In an interview with PaymentsJournal at the 2021 Money 20/20 event, Deborah Baxley, partner at Paygility Advisors, spoke about P2P payments, what faster payment methods are out there, and the importance of a layered authorization approach.
Can you talk to us about what your organization is seeing with Mobile P2P Payment Volumes?
As you can see from the chart, there was a steady uptick in mobile and p2p payments in general sort of under trajectory. And then all of a sudden 2020 happened, and it hit a hockey stick. It was just unbelievable. The growth rate of mobile P2P payments in 2020 was triple what was forecast. Then the question is, what’s going to happen in 2021? Is it going to level out again? Or is it going to keep going up? I think perhaps the pandemic has changed people’s behavior enough that they’re not handing cash to each other anymore, they’re going to keep using Venmo or whatever it might be.
Do you believe that we are just seeing the beginning of the rise in P2P Payments?
I expect the TCH, The Clearing House, offering “RTP” Real Time Payments, very imaginative name – and the Fed offering FedNow are both going to be more at least initially oriented towards B2B and perhaps B2C disbursements. A good example is insurance companies. I don’t know why in the 21st century, insurance companies are still mailing checks out, but a lot of them are. And those are both going to be really good use cases for those as well as earned wage access, early pay and bill payment. There could be some consumer applications. But the existing apps like Zelle, it will probably cobble together a number of different things. They are using RTP now, both for settlement as well as some money send if the bank is on their network. But they’ve cobbled it together with the debit push, which is Mastercard Send, Visa Direct, and ACH. They’re just putting everything together to get complete ubiquity across the whole country, and all bank accounts.
Can you explain the difference between all these new rails and faster payment methods coming up or currently in the marketplace?
The main difference is the message standard. There’s ISO 20022, which is a more modern message standard. I believe it was introduced in 2005. And it’s got all sorts of room for data. Including in the case of businesses, you could put the invoice data in with the payment which dramatically simplifies the reconciliation in the backend. So that’s a really good thing. They also have RFP, request for payment, which is sort of like sending an invoice. But you push the button, and the money comes back to me if I didn’t request for payment. Whereas the Mastercard Send Visa Direct, which is the debit push, are using the much older ISO 8583 message standard. It was introduced in I believe in 1989. It’s a credit card standard. They’re using it debit cards, but it is almost instant. The way Visa and Mastercard have set it up is that the banks receiving one of these are obliged to credit your account within 30 minutes. Usually, it’s within seconds. But the settlement could be overnight.
What are the key topics or trends that you have been discussing at Money 2020?
Well, there’s certainly a lot of talk about stable coins and different blockchain applications. There was a session yesterday about non fungible tokens, NFTs, which was even in the news a few weeks ago. So those are some really hot topics. There’s more fintechs here than I’ve seen in previous years. It’s a pretty exciting show.
What is your organization doing with data to provide additional value and actionable Insights?
I used to work for a data warehousing company. And one of the new buzzwords I think is so cute is data lake house. It’s the idea that you don’t separate warehouse data, like historical data from real time analytics. It’s all the same thing now. We used to always separate operational data store from warehouse where you were doing analytics, it has to be real time. There’s not that much value in doing past analytics. One of the most important areas in addition to marketing and doing customer experience is security and authentication, especially with real time payments. Most of these systems are irrevocable, which means you can’t dispute the transaction, you can’t get the money back when it’s gone, it’s gone. It’s like handing somebody cash. It makes that even more important for the providers, the banks and the networks that are providing the real time payments to do as much authentication and fraud analytics before the transaction goes out. It is to protect consumers and to protect the banks as well.
How does your organization utilize a layered approach when it comes to authentication and authorization?
With the proper kind of authentication, you can be kind of paradoxically both more secure and more convenient at the same time. Instead of juggling 100 passwords, which everyone has password fatigue, I have 500 passwords. If you can use other signals like device integrity, IP address, and behavioral biometrics, to score the riskiness of a transaction and only introduce friction if it’s above a certain risk level. But then on the other hand, if I’m withdrawing money from my account. Maybe sending it to my 401k. If they didn’t ask me anything, I would think does that mean anybody else could log in here and move my money out? So you want to kind of balance the friction with the consumer comfort as well.
Do you believe that super apps will become as popular in the U.S. as they have in other countries?
I’ve done quite a bit of study about this lately, I think what some banking players in the US are looking at it as a set of financial functions, like bank accounts and stuff like the payments. But what the Chinese super apps have done is stitched together a whole ecosystem. It’s not just banking, it’s ordering your ride, your groceries, and everything. It’s all tied together and stitched together with payments. I think that’s the key. And they’re also using mini apps, which means there’s not a lot of downloads keeps you within the super app ecosystem. But it’s very easy to use, you don’t have to manage and download a whole bunch of different apps and use a bunch of storage on your phone. I think what many of the US contenders are missing is the shopping aspect. And that Pay Pal would have in spades because they’re not only payments and financial services, but they’re also shopping. They’re also, if you turn it on its head, they could have Super App type functions for their merchants. Some very sophisticated targeting and loyalty or whatever it might be for these small merchants on their platform, helping them as much as they’re helping the consumers. I think if anyone is going to be successful, it might be PayPal, but it kind of remains to be see if the train has left the station and maybe it will never catch on. But I think they have the best chance