In the rapidly evolving world of financial services, staying ahead of customer expectations and operational demands is paramount. Recently, Cassandra Tucker of ABNB Federal Credit Union shared the institution's journey to implementing Real-Time Payments (RTP) in a podcast with Greg MacSweeney of The Clearing House and Mark Majeske of Alacriti. Here, we explore their innovative approach, operational efficiencies, and the broader implications of RTP for financial institutions.
Prioritizing Fraud Prevention and Compliance
As ABNB embarked on its RTP journey, fraud prevention was a critical focus. Before going live, the credit union conducted a comprehensive fraud scan across its portfolio to identify accounts that were likely owned by synthetic identities.
Risk and compliance played an equally vital role. Crafting policies and procedures for a nascent payment system required meticulous effort. The team started from scratch, developing frameworks to meet both internal and regulatory requirements. This foundational work positioned ABNB to implement a robust and compliant RTP infrastructure.
Driving Operational Efficiency
One of the key drivers for RTP implementation at ABNB was the need to streamline operations. Traditional payment methods like wires and ACH are labor-intensive and prone to errors. Tucker highlighted the operational inefficiencies associated with these methods: "How many people touch a wire before it's sent? How many load errors, rejects, or exceptions per ACH file?"
In contrast, RTP offers near-seamless transaction management, requiring minimal manual intervention. ABNB’s adoption of RTP has allowed the credit union to scale efficiently, even amid rapid growth and expansion into new markets. Tucker emphasized this operational advantage, noting, "By leveraging RTP, we’re able to scale our business without adding full-time employees (FTEs) at the rate we would have otherwise."
Innovative Revenue Streams
ABNB has also leveraged RTP to unlock new revenue opportunities. They charge customers for payment speed, just like Fed X charges more to send a package overnight. By implementing a tiered fee structure with minimum and maximum charges and a percentage-based model, the credit union has effectively monetized this functionality while offering value to its members.
Additionally, ABNB is transitioning wire transfers to an Instant Payments (IP) self-serve model within online banking. This shift not only saves on labor costs but also enhances the member experience by providing a faster, more intuitive service.
Scaling Volume with Precision
The early results of ABNB’s RTP implementation highlight its success. Within the first 90 days, the credit union processed $1 million across approximately 3,000 transactions. Just one month later, these figures had grown to $1.5 million and over 4,000 transactions.
This scalability underscores RTP’s potential to handle increasing transaction volumes without compromising performance. By using a third-party funding source to manage liquidity, ABNB has further streamlined its operations, ensuring smooth transaction processing even during peak demand.
Member-Centric Features
To enhance the member experience, ABNB designed its RTP system with user-friendly features. For instance, failed transactions trigger immediate notifications, providing transparency and enabling members to explore alternative payment methods like ACH or Venmo.
Tucker highlighted the broader potential of RTP for improving member services: "Bill pay use cases on the business side are among the most exciting aspects of instant payments." As the adoption of RTP grows, its use cases will likely expand, offering even greater benefits to businesses and consumers alike.
Strategic Implementation Approach
ABNB’s phased rollout strategy—launching with receive capabilities first, followed by send capabilities a few months later—allowed the credit union to manage risks and operational challenges effectively. A lean team of 5-10 people spearheaded the initiative, demonstrating that even mid-sized institutions can achieve significant innovation with the right focus and planning.
Looking Ahead: RTP as Table Stakes
ABNB’s journey highlights the transformative potential of RTP. Tucker observed, "Instant payment rails are revolutionary. We wanted to make sure we were on these rails now to give us a chance to get comfortable—it will be table stakes in the near future." This foresight underscores the importance of early adoption in gaining a competitive edge.
The introduction of a directory service —an ecosystem-wide service that ties an alias to account numbers - represents the next frontier in RTP innovation. As Tucker aptly noted, if a directory service was available in the U.S., it could "blow the doors off" current capabilities, paving the way for even more seamless and widespread adoption.
Conclusion
ABNB Federal Credit Union’s successful RTP implementation is a blueprint for other financial institutions looking to modernize their payment systems. From rigorous fraud prevention and compliance efforts to operational efficiencies and new revenue streams, their experience demonstrates the transformative potential of instant payments. As RTP becomes a standard expectation in the industry, early adopters like ABNB will lead the charge, shaping the future of payments and member services.
By Sarah Hoisington (Sarah.Hoisington@Matera.com)
Sarah Hoisington is VP of Strategy & Marketing of Matera, U.S. Founded over 30 years ago in Brazil, Matera is a technology company that provides instant payments, QR code payments and digital ledger technology to financial institutions. Matera’s solutions are used by 2 out of the top 3 global banks, 3 of the top 10 U.S. banks and 1/3rd of all banks in Brazil. Over 300 million Pix instant payments are processed per month using Matera’s solution and 60 million of those are initiated by QR Codes. Sarah has specialized in payments and fraud for over 20 years and is currently focused on Matera’s global expansion to the U.S.