. It read, “Search the parks in all your cities, you’ll find no statues of committees,” which I always interpreted to mean, “YOU need to make something happen; don’t wait on others to get going.”

But going it alone in the banking industry is extremely difficult because of the complexities around regulation, underwriting, competition and the thousands of vendors that serve it. Combine that with record breaking investment in financial technology and the next few years may very well serve as our “big bang” and usher in a new era of banking.

I’ve observed how companies seeking to make a real impact within the industry rarely do it alone. While we need committees in business, maybe what we need more is a “virtual committee,” or community of fintech players, to better understand the nuances within the landscape. The value of this fintech community is to provide industry intelligence, serve as a sounding-board for new ideas and foster relationships to move you faster in achieving your organizational goals.

The fintech community should also include thought leaders, published research and reports—and most importantly, peers from outside your organization. Even competitors can be valuable resources for your company and contribute to your personal development.

The banking segment will likely see more action than the rest of the economy. In the future we will probably witness the following:

  • The adoption of a new fintech charter
  • A relaxation of the regulatory burden
  • Improved bank earnings, helped in part by rising interest rates
  • Increased customer expectations

Individuals and organizations that embrace the industry as a community and foster relationships will have a competitive advantage.

Why Dramatic Change in Banking is Hard
Many of the products and services that banks offer are mature, even bordering on commodity status. Technology advances we see in our industry tend to fall into a few categories:

  • How banks deliver products (channel)
  • Customer insights and recommendations (managing their money better)
  • Ease of doing business (speed, simplicity and service)
  • Tweaks to traditional business models (sources of funding, hyper-focused segmentation)
  • Operational improvements (automated processes, enhanced security and improved regulatory compliance processes, to name three)

Many of the platforms we used today are in the process of being either rewritten or replaced. According to one vendor, the life cycle of fintech moving forward will be five years or less on average.

The technology that the vast majority of financial institutions use today is a result of decisions spanning over many years and engagements with a lot of vendors—typically from dozens to hundreds of relationships.

Media, fintech executives and investors have a tendency to focus on new and shiny technology without an appreciation of how hard it is to run a technology company in the financial industry, much less what it takes to achieve long-term success.

Agents For Change
Vendors looking to grow their businesses seek focused education and networking opportunities. Organizations such as the Association for Financial Technology, or AFT, enable vendors to learn about technologies, which organizations are doing well, and gain industry insights that help provide a perspective for decision-making. This particular fintech community includes companies of all sizes that have implementations in virtually every U.S. financial institution.

Ultimately, people do business with people, and fintech advances won’t happen until two people or two companies agree on a shared vision. Finding your community, and being a good citizen within it, will enable you to grow professionally and help your company succeed and make a positive impact.

Additional resource: “What You Need to Know About AFT Fall Summit 2016” by Kelly Williams.

Blockchain Makes Digital ID a Reality


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The concept of identity has not kept pace in a world of accelerated digitization and data. Nowhere is that more apparent than the cost and friction involved in answering three basic questions simply to engage in commerce:

  • Are you who you say you are?
  • Do you have the mandate you say you have?
  • Can I trust you?

Imagine a world where once these questions are answered the first time, no one else needs to ask them again, or only a subset or new information has to be provided. Archaic identity systems aren’t just frustrating—they’re holding back innovation. The full potential of financial technology and digital global finance, so close at hand, will come about only when a global standard for digital identity does. The technology to make that happen? Blockchain.

A blockchain is a record, or ledger, of digital events, one that’s “distributed” between many different parties. It can only be updated by consensus of a majority of the participants in the system. And, once entered, information can never be erased. With a certain and verifiable record of every single transaction ever made, Blockchain provides the underlying technology to give consumers control over their own portable digital identity.

Blockchain brings digital identity into 2016 (and beyond), opening the full potential of digital innovation to change how we buy and sell goods and services, manage health and wealth, and present our digital identity to the world.

BYO ID
Identity data is everywhere—on all types of devices, applications, private and public networks—but it’s disconnected and doesn’t present a complete, accurate profile of a customer. Plus, it’s personal information: Shouldn’t each person own their identity data and choose what they share and when?

Blockchain is a universal, distributed database that can make it easier for individuals to consolidate, access and reveal what they choose about their own identity data. It’s generally considered more secure, reliable and trustworthy than previous identity solutions because it’s controlled by the user and immutable—protected by a combination of cryptology, digital networks and time stamping on a decentralized network not controlled by any single entity.

Blockchain-based digital ID brings identity into a single record—a persona—that is effectively pre-notarized and authenticated and usable almost anywhere. Individuals control their own ID, adding references and third-party endorsements to verify authenticity, so customers and banks can trust that the content is accurate and secure. It offers an extremely efficient way to capture, share and verify information, and establishes a reliable, secure but relatively easy way for individuals to open a bank account, set up utilities, pay taxes, buy a car—nearly anything requiring personal ID.

Benefits of Blockchain Digital ID
The trust breakthrough: Most customers have a rich online record of what they do, who they know, buying habits, credit—but banks and customers both need better reasons to trust the accuracy, completeness and security of identity data. With customers in control of identity data and a framework for rapid verification, blockchain enables an environment more conducive to mutual trust.

New opportunities: Blockchain provides entry into an ecosystem that increases in value as it expands, providing multiple points of ID verification while creating a more complete description of personal identity. This enables banks to “know” each customer better and offer tailored products that are valued and appreciated.

More loyal customers: Customers typically bear the brunt of inefficiencies, wasting time filling out forms, repeating conversations and gathering documentation. By increasing efficiency, security and accuracy of customer data, next generation digital ID helps make banks more attractive to existing and potential customers.

Improved regulatory compliance: Financial firms spend up to $500 million a year on Know Your Customer and Customer Due Diligence compliance. Next generation digital ID can reduce compliance costs by providing a universal, secure platform for consolidated data collection and records management.

Transparency and better controls: With users controlling their ID and every action an immutable record, you’re less likely to have problems with ID management, theft, security and inconsistency. You can also reduce risks of paper documentation left on desks or digital information with insufficient tracking and controls.

Blockchain-based digital ID fundamentally strengthens identity security and can help ease the burden of regulatory compliance. At the same time, it can improve the customer experience and establish a more solid basis for trust between banks and customers. It also transforms identity data into a rich description of a person, so banks can anticipate customer needs and offer solutions that actually make sense for each customer.

Through blockchain, digital ID is poised to completely change the way we think about and manage identity. It can solve old problems and open new opportunities for banks that are ready to embrace the change.

Embracing Disruption: Why Banks and Fintechs Should Work Together in a Regulated Environment


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At first glance, financial technology companies and banks are competitors with similar products but different business models. Fintech companies need fast growth to survive. They must exercise quick marketing strategies and adaptive technologies. And they excel at reaching customers in new ways and providing more personalized customer service. Banks, on the other hand, rely on well-established customer networks, deep pockets and industry experience for their success. However, if they want to preserve their customer base and continue to grow, banks will have to adapt to what’s happening in the financial technology space.

Fintech companies and banks both face many unique challenges. Fintech companies must often decide how to allocate limited resources between marketing, intellectual property, compliance and cybersecurity concerns. Banks depend on legacy technology, lack market speed and must continue to keep pace with new banking regulations and technologies. Although both fintech companies and banks face significant legal barriers, they have different needs and strengths. Fintech companies need the deep regulatory experience that banks have developed over many decades. Banks need flexibility to adapt new technologies to changes in the compliance landscape. These differing but not incompatible needs present an opportune cross point for partnership.

The following laws and regulations exemplify a small portion of the regulatory challenges and business relationship opportunities for fintech companies and banks. Please be aware that all financial products—especially new financial technology products with uncharted regulatory profiles–may implicate many other laws not discussed below.

  • Money transmission laws: In order for a fintech company to transfer money between two individuals, it must be licensed under federal and state money transmission laws. State money transmitter laws vary greatly and this creates a considerable barrier to entering the market on a national scale. Banks are generally exempt from state money transmitter laws. Fintech companies can meet money transmitter compliance requirements by strategically structuring the flow of money with banks. Alternatively, fintech companies can act as an authorized agent of a licensed money transmitter service provider.
  • Lending and brokerage laws: State law may require a lender, buyer, servicer or loan broker to be licensed to engage in its respective activity. A fintech company may face severe consequences for unlicensed lending or brokerage practices. Banks in many cases are able to engage in these types of activities. Fintech companies and banks can structure a business relationship to ensure that appropriate legal precautions are in place. Even if a fintech company is licensed, it does not have the ability to use and apply the interest rates of its home state, a power that is afforded to national banks. Fintech companies may be stuck with interest rate limitations set by the state where the borrower lives. Thus, a strategically structured relationship between a bank and fintech company may provide other non-compliance advantages for lending and brokerage products.
  • UDAP/UDAAP laws: Unfair, deceptive or abusive acts or practices affecting commerce are prohibited by law. Both fintech companies and banks face exposure to penalties for engaging in unfair, deceptive or abusive acts. Taking advantage of fintech companies’ adaptive technologies may help banks minimize the risk of committing the prohibited practices. For example, fintech companies may help banks design software that utilizes pop up warnings on a customer’s phones before the customer makes an overdraft.
  • Financial data law: Financial data is a growing industry that has seen increasing regulatory oversight. Both fintech companies and banks collect enormous amounts of data and may use it for various legal purposes. Data is the core part of the fintech business; fintech companies collect data and rely on data. However, fintech startups do not have the legal and technical resources of traditional banks to resolve a variety of regulatory and cybersecurity concerns related to the use of data. Fintech companies can partner with banks, particularly with respect to cybersecurity issues. A bank offering products through or with a third party is responsible for assessing the cybersecurity risk related to that third party and mitigating it, and thus parties should consider some important questions upfront, including where the data is located, who owns it and how it is protected.

Despite the many issues and concerns that may arise from the partnership between fintech companies and banks, cooperation colors the future. Fintech companies can take advantage of the industry knowledge that bankers possess, certain regulatory advantages that banks enjoy and the industry’s cybersecurity infrastructure. Banks can take advantage of fintech companies’ ability to create new products, certain regulatory advantages and adaptability to regulations. With an understanding of the legal and regulatory framework of fintech companies and banks, their different business models can be used as an opportunity rather than a barrier to business.

Build vs. Buy: How to Crack the Digital Wealth Management Sector


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The wealth management industry has been a significant source of fees for many banks in recent years. As innovation in the sector has resulted in the development of a plethora of digital asset management solutions, including so-called robo-advisors and data aggregation applications, a number of banks and other financial institutions (FIs) have taken steps to participate in this emerging market via partnerships or acquisitions. Recent activity in the sector includes Ally Financial entering the space by buying TradeKing, Northwestern Mutual buying LearnVest and BBVA partnering with FutureAdvisor. Leading robo-advisor firms Betterment and iQuantifi have also taken part in the trend by inking partnership agreements with banks.

Some large FIs have taken a different approach to entering the market, choosing to build their own fintech applications instead of buying or partnering. Firms taking this tack include Schwab, Fidelity and Vanguard, all of which have created their own robo-advisor offerings.

An upsurge in M&A activity can be a sign of a maturing industry, and this appears to be the case in the fintech space; after several years of breakneck growth, the market for digital advisory services seems to be stabilizing. Lending support to the idea that the pace of expansion is declining, at least among business-to-consumer digital wealth management services, is this blog post from industry expert Michael Kitces, who reports that robo-advisor growth rates have dropped precipitously this year to approximately one-third of year earlier rates.

In an interview for this article, Kitces, publisher of the Nerd’s Eye View and co-founder of the XY Planning Network, advised that FIs looking to purchase or partner with a company in the fintech sector focus on aligning any such effort with their core strategy. He suggests they identify the core business model used by the partner or acquisition target and ask how the technology powering that model feeds into the FI’s business strategy: “Is it lead generation? Is it customer retention? Is it expanding wallet share? And will the technology realistically be adopted, by the right customers or prospects, to serve that goal?”

One obstacle banks looking to buy their way into the digital wealth management sector may face is that M&A activity in the industry has lessened the pool of potential acquisitions. Tomas Pueyo, vice president for growth at fintech firm SigFig.com, points out that while buying can allow FIs to accelerate their time to market in comparison with building technology of their own, so many digital wealth management companies have been acquired that those left are mainly newer entrants to the space. While some large FIs have built their own fintech systems, the vast majority don’t, he says, “because they are much less productive than startups at creating new technology and don’t have as strong a culture of user experience.”

Mike Kane, co-founder and master sensei (a Japanese martial arts term that means teacher or instructor) at digital wealth management firm Hedgeable, expressed similar sentiment in regards to the difficulty banks face when competing with startups from a technology standpoint. Along these lines, Kane outlined some of Hedgeable’s latest feature introductions, including “core-satellite investing, bitcoin investing, venture investing, a customer rewards platform, account aggregation, and increased artificial intelligence with many more things in the pipeline.”

The difficulty of competing with nimble startups and the paucity of attractive acquisition targets leaves partnering as the preferred option for banks interested in entering the market, according to both Pueyo and Kane. “The great thing about partnering is that it dramatically reduces cost and time to market,” says Pueyo. “It’s a way to pool R&D for banks with very little cost and risk.” Kane also sees branding benefits accruing to banks which work with innovative technology firms in the sector: “Young people trust tech firms over banks, so it is in the best interest of old firms to partner with young tech firms for product in all parts of fintech,” he said.

SigFig has partnered with a variety of companies throughout its existence, beginning with AOL, Yahoo, and CNN for their portfolio trackers, and more recently with FIs including UBS, the largest private wealth management company in the world. Hedgeable also has made use of the partnership model in building its business. Kane reported that over 50 firms, including both U.S. and international FIs, have signed up for access to the firm’s free API. Hedgeable offers its partners revenue sharing opportunities to go along with the benefit of saving money they would otherwise spend developing their own platform.

Amresh Jain of Strategic Mergers Group, who advises clients looking to do deals in the sector, sees digital wealth management solutions only gaining in importance as new technologies make it easier and more efficient to process and allocate investment portfolios: “The first phase of digital wealth management was focused on the ability of robo-advisors to automate the investment process. The next phase, in my opinion, will see human advisors increasingly integrating their efforts with digital wealth management solutions to provide an enhanced client experience.”

Uber Enters the Financial Services Market


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The online transportation network company Uber shook up the transportation service industry when it introduced the idea of ride sharing. It was a revolutionary development that allowed private citizens to use their vehicles to pick up passengers and earn money for doing so. The service quickly spread around the United States and the world. The company currently provides ride sharing services in 66 countries and 449 cities globally. Other ride sharing companies like Lyft have since entered the market to compete with Uber for customers and drivers. In order to attract and retain drivers Uber has introduced several services, one of which should serve as a wake up call for the banking industry.

Uber has partnered with GoBank to offer business checking accounts and debit cards that allow drivers to get paid immediately instead of once a week. The account functions just like a regular business checking account, and in addition to collecting instant payments users can transfer funds, pay bills and deposit funds directly from other sources. Drivers can add cash to their account for free by stopping into any Walmart that has a GoBank location or by paying a small fee at any participating 7-11, Rite Aid, CVS or Walgreens. Drivers can even order paper checks for $5.95 from GoBank.

The service is offered only in the United States for now, but Uber has said it wants to eventually offer similar services to drivers around the world. The account fee is $8.95 a month but fees are waived for anyone who has initiated an instant pay transaction in the previous six months. Drivers love the fact that they can get paid instantly. Once the fee is added to the account drivers can access cash through a network of over 40,000 ATMs around the United States. The business checking account can also be a good way to keep track of Uber related driving expenses and track profits for tax purposes.

Uber picked the right partner to expand into financial services. GoBank is a subsidiary of Green Dot Corp., a financial services and technology company that says it is on a mission to reinvent personal banking for the masses. Green Dot pioneered the prepaid debit card business and is the leading provider of reloadable debit cards in this country. They also offer online mobile checking accounts that can be managed directly from the user’s smart phone. Green Dot has a relationship with Wal-Mart to provide prepaid debit cards and checking accounts to Wal-Mart customers. The company has marketed its products and services to people who had no previous relationship with a bank or were simply unhappy with traditional banking and wanted a more tech savvy banking relationship. Green Dot’s novel approach to providing banking services made it the perfect fit for Uber’s new instant pay process.

Uber is looking to provide other financial services to its drivers as well. It has a pilot auto leasing program underway, called Xchange Leasing, that is administered by an Uber subsidiary and offers its drivers leases on used cars, and permits them to drive unlimited miles and turn the car in with just two weeks notice. Some leases also include routine maintenance as part of the contract. Uber expects this will enable it to attract and keep drivers as they continue to expand and add services.

If all 400,000 or so Uber drivers in the United States switched their banking relationships to GoBank tomorrow it would not be a tremendous blow to the banking industry. The real threat to the industry is not in this one relationship but the fact that innovative technology companies like Uber are finding new aggressive ways to market financial services, and they are establishing relationships with those the industry has not previously served and do not care for the way the banking industry currently works. These companies are combing technology with financial services in a way that is making inroads with younger tech savvy consumers.

While Uber’s limited expansion into financial services probably won’t keep many bankers up at night, the marketing approach behind it is definitely a potential problem. If tech savvy companies that are popular with millennial consumers begin to aggressively offer financial services offer to their employees, associates and customers—many of whom are millennials—traditional banks could have a hard time building a relationship with that generation of consumers.

Community banks have always had to compete in a marketplace crowded with other banks and credit unions. They will find themselves increasingly competing with technology companies whose product just happens to be financial services. Banks are going to have to change their approach to conducting business and marketing their services to the next generation of consumers to maintain market share and grow their customer base.

Will Cardless Cash Catch On?


mobile-technology-8-7-15.pngApple Pay, where consumers can pay for products using their iPhone, is widely known but not widely used. Will cardless cash do any better?

Six banks in the United States have begun offering a way for customers to get cash from an ATM using their smartphones, according to Doug Brown, senior vice president and general manager at FIS Mobile, a division of the core processing vendor FIS. Twenty-five more are working on rolling out the product, which is part of FIS’ mobile banking platform. The service lets customers use their smartphones to get cash from an ATM, which is billed as a way to increase convenience and security. So far, no adoption figures are being disclosed, Brown says.

“[The banks] are all pleased because adoption is far above what they expected,’’ he says. However, only about 39 percent of smartphone users with a bank account actually use their banks’ mobile banking app, according to a March survey by the Federal Reserve. It’s available. It’s free. And not even half are using it.

But Brown says he expects mobile banking usage to pick up in general, and that tens of thousands of users in the Chicago area have tried out the cashless card service, to rave reviews. BMO Harris Bank, which has $98 billion in assets, and $20 billion asset Wintrust Financial Corp., are offering the service and both are based in the Chicago market.

BMO Harris calls it mobile cash, and it works after you log into your mobile banking app on your phone. You can order up an ATM withdrawal at any of 900 of the bank’s ATMs and your phone communicates with the ATM near you, which flashes a QR code (a machine readable label) that you can scan into your phone. The ATM delivers your cash and a receipt is delivered electronically. You never touch the ATM screen.

All of this is done in about 15 seconds, versus 45 seconds on average for an ATM transaction, Brown says. BMO Harris, which launched mobile cash in March, also launched Touch ID for the iPhone in late July, where you can save even more time by not using a log in and password to access your mobile account—you just use your fingerprint. A PIN can also be used in lieu of a log in and password to save time. The fingerprint ID is available, for now, using the iPhone 5s and newer versions, with a similar Android service available soon.

Brown says cardless cash is secure because each transaction is tokenized, so no data from the transaction is stored on your phone. A secure cloud houses the QR code, Brown says. Fraud is always a possibility, but “it really minimizes the exposure compared to the magnetic stripe world,’’ he said.

Skimming, where fraudsters put cameras on ATMs to record card and PINs, is not possible with this service. “The security that is commonly used at ATMs is over 30 years old,’’ says Douglas Peacock, vice president of mobile banking for BMO Harris, which is a subsidiary of $633 billion asset Toronto-based BMO Financial Group. “It’s been that way since cards were introduced.”

The biggest challenge so far? Marketing.  BMO has a video tutorial for customers who log into online or mobile banking. Wintrust used social media, billboards and TV ads and the Chicago Cubs’ mascot to promote the service. “Like anything that’s brand new, it takes a little bit of learning,” Peacock says.

Banking Compliance and the Cloud: Can They Coexist?


cloud-computing-8-3-15.pngBusinesses large and small are enamored with cloud computing. After all, it promises less information technology expense, delivering cheap, on-demand, and elastic processing power, disk storage and memory, while cutting down on energy use. By meshing their services with the cloud, companies gain social and mobile capabilities that can connect them more closely with their customers. But is it right for financial institutions?

In short, it depends—both on what systems your financial institution is considering and what types of data will be processed, stored or transmitted by the cloud service provider. With careful monitoring and attention to key risk areas, cloud computing can work, and it can be a solid, budget-friendly choice for financial institutions seeking computing power and the ability to scale quickly as business grows.

Cloud Deployment
When considering a cloud solution, you’ll first need to choose a deployment model. Your bank may select from private clouds, which belong to a single organization; public clouds, offered by companies including Amazon and Microsoft; and hybrid clouds, which use a mix of public and private clouds.

Second, consider your service model:

  • Software as a service (SaaS): Your bank uses the provider’s applications and operates them on the provider’s infrastructure.
  • Platform as a service (PaaS): Your bank deploys its own applications onto a cloud infrastructure using the provider’s programming tools—a good choice for banks that develop their own applications.
  • Infrastructure as a service (IaaS): Your bank runs operating systems and applications on the cloud provider’s infrastructure.

Are Cloud Solutions Secure?
For banks, data security is paramount, and you must comply with the Federal Financial Institutions Examination Council (FFIEC)’s Outsourcing Technology Services Booklet, federal and industry protection regulations, and payment card data requirements under the Gramm-Leach-Bliley Act, among others.

Though FFIEC and other guidelines give some clarity on how banks should approach data security, they miss some key nuances of cloud computing. Specifically, banking institutions will also need to consider:

Provider and Data Location
Where your institution’s provider is located and where your data is stored, processed or transmitted can trigger a variety of state, federal or international privacy compliance concerns and issues.

Multiple Levels and Layers of Risk
Cloud providers commonly resell other providers’ services or rely on other subservice providers, which makes risk assessment extremely difficult. Furthermore, data could be backed up and stored by multiple service providers and facilities.

Vendor Risk
Your vendors may use cloud services to store your customers’ information. As a result, you may need to spell out in your contracts what your cloud computing policies are, or at least incorporate questions about cloud computing practices into your vendor risk management program.

Institutions that implement cloud technology will need to address these risks specifically, requiring all parties involved to conform to the security and privacy mandates outlined in their contracts. You’ll also need to develop plans to continually monitor the activities and performance of both service providers and third parties.

Moving to the Cloud
Cloud computing is likely here to stay. And while the shift may be too large for some banks’ tastes, it does come with certain benefits. Keeping compliance and regulations in mind, embracing the cloud may mean increased agility, speed and competitiveness for financial institutions of all sizes.

Why Does It Take So Long to Be Paid?


financial-technology-payments-6-5-15.pngHere’s a topic almost assuredly off the radar for many bank boards: real time payments. Don’t fall asleep yet. This will be of increasing importance in the years ahead.

Commercial customers are definitely in need of such a solution. For business customers, getting paid quickly is far more important than for most consumers. For both business customers and their vendors, checks introduce unpredictable cash flow: slower payments for the vendor, and uncontrolled float for the payer. Businesses are constantly dealing with cash flow management. It often takes 60 or 90 days to get paid after sending an invoice. Some suppliers need to drop tens of thousands of dollars of equipment or supplies off at a customer’s doorstop. Why can’t they be paid right away, instead of waiting around with their valuable goods on someone else’s property? Why do businesses have to preload deposit accounts or prepaid cards to make sure their employees get paid in a timely manner, on payday? 

Online bill pay is no solution, says Bob Roth, a managing director with Cornerstone Advisors, a consulting firm in Scottsdale, Arizona. Twenty percent of payments through online bill pay end up as checks anyway, because the bank has no electronic information on the receiver of the payment. That means a payment can take six days or more to arrive by mail. Eighty percent end up as ACH (Automated Clearing House) transfers, but that can take 12 to 36 hours as well, Roth says. MineralTree founder BC Krishna said he tried to open an ACH account at a bank once, but the bank charged $250 for the application, $50 per month for the account, $20 per ACH file transmitted to the bank, 15 cents per transaction and required him to fill out a credit application. Not surprisingly, this pricing and process is geared towards larger businesses with a higher payment volume. Prepaid credit cards are fast, but they’re also expensive.

If businesses can find something easier and cheaper, they probably will. Seventy-five percent of business owners told the Federal Reserve in a 2013 survey they would prefer their payments be made instantly or within one hour. With thousands of financial technology companies popping up on the landscape trying to reinvent the financial system, there could be a few disrupters in the bunch offering a quicker payment solution. Person-to-person payment networks such as Dwolla and bank-owned ClearXchange already are offering faster (and cheaper) solutions, but they are mostly concentrated on the consumer and small business side of the equation.

In bigger businesses, there are multiple people who have to sign off on an invoice, so emailed invoices often get printed out anyway and the entire payments process is fairly complex, says Rick Hall, an analyst at Mercator Advisory Group in Maynard, Massachusetts. “Businesses have really been looking for ways to not only streamline the process but find the best alternatives,’’ he says.

It may be years before a truly speedy and cheaper alternative exists for commercial businesses trying to make payments. Krishna is a member of the Remittance Coalition, a 240-member group of public and private interests, including members of the Federal Reserve, trying to address some of the obstacles that keep businesses from using electronic alternatives to paper checks. The Federal Reserve is pushing for faster payments, but there are so many different players and legacy systems communicating with each other that a unified set of strategies is hard to implement. The core processing companies FIS, Fiserv and ACI, which each have hundreds or thousands of bank customers that could communicate with each other, are all working on their own real time payment solutions as well, according to Hall. NACHA, The Electronic Payments Association, which administers ACH, also is working on its own solution called Same Day ACH, which was recently approved by its membership. Under NACHA’s plan, same day ACH transfers begin in phases starting in September of 2016. 

But in the meantime, someone may come up with an even better, faster, cheaper and ubiquitous solution. Person-to-person payments are all very exciting, but the consumer side of the equation is a fraction of the payments being made between businesses every day. “The real opportunity is going to lay on the business side,” Hall says. And business customers really are the focus of a great many community banks’ business plans. It will be important not to lose sight of their needs.