Payments On Fire

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Episode 168 – Fanning the Flames: Nacha Smarter Faster Payments 2022

Just off the plane from Nashville, Glenbrook’s Elizabeth McQuerry and Cici Northup sat down with Yvette Bohanan to chat about attending Nacha’s Smarter Faster Payments Conference, where Elizabeth also participated in a session with the US Faster Payments Council. Tune in to hear their takeaways and why this year was “not your grandma’s Nacha conference”.

 

 

Yvette Bohanan:

Welcome to Payments on Fire, a podcast from Glenbrook Partners about the payments industry, how it works and trends in its evolution. I’m Yvette Bohanan, a partner at Glenbrook and co-host of Payments on Fire, along with George Peabody. Today, we are doing a short segment, which we call Fanning the Flames. 15 minutes on some hot takes about topical things going on in the industry. And joining me today are Elizabeth McQuerry and Cici Northup. Cici and Elizabeth, welcome to Fanning the Flames.

 

Cici Northup:

Thanks.

 

Elizabeth McQuerry:

Great to be here.

 

Yvette Bohanan:

Great to have you here. The reason you are joining me is because you are just off the plane from Nashville last week at the Nacha Smarter Faster Payments Conference, 2022. And we want to hear what it was like to be there. Good food, good music, Nashville, hello, but also in person. So how did it feel?

 

Cici Northup:

You know, it was great. I particularly enjoyed the fried chicken and the live music myself.

 

Yvette Bohanan:

Okay. There you go.

 

Elizabeth McQuerry:

Absolutely. And to be back in person eating that fried chicken with folks and hearing about what they’re doing face to face, it was just awesome. Nacha does a great job with the conferences and I think they had at least 1900 people registered on the first day. So a really great sort of return to the big tent.

 

Yvette Bohanan:

Wow, excellent, excellent, hats off to Nacha. Well done. So years ago I went to a Nacha conference, and it was my first Nacha conference, and I walked in and I wanted to talk about payments, but I tried to talk about credit cards for a while with someone. And I quickly found out that I was in a room full of bankers who wanted to talk about ACH and wanted nothing to do with credit cards, what was going on in that part of the industry. And I’m looking at the title of this conference, Smarter Faster Payments, and I’m thinking, what happened? Was it all ACH? Or what were you all talking about? Who was there and what were the topics?

 

Elizabeth McQuerry:

Well, I’ll jump in. I’ve been going to Nacha annual conferences for 20 years, seeing a good bit of evolution there. And you’re exactly right about, it was very much focused on back office, ACH, optimizing the sort of lights out processing. And of course there’s been a lot of new standard entry class, or SEC, codes that have been more challenging than a lights out environment. But honestly, that’s not what the Nacha conference is about anymore. Somewhere along the way, it became a place where we’re talking about all sorts of, well, honestly, at least faster payments, let’s hope they’re smarter. And people are there of course from the faster payments part of the industry and a lot of fintechs too, a lot of name tags that I’ve not heard of before and folks that I would not have expected to really be interested in an ACH conference. There’s a real fundamental transformation going on there.

 

Yvette Bohanan:

Wow. Okay. So Cici, what were some of the things that you picked up on that were thematic? And now we have a much broader playing field. You know, this isn’t your grandma’s Nacha conference anymore. This is something new and exciting. So what did you hear that surprised you or gave you pause or made you think?

 

Cici Northup:

Yeah, well, before I do, I just want to add a comment to Elizabeth’s reflection, which is to say, you know, I’m a newbie to Nacha, but of course familiar with what they do for a decade. And to me, sort of this orientation towards smarter, faster from what the Nacha conference was maybe 20 years ago is a reflection of the fact that Nacha is playing a more expansive, broader role in payments and in the payments ecosystem than they have before. And so this conference is a reflection of their evolving role. And second to me, I think it’s a reflection of the fact that Same Day ACH it, as Elizabeth’s recent payments used post pointed out, offers ubiquity and faster payments than what we’ve had and their role. It has sort of been cemented in a number of ways from some of the observations that we’ve seen, at least in my view, given the other activities that are happening in place and sort of the lack thereof, if you will, specifically around interoperability of other faster payment systems. And with that, I have to sort of acknowledge one of my favorite sessions was led by our own Elizabeth McQuerry, who was talking about interoperability among faster payment systems with the U.S. Faster Payments Council.

 

Yvette Bohanan:

Okay. And will there be interoperability, Elizabeth McQuerry? Will there be interoperability in all these multitude of systems we have in the United States? We’re spoiled with choice when it comes to faster payments, so what’s going to happen?

 

Elizabeth McQuerry:

Yes. We have an, what do they say? Embarrassment of riches, right. We have many great options and perhaps more along coming up, but that’s what the Faster Payments Council organized a real conversation around. It doesn’t appear that there’s going to be a Nacha-like entity, or a way for everyone to seamlessly just transfer payments among each other. That is not an inherent part of how they do business. So what looks like it’s going to happen is we’re probably going to have some sort of technical enablement of interoperability and is that going to be enough? And I think it’s probably a sentiment that “Yes, that’s what we need and how do we get it faster please?” Is really what people are asking about. And so what does that really look like?

 

Elizabeth McQuerry:

And we know that VISA, MasterCard are not interoperable, but it seems that way from a consumer end user experience, right? It’s just easy. It all comes from the same device or the same computer screen. And I think there’s the belief and folks are coming to market with products that are smart, intelligent routing solutions that connect them and to all of the different options. And maybe also allow some business intelligence, right. It’s more than just, how do I reach this routing number, but you know, where do I want my volumes to go? Does it look differently if I’m sending a high value payment as opposed to a P2P transfer? And so these hubs, or routing solutions, well, it could be the best thing since cracker jacks.

 

Yvette Bohanan:

Well, there you go. There you go, so faster and you’re alluding to something that’s an intelligent sort of a hub. Was there anything else, Cici, around payments, nature of payments, type of payments, is the needle moved on this conversation from, “We should have a system.” To, “We’re building a system.” You know, where are we at in the general dialogue from what you were hearing on the floor, in the meetings, and as you were dining over chicken with colleagues. Where’s the conversation today? What phase are we in?

 

Cici Northup:

Yeah, I feel as I never answered your question around themes, so let’s dive in. I think you make such a good, you sort of led me to what was an important theme from this conference, which is the fact that we’re no longer talking about sort of what faster payments are. We have live use cases underway. We have live systems underway. We are now sort of talking about what’s next. And there were two related themes to that. That surfaced for me. One was around this orientation of micro. So what are the micro needs of an individual end user, and not a financial institution end user, and what can we do to facilitate those needs? So for example, the needs to facilitate a transaction for a small business owner, who’s providing lawn services to a homeowner is very different from a reoccurring biller, and how can we make faster payments work in all of these scenarios.

 

Cici Northup:

Very related to that were conversations around data. You know, we now have capabilities to send information, exchange huge amounts of information. It’s almost scary, probably how much we can exchange back and forth, which was certainly one topic, how to mask it. But also related to that was how do we use that? How do we use that to enable these micro use cases? How do we enable the data to supplement existing fraud solutions? Fraud takes place in all payment systems, including Faster Payments, but the type and mechanism of fraud is slightly different and we need to complement, or supplement, our existing solutions to modify, to combat those types of fraud. So how can we use data to do that? There’s a couple of interesting companies who are doing cool new things in that space. So this discussion of micro and discussion of data were two things I noticed.

 

Yvette Bohanan:

And at the same time, ACH payments in and of themselves are bigger than ever, more important than ever. So here we go.

 

Elizabeth McQuerry:

I mean, just so remarkable that ACH is honestly, volume wise, it’s experiencing a Renaissance, right? Of course the network continues to grow, but we have many options for Faster Payments. And Same Day ACH is huge, right? It’s totally on fire. And there’s a good reason for that because frankly that’s where we can get the biggest network and have a faster payment. People are connected to it. There’s nothing they have to do to add it. It’s genius.

 

Cici Northup:

I have to say, I’m so passionate about this space, but I’m so curious to see what comes over the next five years, because we have these systems that are dedicating a lot of talent and resource and time to figure out how to ignite these micro use cases and to see which ones sort of went out at the different, you know, went out at the point of sale, went out in bill pay, at B2B. I’ll be curious to see.

 

Yvette Bohanan:

Yeah. And I’m sure conversations around data, how all this data is going to marry up across all these stakeholders. How that’s all going to change over the next few years will be interesting to watch too. So please tell me, did the card networks show up? Are the card networks present in 2022? They weren’t there 15 years ago.

 

Elizabeth McQuerry:

They absolutely are. They have big exhibitor booths, they organized panels and participate along with everyone else. So it’s a big tent now.

 

Yvette Bohanan:

Wow. So if you’re looking for an interesting payments conference, Payments 2023 should be on your calendar, I suppose.

 

Elizabeth McQuerry:

Absolutely. Sometime in late April, early May.

 

Yvette Bohanan:

Excellent. All right. Any final thoughts before we wrap this up?

 

Elizabeth McQuerry:

You know, one thing that struck me is also just honestly, the number of folks that we had meetings with and were people you’ve looked up to for many years and worked with, that are talking about their retirement. And yeah, that’s a real milestone. This generational shift of the folks that have really just contributed to all the richness that we have at the moment, and to see them transition into their next, you know, whatever they want to do after their current, all encompassing job is a bit overwhelming. It’s a bit exciting, but just imagine, there’s so much opportunity in this space, Payments is hot, just like ACH, I guess.

 

Yvette Bohanan:

The whole industry.

 

Cici Northup:

Don’t we at Glenbrook have a few open roles ourselves, too?

 

Yvette Bohanan:

Indeed we do. We’re always looking for people passionate about Payments and wanting to do more in the space. Just like everybody else right now. It’s crazy. It’s amazing. All right. Well, thank you so much. We’re going to wrap this up, this Fanning the Flames. Thanks for sharing your insights and your reflections on Smarter Faster Payments 2022. And we are looking forward to having you all listen to our upcoming podcasts. We have a few that are going to drop pretty soon and we’re pretty excited about them, so more to come. Thanks for listening in on our Fanning the Flames. Until you tune in next time do good work, take care everybody. Bye.

 

Cici Northup:

Bye.

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