A Lesson in Faster Payments

News & Trends SoundExchange debuts portal to speed up music royalty payments – p. 11

Deep Dive Emerging faster payment methods reduce college tuition stress – p. 14

DECEMBER 2019

GIVING SCHOOLS AND ORGANIZATIONS A Lesson In Faster Payments

PAGE 7 WHAT'S INSIDE FEATURE STORY NEWS & TRENDS

Real-time payments are An interview with Jerry Banks, The latest faster payments making headway around CEO of school-focused headlines, including the the globe and entering new transaction processing launches of new services in markets, including college platform Bursari, on how Brazil and the United Kingdom tuition payments instant, digital services can and details on FPC’s growing make payments easier for both member base parents and teachers 03 07 11

DEEP DIVE SCORECARD ABOUT

An in-depth look at how The results are in. See the Information on PYMNTS.com real-time transactions could top scorers and a provider and Fiserv ease the frustrations legacy directory featuring 65 players payment methods cause at in the space U.S.-based higher education facilities 14 16 50

Table of CONTENTS The Faster Payments Tracker® is powered by Fiserv, and PYMNTS is grateful for the company’s support and insight. PYMNTS.com retains full editorial control over the following findings, methodology and data analysis.

The cross-border payment space’s growth is part- Institute of International Education (IIE). Students from ly fueled by college tuition payments made between around the world share a common challenge, howev- countries. Sending such funds quickly and on time can er, and that is sending tuition payments accurately, be daunting for many families, especially when pay- securely and on time. Student-focused payment re- ers experience the added frictions associated with ceivables platforms help students and their families reconciling payments in local currencies. Payers also manage delinquent accounts, loan collections and sometimes contend with additional fees and even tuition payments. Payers can use these platforms to withdrawal restrictions from their home countries. reconcile overseas transactions, ensuring tuition bills issued in one currency are paid in full when recipients The size of the cross-border tuition space justifies the authorize transfers in their local currencies. attention many industry observers give it. International

payments could reach $3 trillion by 2023, and FinTechs AROUND THE FASTER throughout the world are already seeing the benefits PAYMENTS WORLD of payment options that ensure fast and safe interna- Recent developments in the faster payment space are tional transfers. The global cross-border tuition space, also highlighting emerging markets clamoring for fast- specifically, is currentlyvalued at $70 billion. er payment options. Disputes over creative rights are as Higher education institutions in the United States familiar to music business stakeholders as big-bucks enrolled more than 1 million foreign students this year signing contracts. SoundExchange introduced a fea- — an all-time high that makes up 5.5 percent of the to- ture suite to its online client portal last month that tal U.S. higher education population, according to the could quickly end these disputes and help winners get

© 2019 PYMNTS.com All Rights Reserved | 3 paid quicker. The firm’s tool notifies rights owners SUPPLYING PUBLIC SCHOOLS WITH THE RIGHT TOOLS when other parties make competing claims, enabling them to shut down disputes and get paid. K-12 public schools nationwide have lagged when adopting faster payment innovations that more ef- The U.S. Faster Payments Council (FPC), which fectively manage funds. The process from invoice to is looking to develop a national faster payments

WHAT'S INSIDE WHAT'S payment receipt via cash or checks can take as long system, is not having difficulties beefing up its mem- as 21 days. New digital technologies are emerging bership roster. Companies and entities such as ACI to hasten these cumbersome practices, however. For Worldwide, enterprise software developer BHMI and this Tracker’s Feature Story (p. 7), Jerry Banks, CEO the Federal Reserve have hopped aboard over the of school-focused transaction processing platform past several months, boosting FPC’s profile. Bursari, explains how the company helps securely Faster payment adoption continues to spread transmit funds while reducing the steps involved. across the globe. One of the hottest regions for ex- pansion is Latin America, with Brazil’s central bank DEEP DIVE: FASTER PAYMENTS GIVE HIGHER EDUCATION AN UPGRADE planning to launch its instant payment system in November 2020 — one year earlier than expected — U.S. students attending domestic schools do not to exploit the growing demand. The platform allows have to contend with tricky currency changes, but Brazilians to send payments in seconds with just they still demand faster, safer and more conve- their smartphones. nient ways to make tuition payments. This month’s Deep Dive (p. 14) examines how real-time payment The Tracker’s News and Trends section (p. 11) solutions could supplant U.S. higher education insti- highlights these headlines as well as more faster tutions’ outdated payment processing systems like payments news from the U.S. and abroad. checks, cards and automated clearing house (ACH).

What are some of the benefits that faster payment solutions can offer large and small businesses?

“We live in a real-time environment — one that increasingly includes the need for real-time payments. In the two years since [its] launch, the Real-Time Payments network from The Clearing House has grown to over 2.5 million monthly transactions, and [it] is likely to nearly double that by end of 2019. Now that RTP is becoming more widely used, businesses of all sizes can leverage the faster payments movement to create competitive advantages.

Here are examples of how faster payments benefit businesses: WHAT'S INSIDE WHAT'S • PAYROLL: [They can] pay employees in real time, when they need it. This is particularly important for gig, overtime and temp workers. [It keeps] these key employees happy.

• B2B: [Businesses can] request a payment or pay a bill, sending payment information with a payment behind the secure authentication layer of a bank’s online channel. It’s safer and more convenient than sending [these items] separately over unsecured email or maintaining printed copies of payment records.

• CASH ON DELIVERY: [They can] pay vendors on demand, [allowing businesses to] get what they need when they need it to better serve their customers.

• CLAIMS: [Firms can] pay claims in real time to help customers who experience a significant event.

As the real-time movement continues to grow, businesses will find competitive and operational advantages to implementing real-time payments.” WHAT'S INSIDE WHAT'S CARRIE BLANKENSHIP director of product management at Fiserv

5 54 Number of countries with active real-time payment programs

$5B 80% WHAT'S INSIDE WHAT'S Estimated Southeast Estimated CAGR of real- Asian bank revenue to time payment growth in be displaced by digital higher education between payments and non-bank 2018 and 2022 competition by 2025

21.5% 60% Portion of consumers still Portion of surveyed receiving disbursements payments systems via paper checks stakeholders who think the U.S. is not making adequate progress in adopting faster payments

GIVING SCHOOLS AND ORGANIZATIONS A Lesson In Faster Payments

Approximately 50.8 million students are enrolled in through digital channels. Jerry Banks, Bursari’s CEO, K-12 public schools nationwide, according to the lat- recently spoke with PYMNTS about how faster digi- est figures from the Department of Education, and tal payment solutions are preventing educators and as these students pursue their educations, some parents from having to engage in cumbersome pay- schools are learning new lessons on how to more ment processes. effectively manage funds through faster payment “A school’s primary interest is educating students, solutions. Students often receive their educations and properly so,” he said. “With today’s technology in places beyond the classroom, such as on trips to … Bursari consolidates the payment process so that museums, historical locations and concerts. These school resources can be focused on education and activities may require parents make payments to not on making sure funds are in place for a school schools so their children can participate. School sys- trip or a student’s lunch or team participation. We’re tems often still use paper-based payments like cash here to help with that mission.” and checks despite advancements in digital payment technologies. REDUCING STEPS IN SCHOOL- ORIENTED PAYMENTS Bursari, a transaction processing platform designed Banks pointed out that the education space has for schools and community organizations, is work- lagged in terms of payment innovation compared ing to modernize antiquated payment practices that to other markets with outdated payment methods. educators, administrators, staff and parents must Typical payment processes often begin with an in- contend with. The firm recently announced that it will voice that is delivered to parents, Banks said, and use Fiserv’s Digital Payments SDK to enable these parents pay the invoices using paper checks or cash, parties to make more seamless, digital payments which are physically delivered to schools’ finance for school-related activities and programs. The new offices. Employees then deposit the funds at their solutions allow parents to make one-time or recurring payments to schools and other organizations

8 | © 2019 PYMNTS.com All Rights Reserved institutions’ banks, with the money becoming avail- backpack [asking] for payment for a field trip. Then able several days later. what was chaotic turns into a meltdown.”

This process can take as long as 19 to 21 days, This discovery could put parents into the tricky posi- from the time an invoice is issued to when funds are tion of having to get down to the school with the right made available in schools’ bank accounts. Such pay- amount of cash or a paper check. Banks added that ments are also costly, with recent data indicating the process can also be burdensome for the teachers that each paper check can cost between $4 and $20 who are charged with holding onto payments in their to process. classrooms until they can physically deliver them to schools’ financial offices. “You’ve got numerous moving parts that are part of the process and it takes multiple days to process Bursari’s platform spares both parents and teachers these transactions,” he noted. from the headaches physical payments cause by enabling parents to make payments from their mobile Bursari is introducing greater efficiencies into how devices directly to the schools, preventing teachers education-related payments are handled by granting and administrative staff from having to handle the all parties access to the platform, enabling payments delivery of cash and checks. to be initiated and completed shortly after invoices are issued. Schools can digitally create invoices and “We’re replacing [the] Ziploc bags and shoeboxes use text messages to immediately notify parents, [used to store money] in the classroom,” he said. who can then pay using their mobile devices. INCLUDING SCHOOLS, COMMUNITIES “With Bursari, the whole transaction happens in- IN DESIGN stantly,” Banks said. Safety and security are top concerns for school administrators and parents, both of whom want to KEEPING SCHOOL DAYS CHAOS-FREE be assured that the platform can secure sensitive The platform also stops parents from falling into dif- information when transmitting funds. School ad- ficult situations because of late or missed payments. ministrators also want to be able to demonstrate Banks shared an anecdote of parents learning that that payments have been spent appropriately, their child is supposed to be going on a field trip. The Banks stated. child will not be allowed to go on the trip until the school receives payment — a detail the child forgot Bursari addressed these concerns by making sure to share with the parents. that schools and community organizations were consulted in its design. The platform has been pi- “In the school space, 6:30 in the morning can be cha- loted in roughly 50 school districts nationwide and otic enough as it is,” Banks said. “Then [a child’s] school officials’ insights have been key to encourag- mom or dad finds a crumpled up piece of paper in a

ing adoption. STORY FEATURE

“The difference in the way we’re developing this is [that] it was built with schools and community organizations, not for them,” he said. “It makes all the Jerry Banks, CEO of education-focused difference in the world, because, many times, soft- transaction solution company Bursari, ware is developed for some target audience and explains how schools’ and organizations’ handed to them. We’re taking a totally different payment practices are changing with the approach.” availability of faster payment solutions. This made it easier for school officials to trust the system because they were involved in its early design. The platform includes personalized information “The traditional [method of payment] is a teacher for each organization, including school pictures, lo- or a club leader or a coach in a school enterprise gos and other unique details. The system can also will have some transaction they want to process. integrate with schools’ and organizations’ back-end It could be a field trip, or it could be [that] a soc- accounting systems to help administrators track cer team is going to a tournament for a weekend, spending. but there’s some transaction that needs to be pro-

FEATURE STORY FEATURE cessed. Typically, … parents have been notified Public schools and community groups have largely by some piece of paper that went home, and it fallen behind other markets in implementing digital may or may not finally get to wear it needs to be: payment solutions. New digital solutions could put with parents. educators, parents, administrators and other officials in a new class of payments, however, that The new way is the parent is directly notified enable them to focus on educating students rather through Bursari of a transaction, and with just a than chasing down and handling physical payments. few clicks, that transaction is paid and immediately the school or users within the school are notified who has paid for what, who is registered for what and [that] the payment is going directly into the bank account of the school.

All that happens almost instantaneously, from the moment a user establishes a transaction in Bursari. At that moment, the payer can pay that transaction.”

Bringing Real-Time a leading enterprise software applications provider, joined the council in October. The Federal Reserve, Payments To New which founded FPC last year, hopped aboard as a Markets founding sponsor in December. Electronic payments and banking solutions provider ACI Worldwide joined MASTERCARD DEBUTS REAL-TIME PAYMENTS SOLUTION WITH ALCOHOL in November, giving the council more than 140 mem- SUPPLIER FOCUS bers. ACI already has a strong foothold in the space Wine and spirits suppliers are raising their glasses to as it has integrated with 18 real-time domestic pay- Mastercard, which recently unveiled an instant payment networks around the globe. ments system that allows businesses to pay suppliers JACK HENRY & ASSOCIATES in real time. The financial services giant is partner- CONNECTS FIs TO REAL-TIME ing with PNC Bank to pilot the Payment on Delivery PAYMENTS EXPERIENCES tool, which improves operational efficiency in indus- Many financial services companies adopted real-time tries with complex distribution networks and supply payment services early, and instant payment solu- chains, supplanting their onerous paperwork and tions continue to grow. Jack Henry & Associates, a complicated reconciliation processes largely driven technology solutions and banking software provider, by cash and checks. Mastercard is focusing first on recently announced that 15 financial institutions (FIs) the heavily regulated alcohol distribution space and will use its JHA PayCenter system to connect to The tapped enterprise resource planning (ERP) provider Clearing House’s (TCH’s) Real-Time Payments (RTP) Rutherford & Associates to help facilitate payments. network. Dallas-based Pegasus Bank is among the FIs that will use the platform to permit its customers FPC’S MEMBER ROSTER CONTINUES TO EXPAND to receive instant payments sent by account holders from a rising number of federally insured deposito- Several major membership additions have bolstered ry institutions without incurring risk. A press release the FPC’s goal of developing a national faster pay- announcing the move stated that the firm intends to ments system in the U.S. The FPC reported that BHMI, “aggressively” expand its client base next year.

© 2019 PYMNTS.com All Rights Reserved | 11 KABBAGE EXPANDS INTO PAYMENT funds to any account at any time without paying PROCESSING transfer fees, and those transactions will also be The time between sending out an invoice and getting safer as payments can be made without sharing per- paid can be quite lengthy for many small business- sonal information beyond recipients’ phone numbers es, leading Atlanta-based lending company Kabbage or email addresses. to launch Kabbage Payments in October. The tool Smartphone usage is widespread in Brazil and allows customers to create unique URLs for their makes up the region’s biggest economy, with 67 per- businesses and send payment requests through cent of the adult population having access to such texts, emails or the web. This allows them to secure- devices. The central bank will have competition in the ly collect card payments and eliminates the need for space as Itaú Unibanco, one of the largest FIs in Latin customers to create new accounts, start payment America, has already launched a similar platform. orders or duplicate recurring invoices. Invoices can settle within 24 hours. CREDEC LAUNCHES CLOUD ACCOUNTING REAL-TIME PAYMENTS Helping small and medium-sized businesses (SMBs) solve their cash flow woes is a big market. A recent United Kingdom-based payment service provid- PYMNTS survey of more than 1,000 SMBs found that er CreDec launched a real-time payments solution, 60.5 percent of firms believe immediate payment Virtual Account, at the XeroCon conference in London platforms can boost their revenues as sellers. An last month. The offering bypasses online banks, per-

NEWS & TRENDS NEWS additional 64.8 percent think such offerings would mitting SMBs and their accounting firms to make boost their revenues as buyers. bank payments directly from accounting platforms. A press release stated that Virtual Account allows users to create accounts in seconds on accounting International platforms such as Xero before linking them to any on- Faster Payment line bank account for frictionless payments. This is particularly useful as nearly half a million U.K. SMBs Developments already use Xero, according to CreDec. The compa- BRAZIL PLANS FOR NEW INSTANT ny intends to roll out multiple accounting integrations PAYMENT SYSTEM over the coming months. Demand for faster transactions in Latin America is “CreDec’s Virtual Account effectively turns Xero into ramping up, and Brazil’s central bank is looking to a bank front end,” said Alex Meynell, the company’s cash in. It is reportedly aiming to launch its instant CEO. “We’ve closed the gap between banking and payment system by November 2020 — a year earli- accounting payments, and starting with Xero, we’re er than planned. The new system will allow Brazilian making accounting platforms the principal interface consumers to complete transactions within a few for all payments activity.” seconds by scanning quick-response (QR) codes with their smartphones. Users will be able to transfer

12 | © 2019 PYMNTS.com All Rights Reserved MODULR JOINS BANK OF ENGLAND’S retail and wholesale customers could receive pay- REAL-TIME PAYMENTS SYSTEM ments over via RTP before this development. The Payments application programming interface (API) bank’s clients can now send real-time payments di- provider Modulr joined CreDec last month as one of rectly from their enterprise software or treasury the few non-bank payment service providers (PSPs) workstations, garnering immediate advantages such to hold an account in the Bank of England’s (BoE) as optimized cash flows. real-time gross settlement (RTGS) system. The U.K. FinTech operates an API-driven payments platform BOTTOMLINE’S REAL-TIME MODULE RAISES BANKS’ IQs for corporate payments. Modulr said this alliance with BoE will allow the firm to process payments Financial technology provider Bottomline without going through commercial banks, creating Technologies recently added real-time payment solu- new competition. tions to its Digital Banking IQ suite last month. The firm said in a recent press release that the offering will streamline the business-to-business (B2B) pay- New Offerings And ments process, enabling banks’ corporate customers Features to send and receive real-time payments, leverage complete information and request funds. The firm’s HSBC INTRODUCES RTP NETWORK CAPABILITIES real-time payment module also allows users to send and receive credit transfers in real-time via RTP, ac- HSBC Bank recently launched capabilities for busi- celerating fund settling and improving access while nesses to pay and be paid instantly via TCH’s RTP eliminating paper-based processes. network. Firms were previously only able to receive real-time payments. The bank said in a press NEW PORTAL FROM SOUNDEXCHANGE release that the service is for all U.S. business cli- SPEEDS ROYALTY PAYMENTS ents and will soon be offered to retail customers as Music royalty distributor SoundExchange introduced well. The new features include immediate customer a suite of features to its online client portal, refunds, instant payroll delivery and just-in-time cash SoundExchange Direct, last month. One of the tools, management. The projected rollout will wrap up by Overlaps and Disputes, notifies rights owners if other early 2020. parties make competing ownership claims, enabling the correct parties to resolve overlaps as they oc- WELLS FARGO’S NEW INSTANT PAYMENTS OFFERING AIDS cur. The features will ensure that fewer royalties are CORPORATE CUSTOMERS held up by disputes and increase payment speed. Financial institution (FI) Wells Fargo also recently SoundExchange also projected that the features expanded its offerings. It utilized an API available would increase musicians’ control over their royal- through Wells Fargo Gateway to allow corporate cus- ty accounts. tomers to send payments via the RTP network. Only NEWS & TRENDS NEWS

Real-Time Payments Make The Grade In Higher Education

The cost of college tuition is skyrocketing across the according to one report. Forecasts estimate that country, and the financial burden falls on many par- 25 percent of online bill payments will be sent in ents and students. Legacy college tuition payment real time to colleges and universities by 2022. Such methods, such as personal checks or credit cards, payments are taking market share from ACH trans- can be slow and costly, adding to many families’ frus- actions, checks and debit cards in doing so. trations. Parents and higher education institutions ACH is the most popular higher education payment are learning their lessons and are turning to real-time method, accounting for 40 percent of tuition pay- payments for greater efficiency and ease of use. ments, according to a separate report. The appeal is Real-time payments add on no processing fees and easy to appreciate as ACH payments are mostly free help payers better manage their budgets. and more convenient than writing and sending per- This month’s Deep Dive explores how real-time sonal checks. It can sometimes take several days for payments are upgrading the sometimes clunky tui- funds to deposit, however, since TCH bundles large tion process for families, pushing into a space ripe numbers of transactions in a single batch and only for change. sends the batches out at certain times.

SPEEDING UP TUITION PAYMENTS Though paying by physical check also does not in- cur payment processing fees, parents and students The nascent U.S. market for real-time payments is must send checks days in advance of the due date growing, projected to rise at a compound annual to ensure payment arrives on time, and, like ACH, growth rate (CAGR) of more than 80 percent between further time can be lost to processing. The method 2018 and 2022 to more than 7 million transactions,

14 | © 2019 PYMNTS.com All Rights Reserved is less convenient than competing options and it is Such upgrades provide benefits beyond speed — most susceptible to identity theft and fraud. they are also valued for their security. Many systems’ advanced technologies use tokenization processes Credit or debit cards can be convenient and relative- that create unique party identifiers and shields ac- ly fast, processing in a day or two. Millennials prefer count numbers within the system. using cards, with 42 percent paying their tuition bills in this way — only 5 percent opted to use checks. That reputation does not mean that real-time payments are immune to fraud, of course. PYMNTS These options may not be considered fast enough reported earlier this year that such systems are for today’s students or their parents, who have grown susceptible to account takeover (ATO) fraud, where comfortable buying gas, groceries and other dai- bad actors assume account control and steal mon- ly essentials with just a swipe. Real-time payments, ey from inattentive holders. Younger generations, which instantly move funds from one bank account

including students, are sometimes lured into trans- DIVE DEEP to another, provide convenience, security and speed. ferring money to criminals, tricked into thinking they Students and parents can send tuition payments are helping someone in need. with such technologies to any institution, anywhere, anytime at no cost. Real-time payments even move The speed of real-time transactions means that money faster than same-day ACH or credit card money inadvertently sent to the wrong accounts like- transactions, and since payments are immediately ly cannot be recovered. A parent sending a tuition withdrawn from bank accounts, payers do not have payment to the wrong college would have to rely on to worry about overdrawing. the recipient’s good will to recover the money. Both ACH and credit card providers can refund users’ ac- SCHOOLING HIGHER EDUCATION counts if legitimate misuse is proved. Instant payments offer significant benefits for higher Real-time payments have nonetheless become in- education institutions, too. Colleges can collect tui- valuable within the financial services and insurance tion more efficiently and therefore quickly distribute arenas, and the method continues to expand into financial aid funds and other supports to students. other industries. Such transactions are making the Institutions can take a few simple actions to help grade in higher education by significantly lowering parents and students stay up to date, including text stress for families that need to make ever-increasing message reminders to pay, before upgrading pay- tuition payments. ment systems to support real-time solutions.

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Companies are organized in alphabetical order.

American Express Serve offers prepaid debit card accounts, with money management capabilities and cash load features. Its mobile app supports sending and receiving payments between Serve accounts, check capture, online bill payment and early direct deposit.

American Express Serve VERTICALS