Real-Time Payments: Why Should Corporates Care?
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Real-Time Payments: Why Should Corporates Care? Kerstin Rubinstein Vice President, Senior Product Manager Fifth Third Bank Dennis Humble Director, Treasury Services Humana Irfan Ahmad Vice President, Product Development and Strategy The Clearing House
Transcript of Real-Time Payments: Why Should Corporates Care?
Real-Time Payments: Why Should Corporates Care?
Kerstin Rubinstein Vice President, Senior
Product ManagerFifth Third Bank
Dennis HumbleDirector, Treasury Services
Humana
Irfan AhmadVice President, Product
Development and StrategyThe Clearing House
Your PanelistsDennis Humble, Director, Treasury Services, Humana
Irfan Ahmed, VP, Product Development and Strategy, The Clearing House
Kerstin Rubinstein, Senior Product Manager, Fifth Third Bank
Who Is Humana?• We are committed to helping our millions of medical and specialty members
achieve their best health
• Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well-being and lower costs
• We support physicians and other health care professionals as they work to deliver the right care in the right place for their patients
• Our range of clinical capabilities, resources and tools – such as in-home care, behavioral health, pharmacy services, data analytics and wellness solutions –combine to produce a simplified experience that makes health care easier to navigate and more effective
Who Is The Clearing House?• We are a banking association and payments company that is owned by the
largest commercial banks and dates back to 1853
• We own and operate the core payments system infrastructure in the United States and currently are working to modernize that infrastructure by building a new, ubiquitous, real-time payment system
• We clear and settle nearly $2 trillion in U.S. dollar payments each day, representing half of all commercial ACH and wire volume
Who Is Fifth Third Bank?• We are a diversified financial services company headquartered in
Cincinnati, Ohio
• We have $142 billion in assets and operate 1,191 full-service Banking Centers, and 2,495 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Georgia and North Carolina
• We operate four main businesses: Commercial Banking, Branch Banking, Consumer Lending and Wealth & Asset Management
Will Faster Payments Be All They’re Cracked Up To Be?
Humana issues millions of claims payments annually
Real-time payments were never seriously under consideration until 2016
Payments have been the last piece of the puzzle to change with the delivery of faster information
Why Does Humana Care About Real-Time Payments?
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Humana issues millions of claims payments annually Real-time payments were never seriously under consideration until 2016 Payments have been the last piece of the puzzle to change with the delivery of faster information 2007:25% electronic payments 2017: 75% electronic payments 35% reduction in bank fees Competitive forces are driving changes in the Payer industry Technological changes embraced by members that provide faster real-time information Status of medical and pharmacy claims Status of deductibles Ability to make profile changes on the fly System limitations Faster payment technology limitations ‘Soft’ demand from members, providers & business partners to speed up the delivery of cash
Category Payment Type Per PaymentValue Range
RTP Impact 24x7x365 Impact
B2B Suppliers Low to High LOW Low Impact
B2CMember premium refunds
Low VERY HIGH MediumImpact
B2P (HUM to
Providers)
Claims payments Low to High HIGH Low Impact
P2B(Providers to
HUM)
Claims recovery payments
Low to High VERY HIGH Medium Impact
C2BMember premium payments
Low HIGH Low Impact
Our Assessment of Impact
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Presentation Notes
Our Curiosity Was Peaked
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Presentation Notes
Now that you have a better understanding about what has peaked our interest, we plan to use the rest of this session to get answers to questions that are on all of our minds The Clearing House and Fifth Third Bank will provide some clarity on what Real-time payments are, why they matter and what you need to do to prepare to take advantage of this promising new clearing and settlement system
What steps should I take to prepare for this new payment trend?
Delving Into RTP
Why should we change our business model to accommodate faster payment processing when the speed of payment processing is not an issue for our company?
Delving Into RTP
Even with the efficiencies gained through remittance data and payment settlement, how do I formulate an ROI case for making a capital investment in this new payment stream?
Delving Into RTP
How do I convince my management team that RTP is worth an investment as a competing initiative to what is being considered a non-sales/revenue growth driver?
Delving Into RTP
What are the organizational risks associated with sending/receiving RTP transactions?
Delving Into RTP
RTP: Why Should Corporates Care?• B2B - Suppliers are typically on specific payment terms that don’t create value for
RTP
• B2C - Major opportunity to convert a fully paper-based process today to electronic
• B2P - The opportunity to deliver faster payments (with remittance data) to smaller providers would add value for both Humana and providers
• P2B - Adoption by providers of RTP would speed the collections process and wipe out claims recovery receivables that much faster
• C2B - RTP would keep step with advancing technology in mobile information delivery, allowing members to pay their premiums quickly and conveniently and at any time
Presenter
Presentation Notes
Notes to Slide 2: B2B Humana B2B supplier payments have shifted significantly from check to electronic in the past several years RTP is not a major opportunity for this category of payments; suppliers are typically on specific payment terms that don’t create value for RTP B2C Major opportunity to convert a fully paper-based process today to electronic Opportunity to introduce Zelle as a payment engine Value to Humana: member goodwill; no storage of bank data; 24x7x365 opportunity to settle funds B2P More of Humana’s claims payments are shifting to ACH The opportunity to deliver faster payments (with remittance data) to smaller providers would add value for both Humana and providers Cash is important, but so is accurate ERA delivery for proper posting to provider receivables P2B The process of collecting overpaid claims is primarily manual; over $20 million per month Adoption by providers of RTP would speed the collections process and wipe out claims recovery receivables that much faster C2B RTP would keep step with advancing technology in mobile information delivery, allowing members to pay their premiums quickly and conveniently and at any time Members whose Health Spending Accounts have been shut off due to erroneous spending practices can activate their accounts again by pushing RTP to Humana Value to Humana: improved member relations; reduction of unapplied A/R
Now It’s Your Turn to Chime In
Here’s How to Reach Us
Dennis HumbleDirector, Treasury
ServicesHumana
Kerstin Rubinstein Vice President, Senior
Product ManagerFifth Third Bank513-534-5024
Irfan AhmadVice President, Product
Development and StrategyThe Clearing House
APPENDIX
Your PanelistsDennis Humble
Director, Treasury ServicesHumana
• Manages the treasury function for the consolidated holding company which consists of regulated (State Departments of Insurance) and non-regulated business
• Responsibilities include cash flow forecasting using the direct and indirect method, used for public street projections and for investment and liquidity decision making; bank and third-party relationship management; managing a fee-based budget in excess of $35 million annually; working closely with the Statutory Reporting group, Tax, Accounting and Legal to optimize subsidiary cash dividends and capitalization requirements; and managing and maintaining the company’s treasury workstation environment
Your PanelistsIrfan Ahmad
Vice President, Product Development and StrategyThe Clearing House
• Deeply engaged in the development of several new digital payments initiatives, including real-time payments where he is responsible for the product development work stream
• Works with internal and external technology experts and bank executives to define, develop, and launch the new U.S. payments infrastructure
• Expertise in payments, product development, strategic planning
Your PanelistsKerstin Rubinstein
VP, Senior Product Manager, Payments and Commerce SolutionsFifth Third Bank
• Responsible for the development and execution of strategies related to electronic payments
• Has more than 20 years of banking experience, with more than 10 years in Cash Management services
• Has served on the NACHA Compliance and Operations Committee (2013-2015), CHIPS Business Committee (2015 – current), led Fifth Third’s ACH and Wire Operations (2009 – 2015), led Fifth Third’s Check Services Operations (2001 – 2004) and served as the Director of Enterprise Operational Risk Management (2002 –2005).
• Integral contributor to the development of Fifth Third’s Real Time Payments strategy
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The Clearing House: Hub for Interbank Exchanges
Founded by New York banks to improve efficiency and remove risk from daily exchanges
1853
Owns and operates core U.S. payments system infrastructure, clearing and settling approximately $2 trillion each day, representing half of all commercial ACH, wire and check image exchange volume
TODAY
Working to modernize the U.S. payments infrastructure by building a new, ubiquitous, real-time payment system
RIGHT NOW
©2017 The Clearing House Payments Co.
• RTP is a brand new payment infrastructure that has been uniquely designed to support the way that businesses and consumers interact today
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But what is RTP?
©2017 The Clearing House Payments Co.
• In the same way, RTP provides the tools (network, platform and rules) upon which an FI’s payment services can be created and transformed
• Traditional U.S. infrastructure systems are ACH, wire, check image exchange, card networks, ATM networks
• You can almost think of RTP as a mobile phone and U.S. financial institutions or third-party companies as the developers of new and innovative apps that run on that mobile phone
FI Services APP
24/7RTP
Clearing 24/7
Continuous Input/Output
Continuous Settlement
Immediate Confirmation = Simplified Reconciliation
Real-time postingand visibility
TCH RTP is real-time in every way
©2017 The Clearing House Payments Co. 24
RTP Distinctive FeaturesPayment Status
Immediate notification of successful transfer to end users, providing certainty for both senders and receivers
Payment Certainty
Receivers have certainty that payments will not be reversed or revoked
Complete AR/AP Messaging
Ability to link multiple messages associated with the same transactions through a common reference
Data Extensibility
Allows banks to develop Value added services based on extensible data
Fulfillment Messaging
Ability to provide confirmation by the receiver that they have received funds, combined with fulfillment information
Immediate Availability of FundsReceivers have funds available in real-time 24/7/365
Credit Push Only
Customers send payments directly from their existing accounts – complete transparency, no pending payments
Global Ready
ISO 20022 is a global standard that supports the needs of multi-national customers and will enable cross-border payments in the near future
©2017 The Clearing House Payments Co. 25
Feature Real-Time Payments ACH Wire Debit/Credit Cards
Request for Payment Supported Not supported Not supported Not supported
Cross-Border Interoperability Functionality planned Yes, but limited in reach Yes, but can be slow Yes
Contextual Data 140 characters in payment message + extensive remittance advice
9999 addenda records of 94 characters each
9000 characters Very limited
Authorization Real-time Varies but never real-time Real-time Real-time
Clearing Real-time and continuous Multiple times dailyReal-time(during operating hours)
Real-time or near real-time (pin debit); once daily (signature)
Settlement Real-time and continuous Three times dailyReal-time(during operating hours)
Once daily
SettlementFinality Real-time
Depends on reason for return, can be up to 60 days
Real-timeDepends on reason for return, can be up to 60 days
Posting Real-time Same day as a settlementReal time; may be delayed in some cases
Real-time or near real-time
Reconciliation Real-time After settlement cycleComplex, sometimes manual process
Automated, but with time delay for settlement
Comparison of RTP to Existing Payment Systems
©2017 The Clearing House Payments Co. 26
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TechnolialInfrastructure Support
BuildingProduct Solutions
• Expanding data archive services to support extensible “RTP” receivables capabilities
• Enabling immediate availability and settlement of funds transfers 24/7/365 via Zelle and The Clearing House
• Integrating with ERP platforms to streamline payment flows and reconciliation processes
• Improving payment flow transparency via real time payment acknowledgements and confirmations
What Are Financial Institutions Doing To Enable Customers?
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Technological Infrastructure Support
• Advancing payment systems to support merge of corporation based customer alias profiles (mobile/e-mail) with legacy payable files
• Real time information reporting to enable corporations to post RTP payments to their systems in near real time
• Advancing bank grade real time fraud prevention tools in alignment with US governed payments systems (i.e. SWIFT, Fed)
What Are Financial Institutions Doing To Enable Customers?
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Client Education
• Targeted solution based discovery sessions with customers to validate product solutions and assist with organizational education
• Trade association participation and customer focused round tables • White paper and article publications
What Are Financial Institutions Doing To Enable Customers?
