Why Pay by Bank? An Uncertain Future of Instant Payments in the US.

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More of these use cases being tried the experimentation

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we're going to see this.

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year have a ton of it Whether middleware providers

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or whether it be additional banks coming on board I think this year is the year of

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Experimentation.

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The following year after that is going to be sussing out how do

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we put the protections in place from all the things that happened

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during the experimentation phase?

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And then

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how do we get the market and consumer adoption,

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and how do we expand the distribution channel?

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Tedd Huff - Fintech Confidential, Host: Welcome to Fintech Confidential, bringing

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you the people, tech, and companies that change how you pay and get paid.

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Welcome to another episode of FinTech Confidentials

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Uncut, where we talk about.

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Subjects without any limitations without any restrictions and truly

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share where we're think what we're thinking, where we're getting

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those thoughts from and how we're thinking about all of these subjects.

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Today's topic is going to be.

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pay by bank.

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And we're very lucky to have a guest here today who knows this very, very well.

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We have Dean Nolan and he's the managing director of commercial payments at SRM,

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an independent advisory firm with over 25 years of experience in the payments

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and financial services industry.

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He's held various leadership roles He's held various leadership roles in strategy,

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innovation, product management, and sales.

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Prior to SRM, he was a vice president at Fifth Third Bank, and held senior

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positions at MasterCard, First Data, Wells Fargo Bank, and Bank of America.

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Dean is an active participant in the payments community,

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serving as a consultant.

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A speaker, work group chair, executive director in various organizations.

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He holds an MBA from Marquette.

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He holds an MBA from Marquette university and a BA from

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university of Wisconsin, Milwaukee.

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Dean lives in Charlotte, North Carolina.

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And as always, we're happy to have you on Dean and Matt, welcome back.

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Thank you.

Dean Nolan: 00:02:06

Thanks.

Dean Nolan: 00:02:07

Yeah.

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Likewise, Matt and Tedd looking forward to today's conversation.

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So one of the fun, what we talked about was in the intro

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is the fact that we are going to be diving into pay by bank.

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And everybody seems to have a slightly different definition of what pay by

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bank is And what i'd like to do is

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is dean with you being the guest today.

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I'd love for you to Share with us what your definition of pay by bank is and

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then we'll have matt and then i'll follow in and fill in any Any variations

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that we feel differently on this

Dean Nolan: 00:02:50

Yes, I think the definition I tend to work with is pay by bank

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is a subset of account to account payments and it's really the subset

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that focuses on allowing consumers to make payments for goods and services.

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Um, fund those payments directly from their bank accounts and that those

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payments are made directly to the merchant or service provider without

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the need for a debit or credit card,

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awesome And that that that piece of it really starts to

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look at I think it's interesting you say without debit or credit card,

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um, because a lot of the debit cards are tied directly to the bank account.

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So we'll talk about that in a little bit, but Matt, I'd love to

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get your, your perspective as well.

Matt Vanhouten: 00:03:27

Yeah, I think there's a very literal interpretation of what

Matt Vanhouten: 00:03:32

pay by bank, um, means, which is person, let's just say this is a consumer

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context, uh, can Send money from their bank account to another bank account

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directly with no intermediary that that to me is the the real core of What

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pay by bank is meant to be and for a lot of different reasons some of them?

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I think very necessary some of them perhaps just opportunistic Capitalist,

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um, strategic planning that, uh, companies kind of, uh, insert themselves in between,

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uh, and act as a helpful gatekeepers.

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Um, but the whole point pay by bank from the consumer's perspective,

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uh, is I should be able to send the money where I want it to go.

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And no one should touch it in between or take any value out of it.

Dean Nolan: 00:04:15

you know, and if I just add to that, it's like, I think

Dean Nolan: 00:04:18

it's interesting what you say, and I can see that definition as well.

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And I think to me, 1 of the interesting,

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most interesting things about pay by bank is it really isn't new, right?

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Because before you had debit or credit cards.

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People were doing pay by bank, uh, one could argue a check

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is a form of pay by bank.

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Um, go back to, you know, 17th, that goes back to the 17th century

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when those were being made.

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Um, you know, wires could be considered pay by bank.

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ACH could be considered pay by bank.

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Those are, you know, 1870s or 50, 60 years old.

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I think the reason that we're here today is It's kind of how

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the new technologies, APIs,

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um, have impacted what's happening and then also new payment mechanisms

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like instant payments, FedNow and RTP are kind of changing the dynamics

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of pay by bank and Matt, allowing what you're talking about to happen.

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In a real time technology driven environment rather than a two day

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delay or going back to what checks used to, you know, going back to check.

Dean Nolan: 00:05:18

So, um, yeah, so that perspective, it's both new and old at the same time.

Dean Nolan: 00:05:22

That's one of the things I find most fascinating about the space.

Tedd Huff: 00:05:25

And just, just to be stupid

Matt Vanhouten: 00:05:26

to require in the definition that the, uh, the payment

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is occurring in near real time?

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Like, say, if we're trying to get to a definition of what is pay by

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bank, uh, would we agree that it's a consumer initiated payment that does

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not require an intermediary to move money between accounts in real time?

Dean Nolan: 00:05:44

I'll go with the consumer initiated and in real time.

Dean Nolan: 00:05:47

And I think for real time is good for today.

Dean Nolan: 00:05:49

Um, I think there's got to be an intermediary of some sort

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to connect the two banks.

Dean Nolan: 00:05:54

Right.

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So I, even if you're talking just straight API is going across the internet, you've

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got inner, you've got intermediaries who are participating in that transaction.

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So something's got to happen to connect the bank.

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So that's why I'm a little bit squishier on the without intermediary.

Dean Nolan: 00:06:08

But I do think your point about the cost that gets taken out of the payment.

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Maybe it's no cost taken out is too absolute.

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Maybe it needs to be more, you know, minimizing the cost

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that's taken out of the payment.

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And again, that might be one of the new, uh, interesting things that try, you

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know, starting to evolve and thoughts about how to minimize the costs that are

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associated with those intermediaries.

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and just for everybody's, um, Understanding

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we're going to be focusing on U.

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S.

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based, uh, bank to pay by bank today.

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I mean, there are other technologies across the world that that have,

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I mean, heck, they've been doing real time payments in Europe for, for some time.

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Um, and then, of course, you've got India and, and.

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Brazil that are really playing a part in the global sphere, but we're

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going to stay focused on, on us.

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And, you know, honestly, where, where I I, I, I fit somewhere

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outside of your guys circle,

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um, because I'm looking at.

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If, if I don't, have, for me, pay by bank is when it goes from one

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bank account, my bank account to the person's bank account that I'm, I'm

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paying without inserting some sort of credit facility between the two.

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That to me is pay by bank.

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And like you mentioned, Dean, ACH falls into that category.

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Wire falls into that category.

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Heck RTP and FedNow fall into that category.

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And even for me, the, the push to card and the push via debit card, like what Cash

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App uses to me also falls into the pay by bank because it's leveraging that debit

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card information to do basically what comes down to a PINless debit transaction.

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And so that's why I would bring that piece of it into it.

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Matt, how would you, why would, how would you push that one

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outside and say, no, no, no, no.

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That's, that's a, that's a card brand product.

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That's got to stay out there.

Tedd Huff: 00:08:03

Like, help me understand

Matt Vanhouten: 00:08:05

I don't, yeah, I don't, I don't, I don't know.

Matt Vanhouten: 00:08:06

I think it's, um, I think it's, it's an interesting twist.

Matt Vanhouten: 00:08:10

Um, you, you seem to, in that list of things that you include as pay

Matt Vanhouten: 00:08:14

by bank, Not to agree with the premise that real time is critical.

Matt Vanhouten: 00:08:19

So I think that probably I want to clarify is, is that your perspective?

Matt Vanhouten: 00:08:23

Like,

Matt Vanhouten: 00:08:23

to me is not real time.

Matt Vanhouten: 00:08:25

It is getting faster at the same day.

Matt Vanhouten: 00:08:27

There's multiple settlement windows, but it is not a real time, um, system.

Matt Vanhouten: 00:08:31

So I think it's just a question of if we, if we define.

Matt Vanhouten: 00:08:35

Like, as a key ingredient that the.

Matt Vanhouten: 00:08:37

Delivery of the payment to the recipient occurs in.

Matt Vanhouten: 00:08:41

Near real time, I would say, yeah, some of those don't qualify.

Matt Vanhouten: 00:08:45

Um, maybe we could just clarify that piece because I, I do have other

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thoughts about the, the facility for settlement right in between them.

Tedd Huff: 00:08:52

Yeah.

Tedd Huff: 00:08:52

So the reason why, I mean, today's subject is pay by bank.

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It isn't pay near real time by bank.

Tedd Huff: 00:08:59

Right.

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And So, that's why I was going a little bit of broader discussion is

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pay by bank is, is Dean mentioned is.

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Been around forever is just evolved and each thing has gotten more advanced

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and a little bit faster and more advanced, a little bit faster and

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more advanced, a little bit faster.

Tedd Huff: 00:09:15

And now we're to the point where it's near real time.

Tedd Huff: 00:09:18

And so that's the perspective that I was taking from it.

Matt Vanhouten: 00:09:20

So, let's, let's say, let's, let's say, then, um, we

Matt Vanhouten: 00:09:23

mentioned consumer initiated is a, uh, uh, kind of a critical piece in

Matt Vanhouten: 00:09:28

an scenario, you could have a debit or a credit, so I could have a merchant

Matt Vanhouten: 00:09:32

that's debiting my bank account.

Matt Vanhouten: 00:09:34

I'm not.

Matt Vanhouten: 00:09:35

Initiating, really, I might have given authorization that you could call that

Matt Vanhouten: 00:09:39

initiating, but it's really the business in this case, which is with authorization

Matt Vanhouten: 00:09:45

pulling funds from my bank account.

Matt Vanhouten: 00:09:46

So, let's maybe, I'm just questioning if any of the previous agreements

Matt Vanhouten: 00:09:51

that we had established actually hold true if we, if we take this approach.

Tedd Huff: 00:09:54

Yeah.

Tedd Huff: 00:09:54

And that's a good point.

Tedd Huff: 00:09:56

You know, looking at it from, did the customer press the button to,

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and, and, or gave the, the okay.

Tedd Huff: 00:10:03

At the moment in which the request for payment or the push

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of payment happens, then yeah,

Tedd Huff: 00:10:10

I would agree with you that ACH doesn't fall into that wire.

Tedd Huff: 00:10:13

I think would, um, but Check wouldn't in my, my perspective.

Matt Vanhouten: 00:10:18

Check would not qualify as consumer initiated.

Matt Vanhouten: 00:10:22

You say no,

Dean Nolan: 00:10:23

I, I would, I see where you guys are going on this.

Dean Nolan: 00:10:26

And it, it is one of the reasons I think this definition is so difficult, right?

Dean Nolan: 00:10:30

I mean, you could take it, you could take it to the next degree and say,

Dean Nolan: 00:10:35

even if I pay with my credit card, ultimately I pay off my credit

Dean Nolan: 00:10:38

card with checking account funds.

Dean Nolan: 00:10:40

So it really was money that came out of my checking account that

Dean Nolan: 00:10:43

just got delayed for 30 days.

Dean Nolan: 00:10:44

Cause I was using the free float on my credit card to get it.

Dean Nolan: 00:10:47

Um, I would say, you know, what I've seen.

Tedd Huff: 00:10:50

So everything's paid by bank.

Dean Nolan: 00:10:53

what I throw out there is, you know, maybe for today we do

Dean Nolan: 00:10:57

focus, Matt, closer to the definition you're saying with its consumer

Dean Nolan: 00:11:01

originated and it's something that is happening real time or near real time.

Dean Nolan: 00:11:06

So I think that's where the, that's where the new excitement around this has come.

Dean Nolan: 00:11:10

And, you know, I've sat on discussions with people talking about check

Dean Nolan: 00:11:14

processing and ACH and wires.

Dean Nolan: 00:11:16

And, you know, there's been a lot of those for the long time,

Dean Nolan: 00:11:19

but I think maybe today we could focus more on what's happening in

Dean Nolan: 00:11:22

more of the instant payment space and API and what's happening to

Dean Nolan: 00:11:27

potentially change some of the commerce, change the commerce environment.

Dean Nolan: 00:11:32

That might be a, an agreeable topic or at least agreeable definition

Dean Nolan: 00:11:36

for the next, uh, you know, 45 minutes or so at this call.

Tedd Huff: 00:11:39

Yeah.

Tedd Huff: 00:11:40

I, I will agree with that too.

Tedd Huff: 00:11:42

Um, but I think what, by doing that, what that forces us to have to do is

Tedd Huff: 00:11:46

really look at what are the nuances.

Tedd Huff: 00:11:50

Of these, these types of pieces.

Tedd Huff: 00:11:51

And the one that I really want to get Matt's perspective on is it now that

Tedd Huff: 00:11:56

we're talking about near real time

Tedd Huff: 00:11:57

and we're talking bank to bank, they're possible, some sort of intermediary

Tedd Huff: 00:12:01

where it's the clearing house or fed, um, or a car brand, um, how, how Matt, his

Tedd Huff: 00:12:08

feelings around the, the push to card.

Tedd Huff: 00:12:09

And then Dean, I'd love to get yours as well.

Matt Vanhouten: 00:12:11

Yeah.

Matt Vanhouten: 00:12:11

Just a full disclosure.

Matt Vanhouten: 00:12:13

If anyone doesn't know, I managed the visa direct product team for several years.

Matt Vanhouten: 00:12:19

And so push to card is something I, uh, I definitely, um, love and

Matt Vanhouten: 00:12:25

it's near and dear to my heart.

Matt Vanhouten: 00:12:26

So there's, there's gonna be bias in my, in my, uh, my, my response is bias

Matt Vanhouten: 00:12:30

in any response, but especially there.

Matt Vanhouten: 00:12:32

Um, no.

Matt Vanhouten: 00:12:33

And I, I, I think what you're, what you're pointing to.

Matt Vanhouten: 00:12:35

Uh, there Tedd is like, and this is the way we thought about it at Visa

Matt Vanhouten: 00:12:39

is the, the, the card is just a, uh, a credential that helps to route.

Matt Vanhouten: 00:12:44

Money from 1, 1 end point to another end point and in the case of.

Matt Vanhouten: 00:12:48

Like, say, sending money to an account, using a card as the, as the credential

Matt Vanhouten: 00:12:53

to identify where the funds should go.

Matt Vanhouten: 00:12:55

I would agree.

Matt Vanhouten: 00:12:57

The, the, the 1 thing I think is, is maybe important for us to also

Matt Vanhouten: 00:13:01

clarify as far as, like, just.

Matt Vanhouten: 00:13:02

Drawing, like, where's the box we're going to sort of focus on is.

Matt Vanhouten: 00:13:06

If it's about a, a consumer buying something, right, pushing money

Matt Vanhouten: 00:13:11

from a consumer to a business, uh, while Visa Direct and MasterCard

Matt Vanhouten: 00:13:15

send another, like, push, um, or platforms can support use cases there.

Matt Vanhouten: 00:13:21

They're not designed for that.

Matt Vanhouten: 00:13:22

And so I think it's, there's also some, some, some definite, like, trade offs

Matt Vanhouten: 00:13:27

around, like, where it works well, and where it doesn't work well, it

Matt Vanhouten: 00:13:30

can definitely be part of a solution.

Matt Vanhouten: 00:13:32

Um, but I think it's, I guess, in addition to kind of just.

Matt Vanhouten: 00:13:36

Choosing about where we restrict the scope in, in, in, in the prior, like,

Matt Vanhouten: 00:13:43

uh, thread that we just kind of tied off.

Matt Vanhouten: 00:13:46

I think it would be good to also clarify, like, like, there's person to person

Matt Vanhouten: 00:13:49

payments that facilitate money, money movement in lots of different ways.

Matt Vanhouten: 00:13:53

And then there's disbursements that also facilitate money.

Matt Vanhouten: 00:13:56

Moving from businesses to consumers in a number of different

Matt Vanhouten: 00:13:59

ways in my mind, pay by bank.

Matt Vanhouten: 00:14:01

When people say pay by bank, what they're thinking about is.

Matt Vanhouten: 00:14:04

I, I don't, I don't want to have to pay credit card interchange.

Matt Vanhouten: 00:14:08

I want to be able to end a merchant from a merchant perspective.

Matt Vanhouten: 00:14:10

I want to save money.

Matt Vanhouten: 00:14:12

So I'm going to offer consumers the option to pay by bank so that

Matt Vanhouten: 00:14:14

I don't have to pay as much fees.

Matt Vanhouten: 00:14:16

So, uh.

Matt Vanhouten: 00:14:17

That's what I think of as really being what determines what goes in the box,

Matt Vanhouten: 00:14:21

is merchants think they can save money by avoiding traditional credit card

Matt Vanhouten: 00:14:27

interchange and debit card interchange.

Dean Nolan: 00:14:28

Yeah, I, I, um, when you were talking about Visa Direct in full

Dean Nolan: 00:14:32

disclosure, I spent most of my energy focused on RTP and FedNow payments

Dean Nolan: 00:14:37

and a little less so on Visa Direct.

Dean Nolan: 00:14:39

Um, but I always viewed Visa Direct, you know, similar to

Dean Nolan: 00:14:43

how you were describing it.

Dean Nolan: 00:14:44

You know, one of the characteristics of pay by bank, especially if you're

Dean Nolan: 00:14:48

talking consumer to business is.

Dean Nolan: 00:14:51

If as a business, you don't want every consumer out there to know

Dean Nolan: 00:14:55

your bank account number, right?

Dean Nolan: 00:14:56

So there's usually some intermediary that sits in between whether it's a

Dean Nolan: 00:15:00

directory model or a card number, like a Visa or MasterCard card number that

Dean Nolan: 00:15:05

kind of masks that bank account number.

Dean Nolan: 00:15:06

So there's some privacy there, or, you know, some things happening like that.

Dean Nolan: 00:15:11

I might have been talking more in a P2P instance there, but

Dean Nolan: 00:15:13

I think you got the point.

Matt Vanhouten: 00:15:14

Yeah, yeah, yeah.

Dean Nolan: 00:15:15

I, um, you know, I do see, I, I, so I think there's always something

Dean Nolan: 00:15:20

in there and the directory models or the, the card number or some type of

Dean Nolan: 00:15:24

tokenization or something happening to anonymize that business accounts

Dean Nolan: 00:15:28

number, just because you don't want that exposed to millions of consumers.

Dean Nolan: 00:15:32

It's just going to create too many problems for, you know, lots of problems.

Dean Nolan: 00:15:36

Um, so yeah, that's, but yeah, I do agree.

Dean Nolan: 00:15:39

I definitely see Visa direct and MasterCard send is, you know,

Dean Nolan: 00:15:42

products that fit into space.

Matt Vanhouten: 00:15:43

Well, see, I

Matt Vanhouten: 00:15:44

don't.

Matt Vanhouten: 00:15:44

So that's what I,

Dean Nolan: 00:15:45

Oh, interesting.

Dean Nolan: 00:15:46

Okay.

Dean Nolan: 00:15:46

Sorry.

Matt Vanhouten: 00:15:47

I, I don't see them fitting in the space when

Matt Vanhouten: 00:15:49

we're describing, uh, like a large merchant accepting payments.

Matt Vanhouten: 00:15:54

Visa Direct and MasterCard Send is not meant for them.

Matt Vanhouten: 00:15:57

A tiny, a tiny, like, seller, like, uh, like you or me at the, you know, if we

Matt Vanhouten: 00:16:01

were setting up a table to, to sell, you know, Girl Scout cookies that are

Matt Vanhouten: 00:16:06

being sold in my neighbor, neighborhood now, uh, in theory, I could set up an

Matt Vanhouten: 00:16:10

account where you could just push me money, you know, to my debit card and

Matt Vanhouten: 00:16:14

then it depends on the business having a debit card that they can publish.

Matt Vanhouten: 00:16:19

And last time I checked Verizon doesn't have one debit card that it

Matt Vanhouten: 00:16:23

could share with everyone to receive the money into their bank account.

Matt Vanhouten: 00:16:27

And, and so it's like, I think it's a fit for purpose kind of a question.

Matt Vanhouten: 00:16:31

Like, the technology is there to solve a particular problem, um, and,

Matt Vanhouten: 00:16:37

and then there are, I think, things that it's really good at, and then

Matt Vanhouten: 00:16:40

there are things that it isn't as good at, because that's, you know,

Matt Vanhouten: 00:16:43

not every tool can solve everything.

Dean Nolan: 00:16:46

Yeah.

Dean Nolan: 00:16:46

Okay.

Dean Nolan: 00:16:47

Thanks.

Dean Nolan: 00:16:47

Thanks for that clarification.

Dean Nolan: 00:16:48

And yeah, then I, then I do agree with you.

Dean Nolan: 00:16:50

And I do agree to your point about fit for purpose.

Dean Nolan: 00:16:53

I think that's, that's going to end up being something we're going to

Dean Nolan: 00:16:55

talk about on pay by bank as we get into today as well, because it is

Dean Nolan: 00:16:59

definitely something where it's fit for purpose and you have to find what that

Dean Nolan: 00:17:03

purpose is and where it makes sense.

Dean Nolan: 00:17:05

Over what exists today, because, you know, in the U.

Dean Nolan: 00:17:08

S.

Dean Nolan: 00:17:08

market, you know, consumers are well served by the number of

Dean Nolan: 00:17:11

payment choices they have available.

Dean Nolan: 00:17:13

Right?

Dean Nolan: 00:17:14

So something new, like instant payments, something new, like instant

Dean Nolan: 00:17:18

payments, powered pay by bank, you know, it's going to have an impact in.

Dean Nolan: 00:17:23

They're going to have impact in high value areas where.

Dean Nolan: 00:17:26

The value proposition solves a use case better than what exists today,

Dean Nolan: 00:17:31

but it's not, you know, I'm not sure it will make other payments go away.

Dean Nolan: 00:17:36

And, you know, I go back to my check comment before, you know, checks

Dean Nolan: 00:17:40

have been around for hundreds of years and we keep trying to get rid

Dean Nolan: 00:17:43

of them, but they keep persisting.

Dean Nolan: 00:17:45

You know, and I'm not sure in our lifetime if we'll see checks finally

Dean Nolan: 00:17:48

go away unless there's some government mandate to say, make them go away.

Tedd Huff: 00:17:52

And there are still billions of paper checks that go

Tedd Huff: 00:17:57

through all the systems today.

Tedd Huff: 00:17:59

Um, a lot of people don't realize a lot of times when you do a bill

Tedd Huff: 00:18:02

payment through your bank, guess what?

Tedd Huff: 00:18:05

That turns into a paper check and gets sent off in the mail.

Tedd Huff: 00:18:08

And.

Tedd Huff: 00:18:09

You know, that's, that's the way that it's still done.

Tedd Huff: 00:18:11

But what I want to do is, is talk about, you know, we, we already talked about

Tedd Huff: 00:18:15

fit for purpose use cases, but in the U S when you start to look at the,

Tedd Huff: 00:18:20

the pay by bank, I mean, traction is.

Tedd Huff: 00:18:23

Nearly non existent in the U S right now, when you talk about the

Tedd Huff: 00:18:26

definition, we just taught that we just defined of consumer to merchant,

Tedd Huff: 00:18:31

uh, initiated by the consumer.

Matt Vanhouten: 00:18:32

to a merchant that occur in near real time.

Matt Vanhouten: 00:18:34

It is virtually zero.

Matt Vanhouten: 00:18:35

Recurring payments that are

Tedd Huff: 00:18:36

But I believe a lot of that,

Matt Vanhouten: 00:18:38

from an account is huge, right?

Matt Vanhouten: 00:18:39

And so that's why I was, I think it's important to distinguish, like, if you,

Matt Vanhouten: 00:18:42

if you, if you just switch that one little assumption, say, Pre authorized debits.

Matt Vanhouten: 00:18:47

Is that part of this definition?

Matt Vanhouten: 00:18:49

Well, that's probably one of the biggest sources of value exchange that

Matt Vanhouten: 00:18:53

we, that we currently have, right?

Matt Vanhouten: 00:18:55

Almost

Matt Vanhouten: 00:18:56

many, many recurring payments happen, uh, with that.

Matt Vanhouten: 00:18:59

Methodology, right?

Matt Vanhouten: 00:19:00

The, the higher ticket items in particular.

Matt Vanhouten: 00:19:03

So, like, your utility bill, your, your insurance payments, like, the mix of card

Matt Vanhouten: 00:19:08

and for higher ticket items is definitely,

Matt Vanhouten: 00:19:11

you know, more in favor of, of, of a debit transaction, debit transaction versus a

Matt Vanhouten: 00:19:17

card transaction, a digital subscription.

Matt Vanhouten: 00:19:19

That's 699 a month, 1299 a month.

Matt Vanhouten: 00:19:22

Like, that's heavily.

Matt Vanhouten: 00:19:24

Card oriented.

Matt Vanhouten: 00:19:25

And one of the things that we're seeing, um, the place where I currently work, BGS,

Matt Vanhouten: 00:19:29

is, is a lot of interest in that side of the market, in lower ticket, being able

Matt Vanhouten: 00:19:34

to take advantage of pay by bank, right?

Matt Vanhouten: 00:19:37

So, can, can companies that started off with a heavy focus on card as their sole

Matt Vanhouten: 00:19:43

method of receiving payment, can they, can they offer consumers a different choice?

Matt Vanhouten: 00:19:48

And if they do,

Matt Vanhouten: 00:19:49

what's the likelihood that they'll choose it?

Matt Vanhouten: 00:19:51

And what do they need to kind of like, Believe to, to kind of

Matt Vanhouten: 00:19:54

invest in a program like that.

Tedd Huff: 00:19:55

I mean, a perfect example of that is, you know,

Tedd Huff: 00:19:58

I have Verizon as my wireless carrier.

Tedd Huff: 00:20:00

I'm sorry to those who have AT& T and experienced the blackout last week.

Tedd Huff: 00:20:04

But, um,

Tedd Huff: 00:20:05

you know, I look at that and they, No, no, no.

Tedd Huff: 00:20:08

Just AT& T.

Matt Vanhouten: 00:20:09

Oh, AT& T.

Matt Vanhouten: 00:20:10

Okay.

Matt Vanhouten: 00:20:10

Sorry.

Matt Vanhouten: 00:20:10

Yeah,

Tedd Huff: 00:20:11

AT& T, Yeah,

Tedd Huff: 00:20:11

Um, but you know, I look at it and they gave me three choices.

Tedd Huff: 00:20:16

If I use my credit card on file, I don't get a discount.

Tedd Huff: 00:20:22

But if I use my debit card, I get a little bit of a discount.

Tedd Huff: 00:20:25

If I, if I do ACH, automated ACH withdrawal, then I get

Tedd Huff: 00:20:30

an even bigger discount.

Tedd Huff: 00:20:31

And when I looked at it and I did the, and of course I did this, I looked at the, the

Tedd Huff: 00:20:36

points value of the, the card that I use.

Tedd Huff: 00:20:41

on for my Verizon payment versus the discount and the points were

Tedd Huff: 00:20:46

worth more than the discount.

Tedd Huff: 00:20:47

So I'm like, okay, fine.

Tedd Huff: 00:20:48

I'll just keep using the points from, from my reward card.

Tedd Huff: 00:20:52

And so I think that's going to be one of the things that, and can, will continue

Tedd Huff: 00:20:56

to be one of the things, because we are such a heavily entrenched, Card

Tedd Huff: 00:21:02

people, I guess like that's our culture very, very heavily in our culture to

Tedd Huff: 00:21:06

really leverage the cards That it's going to be harder to move out of the card

Tedd Huff: 00:21:13

arena It's going to have to be Just as easy if not easier than a card payment

Tedd Huff: 00:21:20

in order to

Matt Vanhouten: 00:21:21

is easier than a card payment?

Matt Vanhouten: 00:21:23

You've already set up though, right?

Matt Vanhouten: 00:21:24

I mean, if it's already, if you've already enrolled with a card,

Matt Vanhouten: 00:21:28

you need to do a lot more than make it easy to switch to a bank.

Matt Vanhouten: 00:21:31

You need to give an, like a reason, like an incentive.

Matt Vanhouten: 00:21:33

And what you just illustrated is that even a discount wasn't sufficient.

Matt Vanhouten: 00:21:37

Right.

Matt Vanhouten: 00:21:38

So that just speaks to the amount of inertia that a merchant has to overcome

Matt Vanhouten: 00:21:41

to change the paradigm and, and, and, and affect, you know, consumer behavior

Matt Vanhouten: 00:21:47

to, to kind of move in a new direction,

Dean Nolan: 00:21:49

Yeah.

Dean Nolan: 00:21:50

And, you know, I think your example, Tedd, is really good too of, you know, you,

Dean Nolan: 00:21:55

what you talked about was the happy path.

Dean Nolan: 00:21:57

The payment went through right, the service you bought was exactly what

Dean Nolan: 00:22:00

you thought it was, and you had three options, credit, debit, and ACH.

Dean Nolan: 00:22:04

And in that happy path, you were able to look at the value you got

Dean Nolan: 00:22:07

and said, reward the card, best value, put the payment there.

Dean Nolan: 00:22:11

Um, when you start to go down the unhappy path and you've got a dispute

Dean Nolan: 00:22:14

involved or a service problem, then the difference between debit, credit,

Dean Nolan: 00:22:18

and ACH becomes more apparent.

Dean Nolan: 00:22:21

If it's a credit card purchase and you bought something, you signed up for a

Dean Nolan: 00:22:25

service and say they charged you beyond the length of your service contract.

Dean Nolan: 00:22:29

Not that Verizon would do that, but there's some industries where that's.

Dean Nolan: 00:22:32

It's more prevalent.

Dean Nolan: 00:22:33

Um, well, if it's a credit card, you care about it a little bit

Dean Nolan: 00:22:36

less because it's not your money.

Dean Nolan: 00:22:37

Um, if it's a debit card, well, wait a minute, they just took your money and now

Dean Nolan: 00:22:41

you're fighting to get your money back.

Dean Nolan: 00:22:43

It's, it's a different level of engagement by the consumer.

Dean Nolan: 00:22:46

Worst case though, you can shut down your debit card and make them go away.

Dean Nolan: 00:22:50

Then you just got to fight to get the money back.

Dean Nolan: 00:22:52

If it's an ACH, well, not only is it your money, but they're again, back to your,

Dean Nolan: 00:22:56

they're attached to your bank account.

Dean Nolan: 00:22:57

So if you're trying to fight that one.

Dean Nolan: 00:22:59

You may have to shut down your bank account and that's a big deal, right?

Dean Nolan: 00:23:02

Cause that affects your direct deposit and everything else.

Dean Nolan: 00:23:05

So even though it sounds like an happy path, you can just look at rewards.

Dean Nolan: 00:23:10

If you're one of those people who have been in the industry or one

Dean Nolan: 00:23:13

of those people who've experienced the unhappy path, you know, there's

Dean Nolan: 00:23:16

a big difference between those three on that side of the equation.

Dean Nolan: 00:23:20

Um, and again, that's going to relate to pay by bank too, because.

Dean Nolan: 00:23:24

That same scenario of the protections you get at the point of sale with

Dean Nolan: 00:23:28

pay by bank with a card versus a pay by bank is different.

Dean Nolan: 00:23:33

Um, but again, it's happy path versus unhappy path.

Dean Nolan: 00:23:36

And how do you want to look at those two?

Matt Vanhouten: 00:23:38

how would, how would, if we, if we went back to

Matt Vanhouten: 00:23:40

our original definition, though,

Matt Vanhouten: 00:23:41

Dean and said, we're only going to, we're only going to look at the ones that are,

Matt Vanhouten: 00:23:45

we'd consider to be consumer initiated.

Matt Vanhouten: 00:23:48

And, and, and there's a couple of models where I think that.

Matt Vanhouten: 00:23:50

Um, and if it's consumer initiated, um, where I chose where the, who,

Matt Vanhouten: 00:23:55

who gets to have the money, right?

Matt Vanhouten: 00:23:57

It's up to me and I, I, I'm the one that

Tedd Huff: 00:24:00

when do I release it

Matt Vanhouten: 00:24:01

Yeah.

Matt Vanhouten: 00:24:01

In that scenario.

Matt Vanhouten: 00:24:03

Um, and, and there's a model for that that exists, even with RTP, right?

Matt Vanhouten: 00:24:07

With a request for payment, which you have an option to approve or not approve.

Matt Vanhouten: 00:24:11

So they don't actually have the authorization to take your money.

Matt Vanhouten: 00:24:14

And so I think this is one of the reasons why I think it's important to

Matt Vanhouten: 00:24:17

focus on what I think the potential value of the pay by bank that I was

Matt Vanhouten: 00:24:22

focused on at the start all for these.

Matt Vanhouten: 00:24:24

These are the reasons because if you, if you take away one

Matt Vanhouten: 00:24:28

of them, then you're left with,

Matt Vanhouten: 00:24:30

yeah, exactly what you described.

Matt Vanhouten: 00:24:31

Not, not great.

Matt Vanhouten: 00:24:32

Right?

Matt Vanhouten: 00:24:33

Very little control.

Matt Vanhouten: 00:24:34

Hard to fight back.

Matt Vanhouten: 00:24:35

The rules are not as clear.

Matt Vanhouten: 00:24:37

Not just does have rules like they exist.

Matt Vanhouten: 00:24:39

The banks.

Matt Vanhouten: 00:24:40

Okay.

Matt Vanhouten: 00:24:40

Attempt to follow those rules.

Matt Vanhouten: 00:24:42

It is different than when you go through the networks, which have very, very clear

Matt Vanhouten: 00:24:46

dispute resolution and charge back, um, um, you know, processes and requirements.

Matt Vanhouten: 00:24:52

I think most people feel if something bad happens with a card

Matt Vanhouten: 00:24:56

payment that wasn't my fault.

Matt Vanhouten: 00:24:58

I'm not going to be responsible for it.

Matt Vanhouten: 00:25:00

And I think generally speaking that that is true, right?

Matt Vanhouten: 00:25:04

There's a zero liability posture.

Matt Vanhouten: 00:25:06

A lot of that is funded by.

Matt Vanhouten: 00:25:07

Okay.

Matt Vanhouten: 00:25:08

Because of interchange, banks and networks can afford to eat some losses and have a

Matt Vanhouten: 00:25:14

Big back office that can handle disputes and chargebacks and negotiating between

Matt Vanhouten: 00:25:19

all these parties, which costs money.

Matt Vanhouten: 00:25:20

If you take away interchange and you just go like, well, now we've reached the, you

Matt Vanhouten: 00:25:24

know, the nirvana of real time point to point accounts with nobody in between.

Matt Vanhouten: 00:25:29

And again, I actually, I actually removed that intermediary thing like

Matt Vanhouten: 00:25:33

intentionally, because I think it's, it's part of the myth of what pay by

Matt Vanhouten: 00:25:36

bank is versus what it really is going to need to be to protect consumers.

Matt Vanhouten: 00:25:41

Um, once you add back all the protections.

Matt Vanhouten: 00:25:43

There's not much difference, logistically speaking, between a pay by bank flow

Matt Vanhouten: 00:25:48

and a traditional, like, debit purchase.

Matt Vanhouten: 00:25:50

They're pretty much the same thing.

Tedd Huff: 00:25:51

Yeah, if you add the protections and I would

Tedd Huff: 00:25:53

agree with you, we're not there

Matt Vanhouten: 00:25:56

don't exist yet, right?

Matt Vanhouten: 00:25:57

So we don't even know exactly what they're going to cost, because in

Matt Vanhouten: 00:25:59

many cases Like, take for example, Zelle is not quite pay by bank,

Matt Vanhouten: 00:26:03

but it's sort of like Pretty close.

Matt Vanhouten: 00:26:05

I think to what pay by bank would be if more people were

Tedd Huff: 00:26:08

I mean, it rides on the RTP rails, so wouldn't it.

Tedd Huff: 00:26:11

then be considered

Matt Vanhouten: 00:26:12

Uh, yeah, I sure we could say, let's just say for the,

Matt Vanhouten: 00:26:15

like, I just didn't want to create a

Matt Vanhouten: 00:26:17

total fork in the conversation, but I've had an experience with Zelle

Matt Vanhouten: 00:26:20

where money got sent to a place where it wasn't supposed to go and

Matt Vanhouten: 00:26:23

changing that back to what it was supposed to be was not possible.

Matt Vanhouten: 00:26:28

It just, it wasn't, it just couldn't happen.

Matt Vanhouten: 00:26:30

Um, based on the way that the rules are set based on the banks.

Matt Vanhouten: 00:26:33

Yeah.

Matt Vanhouten: 00:26:33

Um, incentives or lack of incentives to address the problem.

Matt Vanhouten: 00:26:37

Right.

Matt Vanhouten: 00:26:38

And

Tedd Huff: 00:26:38

Now, was that, was that sent to a party you didn't want to send

Matt Vanhouten: 00:26:43

I got the money.

Matt Vanhouten: 00:26:44

I received the

Tedd Huff: 00:26:44

Well, you got the money.

Matt Vanhouten: 00:26:45

I wasn't supposed to get it.

Matt Vanhouten: 00:26:46

It was fraud, right?

Matt Vanhouten: 00:26:47

Somebody, somebody had stolen someone's card and had pushed money to me

Matt Vanhouten: 00:26:51

that I wanted to not give back to the fraudster.

Matt Vanhouten: 00:26:55

I wanted to, but I also didn't want to keep it because it's not my money.

Matt Vanhouten: 00:26:58

I wanted to just like say, Hey, bank, return this to the actual account holder.

Matt Vanhouten: 00:27:03

Of whatever payment instrument was used to fund that Zelle transaction,

Matt Vanhouten: 00:27:07

I don't because I can't see it.

Matt Vanhouten: 00:27:08

Right.

Matt Vanhouten: 00:27:08

I don't know.

Matt Vanhouten: 00:27:09

I don't know how it was funded, but it was just very clear from all the

Matt Vanhouten: 00:27:12

interactions with this individual that this was not a legitimate, like, oops,

Matt Vanhouten: 00:27:16

I sent the money to the wrong place.

Matt Vanhouten: 00:27:18

Can you just send it back to me?

Matt Vanhouten: 00:27:19

Like, it's a common, it's a common fraud, uh, tactic.

Matt Vanhouten: 00:27:22

And yeah, my bank was just sort of like, yeah, just send it back to them.

Matt Vanhouten: 00:27:25

I said, no, no, you don't understand.

Matt Vanhouten: 00:27:27

Like, that, that, that.

Matt Vanhouten: 00:27:28

Yeah.

Matt Vanhouten: 00:27:28

That that person who gave me this money, I don't think they're legitimate.

Matt Vanhouten: 00:27:32

I don't want to be part of that.

Matt Vanhouten: 00:27:33

And I wanted them to resolve it.

Matt Vanhouten: 00:27:35

Right.

Matt Vanhouten: 00:27:35

I didn't want it.

Matt Vanhouten: 00:27:35

I just didn't want to be in the middle and they weren't, they weren't able to, like,

Matt Vanhouten: 00:27:40

they just simply couldn't, they didn't, they didn't have a way to facilitate that.

Matt Vanhouten: 00:27:46

I kept

Tedd Huff: 00:27:46

Well, and that.

Tedd Huff: 00:27:47

kind of brings it to, I mean, that, that's, that's a, the the,

Tedd Huff: 00:27:50

one of the pieces around the person to person piece of it.

Tedd Huff: 00:27:53

Well, I'm.

Tedd Huff: 00:27:54

What I've been hearing kind of between both of you is, is really the pay by bank

Tedd Huff: 00:27:59

today that we have today and the options that we're, that are coming out through

Tedd Huff: 00:28:04

RTP and FedNow.

Tedd Huff: 00:28:07

the use cases for those are best fit for known entities that you trust.

Tedd Huff: 00:28:15

Or essential services that you have little to no choice because it has to

Tedd Huff: 00:28:21

be done by a certain date and time.

Matt Vanhouten: 00:28:25

Yeah,

Tedd Huff: 00:28:25

And what I mean by that is utilities or something of that nature.

Matt Vanhouten: 00:28:28

is.

Matt Vanhouten: 00:28:29

Is there a service in the United States that fits this

Matt Vanhouten: 00:28:32

definition that's live today?

Matt Vanhouten: 00:28:34

If there is, I've never used it.

Matt Vanhouten: 00:28:35

My bank doesn't enable me to send money in real time.

Matt Vanhouten: 00:28:39

To another bank account where I just tell them, send this money to that

Matt Vanhouten: 00:28:43

account in real time using RTP or FedNow.

Matt Vanhouten: 00:28:47

Like my bank doesn't enable me to do that.

Matt Vanhouten: 00:28:49

Maybe another bank does, but mine, mine doesn't.

Matt Vanhouten: 00:28:51

Like I can't, I couldn't even if I wanted to

Dean Nolan: 00:28:53

Oh, Ellen!

Tedd Huff: 00:28:54

mine does.

Dean Nolan: 00:28:55

Go ahead, Tedd.

Tedd Huff: 00:28:56

So mine does.

Tedd Huff: 00:28:56

I mean, I use USAA and they actually use I can't remember which

Tedd Huff: 00:29:00

one it is.

Matt Vanhouten: 00:29:01

allow you to do

Matt Vanhouten: 00:29:02

a real time?

Tedd Huff: 00:29:03

when I, when I transfer, when I decide that I want to transfer

Tedd Huff: 00:29:06

from one bank account to the other,

Matt Vanhouten: 00:29:08

Your own account.

Tedd Huff: 00:29:08

my own two accounts that I own, I'm just.

Matt Vanhouten: 00:29:11

hmm.

Tedd Huff: 00:29:11

When I transfer it automatically, like it shows

Tedd Huff: 00:29:14

up within minutes on the other

Matt Vanhouten: 00:29:17

Slightly different, right?

Matt Vanhouten: 00:29:18

That's a, that's a, that's an account to account, like me to me transfer.

Matt Vanhouten: 00:29:22

I think, I think that is, that is a, that I can do also what I'm talking

Matt Vanhouten: 00:29:26

about is like, I want to designate.

Matt Vanhouten: 00:29:28

Just send this money to that account, because when you set that up, you

Matt Vanhouten: 00:29:30

had to verify the other account.

Matt Vanhouten: 00:29:32

MATT VANHOUTEN - FINTECH CONFIDENTIAL

Matt Vanhouten: 00:29:33

You had to show that it was your account.

Matt Vanhouten: 00:29:35

You wouldn't just be able to send that to me, for example.

Dean Nolan: 00:29:37

Yeah, that makes sense.

Dean Nolan: 00:29:38

And Tedd, I'd also say in that scenario, depending on who your bank

Dean Nolan: 00:29:42

was, sometimes that's still happening as an ACH, but they just trust you and

Dean Nolan: 00:29:48

they're willing to take the risk to let that money go for two days, right?

Dean Nolan: 00:29:51

Now, obviously, for it to get to the other side and then the book

Dean Nolan: 00:29:54

it right away, it has to be RTP.

Dean Nolan: 00:29:56

But, you know, there's scenarios there.

Dean Nolan: 00:29:59

Um, they just, just kind of jump in.

Dean Nolan: 00:30:01

So it, yeah.

Dean Nolan: 00:30:02

It is, it gets really fascinating.

Dean Nolan: 00:30:04

You'd also brought up Zelle and that's how, probably where my brain still was.

Dean Nolan: 00:30:07

You know, the vast majority of Zelle transactions are settled via ACH, not RTP.

Dean Nolan: 00:30:12

Um, you know, the banks just have a messaging network that runs

Dean Nolan: 00:30:15

through Zelle that lets them know that, you know, Tedd's paying Matt.

Dean Nolan: 00:30:19

So Tedd's bank takes the money out of his account.

Dean Nolan: 00:30:22

Matt's bank puts the money in, but the money between the banks

Dean Nolan: 00:30:25

doesn't move for a couple of days.

Matt Vanhouten: 00:30:26

Yeah, it's not it's it's it's post facto, right?

Matt Vanhouten: 00:30:29

So they're they're guaranteeing the funds based on the message

Matt Vanhouten: 00:30:33

and then the banks have to settle in many cases bilaterally, right?

Matt Vanhouten: 00:30:36

They settled directly with each other.

Matt Vanhouten: 00:30:38

Um, in a gross settlement, they don't even do a net settlement.

Dean Nolan: 00:30:41

yeah.

Dean Nolan: 00:30:41

So the settlement that happened to your point, Matt, the settlement that

Dean Nolan: 00:30:44

happens behind the scenes on these payments is much more complicated than

Dean Nolan: 00:30:48

it's being presented to the consumers who make it look like it's real time.

Dean Nolan: 00:30:51

And I think that's also going to play into fact is, you know, when we start,

Dean Nolan: 00:30:54

as we talk about pay by bank and get back to that dialogue again, you know, it's.

Dean Nolan: 00:30:59

There's a lot of scenarios that have to come into play and move the

Dean Nolan: 00:31:02

money and RTP and Fed now do offer that real time gross settlement that

Dean Nolan: 00:31:08

allows that transaction to happen.

Dean Nolan: 00:31:10

The money moves not only between you and the business or you and me.

Dean Nolan: 00:31:15

But it also moves between our banks in real time, and that then adds that

Dean Nolan: 00:31:19

different perspective and differentiating perspective that makes a big deal for

Dean Nolan: 00:31:23

certain members in the ecosystem, probably not for consumers because they still think

Dean Nolan: 00:31:28

everything's moving in real time anyway.

Matt Vanhouten: 00:31:29

Why do you think the banks haven't exposed the ability for us?

Matt Vanhouten: 00:31:33

To just send money in real time, wherever we want, whenever

Tedd Huff: 00:31:36

I haven't figured out how to

Matt Vanhouten: 00:31:37

for, a dollar, like RTP and FedNow can do this today for

Matt Vanhouten: 00:31:41

70 percent of, um, of bank accounts.

Tedd Huff: 00:31:44

but just kind of like what you're talking about with

Tedd Huff: 00:31:46

your Zelle from my perspective, you know, somebody sent you money.

Tedd Huff: 00:31:50

the person, but they had access to the credentials.

Tedd Huff: 00:31:54

And if you were leveraging

Matt Vanhouten: 00:31:55

in that case, an email address

Tedd Huff: 00:31:57

and it, well,

Matt Vanhouten: 00:31:58

Zelle.

Tedd Huff: 00:31:59

but they had, but they had the, that they did an account takeover

Tedd Huff: 00:32:02

of some sort, they got the credentials.

Tedd Huff: 00:32:04

They were able to push those to you.

Tedd Huff: 00:32:07

And this is the same issue that I believe that the banks are running

Tedd Huff: 00:32:10

into is that the ability to monitor and act on transactions that.

Tedd Huff: 00:32:16

are deemed fraudulent or not initiated truly by the individual that has

Tedd Huff: 00:32:23

been KYC, KYB'd or KYC AML'd, all that stuff hasn't been done.

Tedd Huff: 00:32:28

So they don't have the ability to do that.

Tedd Huff: 00:32:31

So that's why the batch process that you were just talking

Tedd Huff: 00:32:34

about is a really big deal.

Tedd Huff: 00:32:35

And I've actually had a conversation with a couple of financial institutions that

Tedd Huff: 00:32:41

want to give the consumer to business.

Tedd Huff: 00:32:44

RTP functionality, but they're stuck with this risk profile that they

Tedd Huff: 00:32:51

haven't been able to figure out.

Tedd Huff: 00:32:52

How do we do it?

Tedd Huff: 00:32:53

Without being batch

Dean Nolan: 00:32:55

Yeah, I'd answer your question, Matt, and say, you know, in

Dean Nolan: 00:32:58

terms of the moving the money between the 70 percent of the accounts that are there

Dean Nolan: 00:33:03

right now, businesses are able to push money to consumers or other businesses

Dean Nolan: 00:33:08

pretty regularly down that channel.

Dean Nolan: 00:33:09

And that's where most of that's happening today.

Dean Nolan: 00:33:12

Or it can be an.

Dean Nolan: 00:33:13

Yep.

Dean Nolan: 00:33:13

Disbursement side.

Dean Nolan: 00:33:15

On the consumer side, you know, the consumer paying a business a little

Dean Nolan: 00:33:19

bit more complicated because you've got additional regulations on the

Dean Nolan: 00:33:23

consumer as a set that have to be applied to the consumer as a sender

Dean Nolan: 00:33:26

versus the business as a sender.

Dean Nolan: 00:33:28

And I think some of that gets into making sure that the banks are comfortable

Dean Nolan: 00:33:32

with meeting those regulations.

Dean Nolan: 00:33:34

Some of it gets into making sure that the transactions themselves have

Dean Nolan: 00:33:37

the appropriate data to allow the banks to make all those decisions.

Dean Nolan: 00:33:41

Um, and I'll get into that example in one more second here.

Dean Nolan: 00:33:45

You know, the last F last piece of this is the request for payment.

Dean Nolan: 00:33:49

And that's the scenario where in that case, you initiate a request for payment.

Dean Nolan: 00:33:54

The consumer then has to log on, approve that request to push the money.

Dean Nolan: 00:33:59

Um, you know, in that scenario, that itself is, you know, the clearinghouse is

Dean Nolan: 00:34:03

doing some of that in a limited fashion.

Dean Nolan: 00:34:06

They've got permitted use cases, and they've got things that they're built

Dean Nolan: 00:34:09

around that all of that is really built around making sure that the right

Dean Nolan: 00:34:14

controls are in place to make sure that when someone's requesting money from

Dean Nolan: 00:34:18

you, it's a legitimate request, right?

Dean Nolan: 00:34:19

Because what will happen is.

Dean Nolan: 00:34:21

If it's an illegitimate request and you respond to it,

Dean Nolan: 00:34:25

um, even though technically in a request for payment environment and

Dean Nolan: 00:34:29

in an instant payment environment, that should be treated like cash.

Dean Nolan: 00:34:32

And if you set it to go, the money goes not in the U.

Dean Nolan: 00:34:36

S.

Dean Nolan: 00:34:36

Environment is Especially us regulatory environment.

Dean Nolan: 00:34:39

There's some uncertainty about whether you have a right to pull that money back.

Dean Nolan: 00:34:43

And now the banks have to figure that out.

Dean Nolan: 00:34:46

And that's where there's caution being put in place by the banks to

Dean Nolan: 00:34:50

make sure that the right mechanisms are placed to protect the consumers

Dean Nolan: 00:34:53

for those unhappy path transactions.

Dean Nolan: 00:34:56

Like we talked about before.

Tedd Huff: 00:34:57

Well, you just talked about something that has really,

Tedd Huff: 00:35:01

the UK ran into a lot with their real time payments problem.

Tedd Huff: 00:36:08

And they were finding that what was happening is that they were getting

Tedd Huff: 00:36:11

requests, someone would find, I'm just overgeneralizing, but they would find out

Tedd Huff: 00:36:16

that my landscaper was landscaper was.

Tedd Huff: 00:36:19

You know, Joe's landscaping and they knew that.

Tedd Huff: 00:36:22

So what they do is they'd send a request for payment for Joe's landscaping at the

Tedd Huff: 00:36:25

time that, that he's working on my yard, which wasn't actually coming from Joe's

Tedd Huff: 00:36:30

landscaping, but it was another account, the Joe landscaping that was there.

Tedd Huff: 00:36:34

It was coming from another Joe's landscaping.

Tedd Huff: 00:36:36

And so they would request for payment.

Tedd Huff: 00:36:38

They'd send the payment and then Joe's landscaping, and it was actually there.

Tedd Huff: 00:36:41

Would say, Hey, you never paid me like, no, no, no, look, I paid you.

Tedd Huff: 00:36:45

And then when they would do all of the looking, then they would find

Tedd Huff: 00:36:47

out that, Oh, that's somebody else that posed as Joe's landscaping

Tedd Huff: 00:36:51

and got that, that funds.

Tedd Huff: 00:36:53

And I think that's going to be, that's one of the things that, as you just

Tedd Huff: 00:36:56

mentioned with the clearing house and being very specific on their use cases

Tedd Huff: 00:37:01

is to not repeat the same mistakes that have happened elsewhere in the world.

Dean Nolan: 00:37:05

100 percent agree on that.

Dean Nolan: 00:37:07

So yeah, so from the outside, it looks like the industry's moving snow slow,

Dean Nolan: 00:37:11

but I think on the inside, what's really happening is you're trying to

Dean Nolan: 00:37:14

move smart and avoid those mistakes.

Dean Nolan: 00:37:17

But sometime, you know, it all depends which way, which way you're

Dean Nolan: 00:37:20

looking at the, you know, which side of the coin you're looking at.

Matt Vanhouten: 00:37:22

are they, are they moving smart or are they just not moving much?

Matt Vanhouten: 00:37:25

Cause I, I questioned the incentives here, right?

Matt Vanhouten: 00:37:27

Like, like, is there an incentive for, I think there's a lot to overcome, right?

Matt Vanhouten: 00:37:31

There's a lot of, there's a lot of problems to solve.

Matt Vanhouten: 00:37:33

There's a lot of risks to take on.

Matt Vanhouten: 00:37:34

There's a lot of money you got to spend people you got to hire.

Matt Vanhouten: 00:37:36

What, what, why, if I'm going to, if I'm a bank, right.

Matt Vanhouten: 00:37:39

And I've been at, I've worked at JP Morgan, Wells Fargo, right.

Matt Vanhouten: 00:37:44

I can try to put that hat back on and ask myself, um, why, why do

Matt Vanhouten: 00:37:49

I want to make this a priority?

Matt Vanhouten: 00:37:51

Right.

Matt Vanhouten: 00:37:52

And I

Matt Vanhouten: 00:37:52

think,

Tedd Huff: 00:37:53

Why do I make it?

Tedd Huff: 00:37:53

Why do I make it easy to disperse my deposits faster?

Matt Vanhouten: 00:37:57

Well, that yeah, But also

Tedd Huff: 00:37:59

it comes the other way,

Matt Vanhouten: 00:38:00

I have, I have ways that I can enable my customers to

Matt Vanhouten: 00:38:03

spend money safely that they, that the customer is happy with and that

Matt Vanhouten: 00:38:07

I understand why, why mess with that?

Matt Vanhouten: 00:38:09

Right?

Matt Vanhouten: 00:38:09

I'm, I'm a bank and I'm saying to myself, like, do I, do I really

Matt Vanhouten: 00:38:12

see an incentive here for me to put all this infrastructure in place?

Matt Vanhouten: 00:38:16

Nobody's clamoring for it except the payment nerds out here like us who are

Tedd Huff: 00:38:20

Well, and I

Matt Vanhouten: 00:38:21

to try new

Tedd Huff: 00:38:22

the cut the Yes, we like to do that.

Tedd Huff: 00:38:26

You know, one of the things that

Tedd Huff: 00:38:27

I've heard from a handful

Tedd Huff: 00:38:29

of

Matt Vanhouten: 00:38:30

let me do this.

Matt Vanhouten: 00:38:31

Sorry.

Matt Vanhouten: 00:38:31

I talked over you, Tedd.

Matt Vanhouten: 00:38:32

I think

Dean Nolan: 00:38:32

Yeah.

Dean Nolan: 00:38:33

I

Matt Vanhouten: 00:38:33

connection was laggy a little bit,

Tedd Huff: 00:38:35

it's okay.

Tedd Huff: 00:38:35

No worries.

Tedd Huff: 00:38:36

You know, I've heard from community bankers that they believe that this is

Tedd Huff: 00:38:40

something that will allow them to increase their deposits if they were able to offer

Tedd Huff: 00:38:45

it in a way that Differentiates themselves from the big banks, the top 100, right?

Tedd Huff: 00:38:52

And so that's, that's the way that they're trying to understand.

Tedd Huff: 00:38:56

How do I offer this out to my community in a way that provides additional value

Tedd Huff: 00:39:03

to my community, within my community to continue to grow my community deposits

Tedd Huff: 00:39:08

so that I can do all the other stuff.

Tedd Huff: 00:39:10

And I think that's, That's a lot of the perspectives there.

Tedd Huff: 00:39:13

They're,

Tedd Huff: 00:39:14

they're trying to figure out how do they do that to better serve the community?

Matt Vanhouten: 00:39:17

but who in their community is saying I really am

Matt Vanhouten: 00:39:20

struggling because I can't instantly send money from my phone to a business.

Matt Vanhouten: 00:39:26

Like, where's, where's that showing up in there?

Matt Vanhouten: 00:39:28

Sort of like

Matt Vanhouten: 00:39:29

customer feedback.

Matt Vanhouten: 00:39:31

That's saying that's a problem.

Matt Vanhouten: 00:39:33

I'm not able to pay merchants.

Matt Vanhouten: 00:39:35

With my debit card or my credit card or with a recurring ACH

Tedd Huff: 00:39:38

so what, what I've heard is that a lot of the, a lot of these

Tedd Huff: 00:39:43

merchants have decided to do the, well, what are we supposed to call it now?

Tedd Huff: 00:39:48

It's not, it's not cash discount.

Tedd Huff: 00:39:50

It's not,

Matt Vanhouten: 00:39:51

surcharge.

Tedd Huff: 00:39:53

well, I mean, they don't call it surcharge, um, dual pricing,

Tedd Huff: 00:39:57

whatever you want to call it.

Tedd Huff: 00:39:59

Right.

Tedd Huff: 00:39:59

And so what.

Matt Vanhouten: 00:40:00

about Verizon giving you incentives to change payment

Tedd Huff: 00:40:03

Right.

Tedd Huff: 00:40:04

And so,

Matt Vanhouten: 00:40:05

not to use, even though you could have, right?

Matt Vanhouten: 00:40:10

That's

Tedd Huff: 00:40:10

but a lot of these, a lot of

Matt Vanhouten: 00:40:11

So if you're already doing the math and

Matt Vanhouten: 00:40:12

you're like, it ain't worth it.

Matt Vanhouten: 00:40:14

I'm, I'm,

Tedd Huff: 00:40:14

But most people don't do the math.

Matt Vanhouten: 00:40:16

and thinking to myself, like, I have so

Matt Vanhouten: 00:40:18

many things I could be doing.

Matt Vanhouten: 00:40:19

Right now with my time and resources, is this, is this where I want to

Matt Vanhouten: 00:40:23

put the, you know, bet the chips like I can see why it's being slow.

Matt Vanhouten: 00:40:28

And I'm just, I'm not, I'm just asking Dean.

Matt Vanhouten: 00:40:30

You're more of an insider now than me on this stuff.

Matt Vanhouten: 00:40:33

Is it slow or is it.

Matt Vanhouten: 00:40:34

Is it smart is what you said, meaning like methodically moving forward towards

Matt Vanhouten: 00:40:38

a vision, or is it more of a wait and see, like, let's wait and see, like,

Matt Vanhouten: 00:40:42

let's see, let's see if there's really demand here before we kind of keep going.

Dean Nolan: 00:40:45

see.

Dean Nolan: 00:40:45

Yeah.

Dean Nolan: 00:40:46

It is a great question.

Dean Nolan: 00:40:48

Right.

Dean Nolan: 00:40:48

And I, I think is I've talked to banks, I see different,

Dean Nolan: 00:40:52

there's different answers to it.

Dean Nolan: 00:40:53

So there's a lot of banks out there who are taking the wait and see approach.

Dean Nolan: 00:40:57

Clearly that's happening for every reason you just said, they've got a

Dean Nolan: 00:41:00

lot of things they've got to invest in.

Dean Nolan: 00:41:02

Is this one you really want to put your chips in right now?

Dean Nolan: 00:41:04

Um, I think on the commercial side of the house is probably, and I know this

Dean Nolan: 00:41:09

is deviating from pay by bank a bit.

Dean Nolan: 00:41:11

But on the commercial side of the house, one of the things that's

Dean Nolan: 00:41:14

happening is there's a lot, you know, instant payments specifically can

Dean Nolan: 00:41:18

change a value proposition for what the merchant provides their customers.

Dean Nolan: 00:41:22

Um, so there's a lot of tests happening out there to see where instant payments

Dean Nolan: 00:41:26

are going to make that value proposition something customers really want.

Dean Nolan: 00:41:30

It's an example, um, and those, by the way, those tests are happening in places

Dean Nolan: 00:41:34

where us payment nerds haven't really even thought about them happening, but

Dean Nolan: 00:41:38

all of a sudden they're popping up.

Dean Nolan: 00:41:39

An example of that would be in prepaid wallet unloads and specifically

Dean Nolan: 00:41:43

in the gaming industry, right?

Dean Nolan: 00:41:45

Um, that particular model went from a pilot with one provider, um, nine months

Dean Nolan: 00:41:52

after they piloted it, they won awards in the industry for innovative solution.

Dean Nolan: 00:41:57

Nine months after that, everybody was doing it.

Dean Nolan: 00:42:00

So basically proof of concept to table stakes, no pun intended

Dean Nolan: 00:42:04

with gaming, but proof of concept table stakes in 18 months.

Dean Nolan: 00:42:08

If you were a corporate bank serving one of those customers

Dean Nolan: 00:42:12

and you weren't ready to participate, there's a good chance you were going to

Dean Nolan: 00:42:16

lose part of that corporate relationship.

Tedd Huff: 00:42:18

If not all those deposits.

Matt Vanhouten: 00:42:19

this is a pre, but there's a disbursement, right?

Matt Vanhouten: 00:42:21

Like, this is a prepaid card that's

Dean Nolan: 00:42:23

was just,

Matt Vanhouten: 00:42:24

a bet.

Matt Vanhouten: 00:42:25

And then the disbursement piece, I have no questions about, like, that makes sense.

Matt Vanhouten: 00:42:28

And then, and I can see why that's gone really fast and has been super

Matt Vanhouten: 00:42:32

successful, frankly, like for the.

Matt Vanhouten: 00:42:34

businesses that can originate a real time payment.

Matt Vanhouten: 00:42:37

Like, I don't think there's a debate there.

Matt Vanhouten: 00:42:39

It's the, it's, but the opposite is where I don't see, I just don't see

Matt Vanhouten: 00:42:43

the, the same incentives applying to

Matt Vanhouten: 00:42:44

consumers.

Tedd Huff: 00:42:45

let me stick with, let me stick with the gaming idea.

Tedd Huff: 00:42:48

Right.

Tedd Huff: 00:42:49

So let's, let's pretend that, that I love to do sports gambling and I, I,

Tedd Huff: 00:42:56

yeah, I, I suck at it.

Tedd Huff: 00:42:58

I, I donate my money when I do it.

Tedd Huff: 00:43:00

Um, but like, let's say I, I like to do that and there's a

Tedd Huff: 00:43:04

new service that comes out that doesn't have any record of me just.

Tedd Huff: 00:43:08

saying is, a new case, but I'm able to use a pay by bank to fund my, my account.

Tedd Huff: 00:43:18

Traditionally, if I had to use a credit card or an ACH, they would be a little,

Tedd Huff: 00:43:23

they would be restrictive on how much money I can put into that account.

Tedd Huff: 00:43:27

A lot of times what, I've seen for me when I sign onto new accounts is I have a

Tedd Huff: 00:43:32

max of 500 bucks that I can put in there.

Tedd Huff: 00:43:34

That's all I can put in there is 500 bucks.

Tedd Huff: 00:43:36

what the case of pay by bank, as we've described where the consumer

Tedd Huff: 00:43:40

pushes the money to a merchant, I would be able to not increase my risk,

Tedd Huff: 00:43:46

but increase the ability to take in more cash as part of that service.

Tedd Huff: 00:43:53

And so that's

Matt Vanhouten: 00:43:54

account funding, instant account funding is

Matt Vanhouten: 00:43:56

what that would equate to.

Matt Vanhouten: 00:43:58

And the, it exists in, in betting.

Matt Vanhouten: 00:44:01

It exists in investing.

Matt Vanhouten: 00:44:03

It exists in, um, wallet loads, right?

Matt Vanhouten: 00:44:05

It's like anytime when I'm trying to take my money and make it available to

Matt Vanhouten: 00:44:10

me in another, in another, you know, environment, um, I think it's a great

Matt Vanhouten: 00:44:14

example, like, so instant funding.

Matt Vanhouten: 00:44:17

And cards is the de facto method for, for instant funding today.

Matt Vanhouten: 00:44:22

And I think would be a really good one to focus on.

Matt Vanhouten: 00:44:25

Like that use case, I think does have legitimate fit, like the

Matt Vanhouten: 00:44:29

capability actually fits the problem.

Tedd Huff: 00:44:31

Well, and then You get into the idea of gift cards as well.

Tedd Huff: 00:44:34

So anything that's really, that has some sort of value, transfer

Matt Vanhouten: 00:44:38

to, to, transfer value to a gift card.

Matt Vanhouten: 00:44:40

Is that what you're referring to?

Matt Vanhouten: 00:44:41

Yeah, that's, that's what I call it.

Matt Vanhouten: 00:44:42

I just, why generically referred to as account funding, like

Matt Vanhouten: 00:44:44

instant account funding.

Matt Vanhouten: 00:44:45

So you're, you're not buying something.

Matt Vanhouten: 00:44:47

You could say you're buying a gift card.

Matt Vanhouten: 00:44:49

In that case, what we're saying is we're, we're.

Matt Vanhouten: 00:44:51

Transferring value to another account.

Tedd Huff: 00:44:53

you're buying bets when you do gaming,

Matt Vanhouten: 00:44:55

Well, but first you're putting a balance in a betting platform

Matt Vanhouten: 00:44:58

and then you choose how to place that bet.

Matt Vanhouten: 00:44:59

You don't just like spend the money, like straight into a bet

Dean Nolan: 00:45:02

yeah.

Dean Nolan: 00:45:03

Yeah, I hear what you're saying.

Dean Nolan: 00:45:04

And I think the account I agree with you.

Dean Nolan: 00:45:06

Account funding is the next horizon where you're going to see

Dean Nolan: 00:45:09

more and more of the payments.

Dean Nolan: 00:45:10

And that's probably the stepping stone towards pay by bank because that

Dean Nolan: 00:45:14

account funding is going to be based on that request for payment transaction.

Dean Nolan: 00:45:18

And that starts to get that infrastructure in place and people get used to it.

Dean Nolan: 00:45:22

And I think, you know, the wallet loads is a good one.

Dean Nolan: 00:45:24

Brokerage accounts is probably the better one.

Dean Nolan: 00:45:27

You know, the number of times where I've wanted to, you know, load up my brokerage

Dean Nolan: 00:45:31

account to buy some stock and I just can't do it as quickly or as as much money as

Dean Nolan: 00:45:35

I want with the current mechanisms, I think there's a great opportunity there.

Dean Nolan: 00:45:39

Um, when you start to get to pay by bit.

Dean Nolan: 00:45:41

It's me to me.

Dean Nolan: 00:45:42

Yep.

Dean Nolan: 00:45:43

When you start to get to me to the merge.

Matt Vanhouten: 00:45:44

to start.

Dean Nolan: 00:45:45

Yeah, exactly.

Dean Nolan: 00:45:46

Back to that point about smart, safe, you know, trying to

Dean Nolan: 00:45:49

work your way down the path.

Dean Nolan: 00:45:50

I do think where you're starting to hear and, you know, at least I'm

Dean Nolan: 00:45:54

starting to hear on the pay by bank interest is that merchant situation.

Dean Nolan: 00:45:59

I forget which one of you brought it up before about the merchant, maybe not

Dean Nolan: 00:46:02

wanting to pay that interchange, charging consumers back for that interchange,

Dean Nolan: 00:46:06

which is happening more and more often.

Dean Nolan: 00:46:08

Um, yeah.

Dean Nolan: 00:46:09

As then I'll put my, and I'm going to take that scenario and

Dean Nolan: 00:46:11

put on my consumer had is why,

Dean Nolan: 00:46:13

why I might want that as a consumer, excuse me, why a merchant may want it if

Dean Nolan: 00:46:17

this is the first time I'm going to that merchant, well, having the card facilitate

Dean Nolan: 00:46:22

the transaction and the acceptance that goes with that and the protections that

Dean Nolan: 00:46:27

go with that probably makes a lot of sense

Dean Nolan: 00:46:29

and that overhead for that interchange makes sense too, because

Dean Nolan: 00:46:32

you're making a payment happen, didn't know each other too well.

Dean Nolan: 00:46:34

Okay.

Tedd Huff: 00:46:35

that trusted, that trusted entity

Dean Nolan: 00:46:37

didn't exist.

Dean Nolan: 00:46:38

But now if I have a trusted entity, if I've been shopping,

Dean Nolan: 00:46:41

some cause some merchant, like the grocery store across the street,

Dean Nolan: 00:46:44

I go there, you know, every week.

Dean Nolan: 00:46:46

I know the store manager.

Dean Nolan: 00:46:47

I know these people.

Dean Nolan: 00:46:48

I make my purchases.

Dean Nolan: 00:46:49

Well, do we really need to have all of that extra overhead that comes with a card

Dean Nolan: 00:46:54

transaction to facilitate that activity?

Dean Nolan: 00:46:58

No, that's where pay by bank can come into play.

Dean Nolan: 00:47:00

And I can make a payment.

Dean Nolan: 00:47:01

If we can set up the right environment, I can pay them.

Dean Nolan: 00:47:04

Am I going to be returning my groceries?

Dean Nolan: 00:47:06

Maybe.

Dean Nolan: 00:47:07

But if I do, I'm going to be going to the front counter and complaining that

Dean Nolan: 00:47:10

this, you know, this was rotten when I bought it and they're going to take care

Dean Nolan: 00:47:13

of me because it's a trusted environment.

Dean Nolan: 00:47:15

So I think,

Tedd Huff: 00:47:15

but you just hit on the two pieces that I talked about, trusted

Tedd Huff: 00:47:18

environment and essential services.

Tedd Huff: 00:47:20

Goods and services.

Tedd Huff: 00:47:22

Those are the two things that the comfort level of being able to

Tedd Huff: 00:47:26

pay by bank are going to, that's where it's going to take off.

Tedd Huff: 00:47:29

And then once everybody gets to that point, I think, the next step is.

Tedd Huff: 00:47:33

figuring out some sort of controls as Matt was talking about for the

Tedd Huff: 00:47:36

untrusted or unknown or on essentials to make sure that the protections are

Tedd Huff: 00:47:41

there and maybe they never get there.

Tedd Huff: 00:47:42

Maybe they never, it never goes that far, but.

Dean Nolan: 00:47:45

or

Tedd Huff: 00:47:45

That's where I was

Dean Nolan: 00:47:46

yeah, or it takes time, right?

Dean Nolan: 00:47:48

It's, it's a new payment networks.

Dean Nolan: 00:47:49

You started with disbursements.

Dean Nolan: 00:47:51

There were certain use cases were high value and made sense.

Dean Nolan: 00:47:53

Then you get in these account to account transfers and you get the account account

Dean Nolan: 00:47:57

transfers funded by a request for payment.

Dean Nolan: 00:48:00

Well, that starts to make sense, and now you're building that foundational element

Dean Nolan: 00:48:03

to move into pay by bank and then pay by bank goes to those trusted services,

Dean Nolan: 00:48:09

trusted relationships, the essential services, and you start to get more

Dean Nolan: 00:48:12

comfort and build things around that.

Dean Nolan: 00:48:14

And then you get to that next level of you can use it for anything.

Dean Nolan: 00:48:17

Um, each 1 of those has investments that go with it.

Dean Nolan: 00:48:22

Each one of those has value propositions that go with it.

Dean Nolan: 00:48:26

Each one of them will make sense in certain environment and there'll be

Dean Nolan: 00:48:28

situations where it doesn't make sense.

Dean Nolan: 00:48:30

Um, and it becomes a very nuanced situation, but I do think we're in the

Dean Nolan: 00:48:36

situation, we're in the point right now where the testing and the what's

Dean Nolan: 00:48:41

happening in those account to account loads is positioning us for that next

Dean Nolan: 00:48:45

level, that first level of pay by bank.

Dean Nolan: 00:48:47

Within those trusted services.

Dean Nolan: 00:48:49

And I suspect that, you know, I don't have any inside information on this, but

Dean Nolan: 00:48:53

just what I pick up from conversations,

Dean Nolan: 00:48:56

I wouldn't be surprised to see some material movement on that in the

Dean Nolan: 00:48:59

next 12 months of organizations starting to test pay by bank who

Dean Nolan: 00:49:03

are in that trusted environment, who are in those essential services.

Tedd Huff: 00:49:07

one of the things that, that I've been kind of mulling around in my

Tedd Huff: 00:49:10

head where I think pay by bank could, if, if we could get the consumer behind

Tedd Huff: 00:49:15

a little bit more, provide some sort of additional value that could, could be

Tedd Huff: 00:49:19

there would be in the, the micro payments.

Tedd Huff: 00:49:22

So the, the 1, the 2, the vending machine, or I'm, I'm buying.

Tedd Huff: 00:49:28

Some digital good

Tedd Huff: 00:49:30

getting in something that's a low value and to me low value

Tedd Huff: 00:49:33

is under 10 bucks, right?

Tedd Huff: 00:49:35

So if it's under 10 Am I am I able to to push that payment to the merchant?

Tedd Huff: 00:49:41

They may provide some additional value for that But I think that's an area that

Tedd Huff: 00:49:45

that could be one of the next steps beyond what we just talked about I'd love to get

Tedd Huff: 00:49:50

your guys's perspective on that as well.

Dean Nolan: 00:49:52

I'll jump in first.

Dean Nolan: 00:49:53

I, I tend to agree with you.

Dean Nolan: 00:49:55

I think it.

Dean Nolan: 00:49:56

Because it's a low value payment, it overcomes the need to have

Dean Nolan: 00:49:59

a trusted relationship, right?

Dean Nolan: 00:50:02

It's 10 if you lose 10, you know, it's painful, but not the end of the world.

Dean Nolan: 00:50:07

Um, so it gets past that.

Dean Nolan: 00:50:10

I do think that there are some value added services that need to get brought

Dean Nolan: 00:50:14

into play to simplify the customer experience before that will take off.

Dean Nolan: 00:50:18

Um, you know, right now, if I just were to describe that low value payment.

Dean Nolan: 00:50:22

Um, if I was a merchant and you wanted to buy something for me for

Dean Nolan: 00:50:26

five bucks, well, I, you would want to, you would start the purchase.

Dean Nolan: 00:50:32

I would then send you a request for payment.

Dean Nolan: 00:50:34

You would have to leave your purchase experience and go to your bank and

Dean Nolan: 00:50:39

approve that request for payment.

Dean Nolan: 00:50:41

Then the money comes back to me.

Dean Nolan: 00:50:42

And are you going to really want to invest that much time and

Dean Nolan: 00:50:45

energy for five for a 5 purchase?

Dean Nolan: 00:50:47

It's a great question.

Dean Nolan: 00:50:48

I don't know the answer.

Dean Nolan: 00:50:49

There are FinTechs out there who are streamlining that process, making sure

Dean Nolan: 00:50:54

that that approval happens within a session of a mobile bank, a mobile

Dean Nolan: 00:50:58

session or an e commerce session.

Dean Nolan: 00:51:00

As that technology comes to play, then yeah, I definitely see that becoming, you

Dean Nolan: 00:51:05

know, those transactions becoming the type of transactions we'll see movement on.

Dean Nolan: 00:51:09

Um, but, and I'll, Matt, to your point, is this something that people are requesting

Dean Nolan: 00:51:15

and beating down the doors for right now?

Dean Nolan: 00:51:17

I

Dean Nolan: 00:51:18

don't know.

Dean Nolan: 00:51:18

I don't know if I've seen that.

Dean Nolan: 00:51:19

I think there's certain use cases that they will, um, you know, it goes back,

Dean Nolan: 00:51:24

I go back to, and, you know, we all go back to the iPhone example, you know,

Dean Nolan: 00:51:28

where people beaten down the door for an iPhone or, you know, the Henry Ford

Dean Nolan: 00:51:31

example, he asked them what they wanted.

Dean Nolan: 00:51:33

They wanted a faster horse, not a car,

Dean Nolan: 00:51:35

you know, maybe there's some of that happening here too.

Dean Nolan: 00:51:38

I don't know.

Dean Nolan: 00:51:38

It's, it.

Dean Nolan: 00:51:39

A lot of unknowns, if I could predict the future, I'd be rich, living on the

Dean Nolan: 00:51:45

beach in Hawaii instead of, you know, but that's not how the world works.

Matt Vanhouten: 00:51:49

Yeah, I feel, I feel like you need to have a vending, a

Matt Vanhouten: 00:51:51

vending machine, um, uh, uh, risk taker, somebody that's, uh, prepared

Matt Vanhouten: 00:51:57

to take all the card terminals and NFC terminals off of their machine and put

Matt Vanhouten: 00:52:02

a QR code that says at the airport.

Matt Vanhouten: 00:52:05

Right?

Matt Vanhouten: 00:52:05

Here's the QR code for, uh, you want to, you want to buy,

Matt Vanhouten: 00:52:08

you know, whatever's in here.

Matt Vanhouten: 00:52:10

You like the goodies that are hiding behind this glass.

Matt Vanhouten: 00:52:12

You're thirsty.

Matt Vanhouten: 00:52:12

You're hungry.

Matt Vanhouten: 00:52:13

Um, the only way to get it is to go through this QR.

Matt Vanhouten: 00:52:16

Because I feel like if you've got a QR code and you've got Apple Pay

Matt Vanhouten: 00:52:19

and you can card swipe, I just don't see why you'd pull out your phone,

Matt Vanhouten: 00:52:23

log into online banking, find the QR camera, you know, like, scan it.

Matt Vanhouten: 00:52:30

Prove it.

Matt Vanhouten: 00:52:30

It's just like I could just hold my phone up and it goes beep

Matt Vanhouten: 00:52:33

and now I get my stuff, right?

Matt Vanhouten: 00:52:34

It's there's apple It took a long time for apple to get where it is now

Matt Vanhouten: 00:52:40

Right a lot of a lot of detractors at the beginning Were were doubtful that

Matt Vanhouten: 00:52:44

apple was ever going to reach critical mass have enough, you know saturation

Matt Vanhouten: 00:52:47

coverage for it to be Really usable.

Matt Vanhouten: 00:52:50

I don't know about you, but I often leave the house I'd say most of

Matt Vanhouten: 00:52:53

the time I leave the house with no cards with me I just have my phone

Matt Vanhouten: 00:52:56

and my car keys and I rarely have a situation where that Becomes a problem.

Matt Vanhouten: 00:53:01

Right?

Matt Vanhouten: 00:53:02

So it's like, we just need to think the phone is the stand in and,

Matt Vanhouten: 00:53:06

and we are now, we already have capabilities that are quite, quite good.

Matt Vanhouten: 00:53:11

Right?

Matt Vanhouten: 00:53:11

They're, they're expensive to the merchant.

Matt Vanhouten: 00:53:14

And, and arguably, you could say that's expensive to consumers, but

Matt Vanhouten: 00:53:18

we've also seen that when merchants save money on card costs, like

Matt Vanhouten: 00:53:23

what happened with debit cards.

Matt Vanhouten: 00:53:24

Uh, interchange regulation

Matt Vanhouten: 00:53:26

with

Tedd Huff: 00:53:26

good old Durban, though.

Matt Vanhouten: 00:53:27

those savings do not come back to the consumer.

Matt Vanhouten: 00:53:30

And so I'm just sitting here as the, as the person that's just trying to

Matt Vanhouten: 00:53:33

be practical saying, well, if I'm not going to get the savings and I'm going

Matt Vanhouten: 00:53:36

to have to do more work, even one time,

Matt Vanhouten: 00:53:39

why, why, why would I do it?

Matt Vanhouten: 00:53:40

Right?

Matt Vanhouten: 00:53:41

I get it.

Matt Vanhouten: 00:53:41

It could be great.

Matt Vanhouten: 00:53:42

It'd be a great user experience if I was, if I didn't already have the

Matt Vanhouten: 00:53:45

ability to just hold up my phone and it buzzes and I get my stuff.

Tedd Huff: 00:53:48

Well, and I think that comes into the whole user experience piece

Tedd Huff: 00:53:52

of it that we started off talking about at the beginning is that it's, it's

Tedd Huff: 00:53:56

got to be as easy, if not easier than the methods that they have today to

Tedd Huff: 00:54:01

be able to use as a daily spend tool.

Tedd Huff: 00:54:05

It just, it just has to be,

Tedd Huff: 00:54:07

how are the, how are we going to do, how is that going to be done?

Tedd Huff: 00:54:10

Is it going to be a,

Matt Vanhouten: 00:54:11

Tedd, I think, I think that the incentives

Matt Vanhouten: 00:54:14

can, can shift the amount of friction you're willing to accept.

Matt Vanhouten: 00:54:20

So it's, there's an equation.

Matt Vanhouten: 00:54:21

I would, I would say there's an equation that includes ease of use as part of it.

Matt Vanhouten: 00:54:26

But if my benefits vastly outweigh the cost of lower ease of use.

Matt Vanhouten: 00:54:31

I'll still probably be okay with something that is not as elegant if

Matt Vanhouten: 00:54:36

it's significantly better for me.

Matt Vanhouten: 00:54:38

For example, when I go to, when I go to pay my property taxes,

Matt Vanhouten: 00:54:41

I have a choice to make, right?

Matt Vanhouten: 00:54:43

I can either get my account, account information, plug in

Matt Vanhouten: 00:54:46

the ACH, and I pay no fee.

Matt Vanhouten: 00:54:48

Or, I have my, my, my, uh, debit card, credit card, they're linked to

Matt Vanhouten: 00:54:52

my, you know, automated, uh, plugin.

Matt Vanhouten: 00:54:55

It's very simple.

Matt Vanhouten: 00:54:56

I can, paying, checking out is way easier to use a card than if I'm paying online.

Matt Vanhouten: 00:55:01

The price differential is so big that I say, no, no, no,

Matt Vanhouten: 00:55:04

it's not, it's not worth that.

Matt Vanhouten: 00:55:06

The convenience isn't worth that much money, right?

Matt Vanhouten: 00:55:09

Because when you're paying property taxes, it's a big ticket and two

Matt Vanhouten: 00:55:12

and a half, 3 percent of whatever,

Matt Vanhouten: 00:55:14

I won't disclose how much I pay in taxes, but it's a lot.

Matt Vanhouten: 00:55:16

And, uh,

Tedd Huff: 00:55:18

you do live in California, so

Matt Vanhouten: 00:55:21

so

Tedd Huff: 00:55:21

so we, we know it's, it's not low,

Matt Vanhouten: 00:55:23

Yeah.

Matt Vanhouten: 00:55:23

And it's the same thing with like IRS taxes.

Matt Vanhouten: 00:55:25

Like you get to that checkout screen at the end.

Matt Vanhouten: 00:55:27

I always look just for, for, cause I was curious, like,

Matt Vanhouten: 00:55:31

okay, this means I don't get a refund.

Matt Vanhouten: 00:55:32

That's true.

Matt Vanhouten: 00:55:33

Um, I always, oh, and, um.

Matt Vanhouten: 00:55:35

And then it's a huge amount.

Matt Vanhouten: 00:55:37

I'm like, that's crazy.

Matt Vanhouten: 00:55:38

I'd never pay that amount of money.

Matt Vanhouten: 00:55:40

And so I get it.

Matt Vanhouten: 00:55:40

Like I get why a merchant on the other side is looking at their own bills and

Matt Vanhouten: 00:55:43

thinking, that's a crazy amount of money.

Matt Vanhouten: 00:55:45

Why do I have to keep paying that?

Matt Vanhouten: 00:55:46

Right.

Matt Vanhouten: 00:55:47

And so the pressure to me seems to all be coming from the merchant and the merchant

Matt Vanhouten: 00:55:51

has lots of reasons to want to change the dynamic, which I completely understand.

Matt Vanhouten: 00:55:56

The banks, I don't see as much of an incentive for them.

Matt Vanhouten: 00:55:59

I, I hear what you're saying, Tedd.

Matt Vanhouten: 00:56:01

I think it's.

Matt Vanhouten: 00:56:02

There's a story to be told there.

Matt Vanhouten: 00:56:04

I don't think it's super clear cut.

Matt Vanhouten: 00:56:06

And then, and then, um, consumers, again, I, I just don't see what is

Matt Vanhouten: 00:56:11

sufficient to change behavior at scale.

Matt Vanhouten: 00:56:14

You can, around the edges, sure.

Matt Vanhouten: 00:56:16

Use case, use case, use case, like, there's going to be

Matt Vanhouten: 00:56:18

pockets where it makes sense.

Matt Vanhouten: 00:56:20

Broadly speaking, I just, who knows what the future holds, um, to

Matt Vanhouten: 00:56:23

your point, Dean, like, you know, I like that Henry Ford example.

Matt Vanhouten: 00:56:26

I think it's a good one.

Matt Vanhouten: 00:56:28

Um.

Matt Vanhouten: 00:56:28

And I'm just, but again, we're looking at the, at what happens

Matt Vanhouten: 00:56:31

now and like, where, where.

Matt Vanhouten: 00:56:33

Where, where to do some experiments, right?

Matt Vanhouten: 00:56:35

That's the kind of view that I take you on.

Matt Vanhouten: 00:56:37

These things is where can we experiment to go find out right?

Matt Vanhouten: 00:56:41

Like, where there is an underserved population where we put something in

Matt Vanhouten: 00:56:46

place and give them access to something.

Matt Vanhouten: 00:56:48

That's really.

Matt Vanhouten: 00:56:49

Impactful that would be really incredible.

Matt Vanhouten: 00:56:52

And then your community banking story might be exactly the

Matt Vanhouten: 00:56:54

place to go look for that.

Tedd Huff: 00:56:57

You know, we were talking about cost savings for, for merchants.

Tedd Huff: 00:57:01

We're talking about reducing the dual pricing mechanism that's being used

Tedd Huff: 00:57:07

or surcharges that are being used as being two different options for this.

Tedd Huff: 00:57:12

But the one thing that.

Tedd Huff: 00:57:12

we haven't talked about is how are the financial institutions that are

Tedd Huff: 00:57:17

receiving the interchange off of these card types going to monetize.

Tedd Huff: 00:57:23

These bank to bank so that they don't lose that revenue.

Tedd Huff: 00:57:26

How are they going to

Matt Vanhouten: 00:57:26

to lose that revenue.

Matt Vanhouten: 00:57:27

No, they're revenue.

Matt Vanhouten: 00:57:28

That's the point.

Matt Vanhouten: 00:57:28

Like, that's why that's why I'm questioning the incentive structure.

Matt Vanhouten: 00:57:31

Cause like the, the, the revenue that won't be there.

Matt Vanhouten: 00:57:34

how it works with Zelle.

Matt Vanhouten: 00:57:34

That's how it works with, with existing RTP flows.

Matt Vanhouten: 00:57:37

It's how it works with,

Matt Vanhouten: 00:57:38

um, with ACH.

Matt Vanhouten: 00:57:40

And so that's already, that's already at play, like with all the different

Matt Vanhouten: 00:57:44

methods of payment that are out there.

Matt Vanhouten: 00:57:46

And I do think that, that.

Matt Vanhouten: 00:57:48

The biggest shift, I believe, is likely to come from increased

Matt Vanhouten: 00:57:53

regulation of card interchange.

Matt Vanhouten: 00:57:55

Like, if the Credit Card Competition Act becomes real,

Matt Vanhouten: 00:57:59

and credit card interchange starts to experience similar pressure as debit card

Matt Vanhouten: 00:58:04

interchange, I think you will see a lot of banks suddenly being interested in pay by

Matt Vanhouten: 00:58:08

bank, in a way that they're not right now.

Matt Vanhouten: 00:58:10

Mm hmm.

Dean Nolan: 00:58:11

Yeah, I, I would agree with you.

Dean Nolan: 00:58:13

And I also think the, uh, on the interchange front, some of the discussions

Dean Nolan: 00:58:17

going on right now about the lowering the cap on debit interchange, uh, are

Dean Nolan: 00:58:21

going to have some of the similar effects

Dean Nolan: 00:58:22

because you get to a point where, you know, the.

Dean Nolan: 00:58:25

The cost differential for providing those as a bank starts

Dean Nolan: 00:58:29

to, you might be just better off

Dean Nolan: 00:58:31

doing pay by bank versus a debit card as a bank at that point, especially

Dean Nolan: 00:58:35

if you're on, you know, if you're in one of the, if you're impacted,

Dean Nolan: 00:58:38

um, you know, I think from your perspective on a, you know, where

Dean Nolan: 00:58:41

does a bank make money on this?

Dean Nolan: 00:58:43

Well, I guess 2 things 1, I think when you look at that, you know,

Dean Nolan: 00:58:47

from a consumer perspective, it is.

Dean Nolan: 00:58:49

It is about customer retention and acquisition right now, which

Dean Nolan: 00:58:54

is always, you know, a soft dollar use case, if you would.

Dean Nolan: 00:58:56

It's real, but it's, you know, sometimes it's more challenging

Dean Nolan: 00:58:59

one to get through approvals.

Dean Nolan: 00:59:00

Um, and I'll just give you an example.

Dean Nolan: 00:59:02

Um, again, I can't use pay by bank as an example, specifically because

Dean Nolan: 00:59:06

Matt, as you said, you know, that's not really out in the wild yet.

Dean Nolan: 00:59:09

But, um, if you take a look at one of the use cases that is really popular

Dean Nolan: 00:59:14

right now around instant payments, it's what they call earned wage access or

Dean Nolan: 00:59:17

it's, um, real time payroll, right?

Dean Nolan: 00:59:20

And you're seeing that in the gig economy, uh, shift work, where in a gig

Dean Nolan: 00:59:24

economy, you're paid for the service you perform right at the end of it.

Dean Nolan: 00:59:28

You know, so it could be at the end of your delivery, you get paid

Dean Nolan: 00:59:30

for it, or shift work, you get paid when you're done working that day.

Dean Nolan: 00:59:33

Before instant payments that existed, but in order for you to get paid, you were

Dean Nolan: 00:59:39

either getting cash, which sometimes is good, but sometimes it's problematic.

Dean Nolan: 00:59:44

Um, you were getting a check again, if you get a check at midnight,

Dean Nolan: 00:59:48

when you get off your shift, what are you going to do with it?

Dean Nolan: 00:59:50

Um, or you were getting an.

Tedd Huff: 00:59:52

Let's go party.

Tedd Huff: 00:59:53

I was, I

Dean Nolan: 00:59:54

or you were getting a ch that came two days later,

Dean Nolan: 00:59:56

which kind of defeated the purpose of getting paid in real time.

Dean Nolan: 00:59:59

Well, instant payments now let you get paid immediately.

Dean Nolan: 01:00:02

Um, it's creating use cases where people are going out and driving for

Dean Nolan: 01:00:06

uber in the afternoon on saturday to fund going out saturday night.

Dean Nolan: 01:00:09

There's other budgetary use case for people who have cashflow, you know,

Dean Nolan: 01:00:13

go out and run, drive Uber to get some money or do whatever you need to do.

Dean Nolan: 01:00:16

The point I wanted to bring up though, and it was getting to is

Dean Nolan: 01:00:19

that we've seen stories of employees posting on bulletin boards.

Dean Nolan: 01:00:24

Which banks are participating in which banks aren't right because those people

Dean Nolan: 01:00:29

who are bank the employees who are at banks are participating instant payments

Dean Nolan: 01:00:33

are getting their money in real time.

Dean Nolan: 01:00:35

Those ones that aren't are still getting stuck with all of those

Dean Nolan: 01:00:38

challenges I talked about before.

Dean Nolan: 01:00:40

And it seemed some switching of banks happening because of that.

Dean Nolan: 01:00:43

Um, is it huge material?

Dean Nolan: 01:00:46

No, but is it something that you start to see?

Dean Nolan: 01:00:48

Well, this is how this is playing out that if you provide a better

Dean Nolan: 01:00:52

value proposition, people are willing to move banks to get that better

Dean Nolan: 01:00:55

value proposition off of a payment.

Dean Nolan: 01:00:57

Um, so I think from a banking perspective.

Dean Nolan: 01:01:00

Those that are in the space early have the opportunity to acquire customers because

Dean Nolan: 01:01:04

it, those who are late and laggards are going to have retention challenges.

Dean Nolan: 01:01:08

The other, the other components that come in, you know, deposits you mentioned,

Dean Nolan: 01:01:13

um, you know, great case study on that was, um, Navy federal when they launched

Dean Nolan: 01:01:19

real time payments back in December.

Dean Nolan: 01:01:21

Um, they, in the market, they quoted two point that they received 2.

Dean Nolan: 01:01:25

7 million of incoming payments the first day, 2.

Dean Nolan: 01:01:29

7.

Tedd Huff: 01:01:30

one of those people that sent money cause I have an account

Dean Nolan: 01:01:32

Okay.

Tedd Huff: 01:01:32

Cause I wanted to try, I mean, I'm a payments geek, a fintech geek.

Tedd Huff: 01:01:36

So I wanted to see how it worked.

Dean Nolan: 01:01:37

And for the people who weren't just trying it who are

Dean Nolan: 01:01:40

using it for some other services, 2.

Dean Nolan: 01:01:42

7 million sounds like a decent amount of money.

Dean Nolan: 01:01:45

Extrapolate that out.

Dean Nolan: 01:01:46

365 days.

Dean Nolan: 01:01:47

That's just short of a billion dollars and that's real money.

Dean Nolan: 01:01:51

Well, where was that billion dollars going before they turned it on?

Dean Nolan: 01:01:54

I don't know.

Dean Nolan: 01:01:55

Was it going coming in the Navy federal a different way?

Dean Nolan: 01:01:57

Was it going to a different bank?

Dean Nolan: 01:01:59

Different credit union?

Dean Nolan: 01:02:00

You don't know.

Dean Nolan: 01:02:01

So there's there's all of this stuff around the edges that there's

Dean Nolan: 01:02:05

business cases being built for it.

Dean Nolan: 01:02:07

Um, and it, I think a lot of it comes down to serving your customers.

Dean Nolan: 01:02:11

And as a bank, making sure you have the products that your customers want to

Dean Nolan: 01:02:14

use, you're enabling them to participate in the services that they want to use.

Dean Nolan: 01:02:18

And when you start to stack up the B2C disbursement use cases, which are taking

Dean Nolan: 01:02:22

off the ADA use cases that are starting to take off the pay by bank, that's around

Dean Nolan: 01:02:27

the corner, banks are going to have to make investment in technology right now,

Dean Nolan: 01:02:31

or sometime in the near future to play in this space, to position themselves.

Dean Nolan: 01:02:35

To be able to service our customers.

Dean Nolan: 01:02:37

And that's where I see the big, you know, from the bank perspective

Dean Nolan: 01:02:41

and Matt's perspective of waiting.

Dean Nolan: 01:02:43

Banks don't want to wait a heck of a lot longer to get into the space because

Dean Nolan: 01:02:47

there, again, don't want to be a laggard.

Dean Nolan: 01:02:50

Uh, you want to be as close to the front as you can, where it makes sense for you.

Dean Nolan: 01:02:54

And I just see there's, there's models, there's money to be made

Dean Nolan: 01:02:57

there, but you got to get into the space at the right time.

Dean Nolan: 01:02:59

Well, I, you know, I just realized I was probably talking for like

Dean Nolan: 01:03:02

three minutes straight, Jeric.

Dean Nolan: 01:03:03

I get off my soapbox.

Dean Nolan: 01:03:04

so,

Dean Nolan: 01:03:05

so,

Tedd Huff: 01:03:05

it was all, it was all great.

Tedd Huff: 01:03:06

It great information.

Tedd Huff: 01:03:07

But what I, what I want to do is

Tedd Huff: 01:03:09

I want to close out today by just kind of giving our perspectives on what is.

Tedd Huff: 01:03:16

The future of pay by bank, I know we've talked about a whole bunch of

Tedd Huff: 01:03:19

different things, but let's let's distill it down into our thoughts

Tedd Huff: 01:03:23

on What the future of pay by bank?

Tedd Huff: 01:03:26

May look like in the next let's just let's keep it short.

Tedd Huff: 01:03:29

Let's just say three years matt.

Tedd Huff: 01:03:31

I'll start with you

Matt Vanhouten: 01:03:32

Wow.

Matt Vanhouten: 01:03:33

Thank you.

Matt Vanhouten: 01:03:34

So in the next three years, I think we're going to see experimentation

Matt Vanhouten: 01:03:37

on incentive models that merchants will be offering to, uh, convince

Matt Vanhouten: 01:03:43

consumers to try paying different ways.

Matt Vanhouten: 01:03:46

And, um, We've seen it already starting.

Matt Vanhouten: 01:03:49

I think it's going to accelerate.

Matt Vanhouten: 01:03:50

Um, so that's 1.

Matt Vanhouten: 01:03:51

I think the 2nd, 1 is we're going to see more companies, um, helping develop

Matt Vanhouten: 01:03:57

services to improve the experience when a consumer chooses to opt for

Matt Vanhouten: 01:04:03

a pay by bank, um, transaction type.

Matt Vanhouten: 01:04:06

They're going to, they're going to be.

Matt Vanhouten: 01:04:07

There'll be better ways to do that, right?

Matt Vanhouten: 01:04:09

There's already some that exists.

Matt Vanhouten: 01:04:11

We don't really talk about them much here today, but like, trust Lee has

Matt Vanhouten: 01:04:14

a product, um, plaids developing a product stripe has a product.

Matt Vanhouten: 01:04:18

Like, those are going to keep improving.

Matt Vanhouten: 01:04:21

Um, the incentive piece is still going to, I think, be the key

Matt Vanhouten: 01:04:24

determinant for, like, where things go.

Matt Vanhouten: 01:04:26

And then, um, I think I think what we've kind of talked about here, which is, uh,

Matt Vanhouten: 01:04:30

certain use cases are going to make a lot more sense than others.

Matt Vanhouten: 01:04:33

And I think we'll see concentrated.

Matt Vanhouten: 01:04:35

We're good.

Matt Vanhouten: 01:04:35

Uh, use of capabilities in those in those use cases and we talked

Matt Vanhouten: 01:04:40

about, um, you know, account loads.

Matt Vanhouten: 01:04:42

I think that's a really good 1.

Matt Vanhouten: 01:04:45

we didn't really talk about this 1, but I think it is critical, which is like

Matt Vanhouten: 01:04:49

urgent payments.

Matt Vanhouten: 01:04:50

Um, these are usually for, for, for somebody whose services are potentially

Matt Vanhouten: 01:04:54

going to be interrupted because of.

Matt Vanhouten: 01:04:56

Prior lack of payment and so an urgent payment to restart your

Matt Vanhouten: 01:05:00

phone, you know, and, uh, and utilities and, and whatever, right?

Matt Vanhouten: 01:05:04

Essential services.

Matt Vanhouten: 01:05:05

You mentioned that, um, category, Tedd, I would expect that to be an area that,

Matt Vanhouten: 01:05:10

that, um, would, would have a real value prop for consumer and would allow the

Matt Vanhouten: 01:05:16

banking industry to develop at least the core capabilities needed to facilitate

Matt Vanhouten: 01:05:22

The baseline transaction, um, so those, those would be,

Matt Vanhouten: 01:05:26

those would be my predictions.

Dean Nolan: 01:05:28

I, I would agree with everything you said there, um,

Dean Nolan: 01:05:31

only have really a couple of ads.

Dean Nolan: 01:05:32

And I think, you know, in the financial services space, I

Dean Nolan: 01:05:35

think you'll see banks really.

Dean Nolan: 01:05:37

Those who aren't participating in instant payments right now are going to start

Dean Nolan: 01:05:40

participating, you're going to see them with their strategies of how they

Dean Nolan: 01:05:43

want to participate, when, with whom,

Dean Nolan: 01:05:45

um, even those who are participating right now and just are only

Dean Nolan: 01:05:48

receiving payments, they're going to realize the need to move into

Dean Nolan: 01:05:52

sending payments and making that being able to originate payments on

Dean Nolan: 01:05:56

behalf of their commercial customers and their consumer customers.

Dean Nolan: 01:05:58

So all of that will put those foundational elements in place

Dean Nolan: 01:06:02

to make pay by bank happen.

Dean Nolan: 01:06:03

And then, um, yeah.

Dean Nolan: 01:06:05

I also agree.

Dean Nolan: 01:06:06

I think you're going to see experimentation on certain use cases.

Dean Nolan: 01:06:10

Um, and that And if,

Dean Nolan: 01:06:11

you know, if what we've seen happen in instant payments in other places,

Dean Nolan: 01:06:15

like when I was talking about gaming wallets, I think you'll start to see

Dean Nolan: 01:06:18

some of that experimentation, find a use case that really takes off

Dean Nolan: 01:06:22

and it's going to move faster than we think it will, faster than we've

Dean Nolan: 01:06:25

probably seen in payments in the past.

Dean Nolan: 01:06:27

Um, is it going to be mass market?

Dean Nolan: 01:06:29

Matt, I agree with you.

Dean Nolan: 01:06:30

I don't think it's a mass market thing that's going to happen in three

Dean Nolan: 01:06:33

years, but could we see specific use cases really light up and move?

Dean Nolan: 01:06:38

Make materially.

Dean Nolan: 01:06:39

I think that's totally possible.

Dean Nolan: 01:06:41

That's kind of where I see about this.

Tedd Huff: 01:06:43

Well, I mean looking at just this year alone Um, I I see us

Tedd Huff: 01:06:48

seeing more of these use cases being tried the experimentation Matt that

Tedd Huff: 01:06:51

you mentioned I think we're going to see this year have a ton of it

Tedd Huff: 01:06:55

Whether middleware providers that you talked about or whether it be

Tedd Huff: 01:06:58

additional banks coming on board I think this year is the year of it

Tedd Huff: 01:07:02

is of the Experts Experimentation.

Tedd Huff: 01:07:05

Wow.

Tedd Huff: 01:07:05

That was hard to say.

Tedd Huff: 01:07:06

Experimentation.

Tedd Huff: 01:07:07

This is the year of that.

Tedd Huff: 01:07:08

I think the following year after that is going to be sussing out how, how

Tedd Huff: 01:07:12

do we put the protections in place from all the things that happened

Tedd Huff: 01:07:15

during the experimentation phase?

Tedd Huff: 01:07:18

And then the third one is how do we get the market and

Tedd Huff: 01:07:22

consumer adoption, broaden that?

Tedd Huff: 01:07:25

How do we broaden that outside of that?

Tedd Huff: 01:07:27

And how do we expand the distribution channel?

Tedd Huff: 01:07:30

Because a lot of the things we've talked about is the

Tedd Huff: 01:07:31

distribution channel is the bank.

Tedd Huff: 01:07:33

And we know that with a lot of services that are out in the marketplace, you

Tedd Huff: 01:07:37

need distribution channels that are outside of the bank that are looking

Tedd Huff: 01:07:42

at things completely different.

Tedd Huff: 01:07:44

It could be the third party service providers you talked about.

Tedd Huff: 01:07:46

It could be some of the traditional players.

Tedd Huff: 01:07:48

It could be brand new players.

Tedd Huff: 01:07:50

But I think that year three is really going to be about how

Tedd Huff: 01:07:52

does the distribution kick in.

Tedd Huff: 01:07:55

And then beyond that, it's just the incremental adoption happens after that.

Tedd Huff: 01:07:59

So that's kind of the perspective that I'm looking at it from.

Matt Vanhouten: 01:08:02

Makes sense.

Matt Vanhouten: 01:08:02

Yeah, that risk piece is critical.

Matt Vanhouten: 01:08:04

We didn't really talk a lot about that, um, during, during the discussion,

Matt Vanhouten: 01:08:07

but I think, um, that, that often goes, yeah, definitely, like, just

Matt Vanhouten: 01:08:11

as an example here, under, we don't, we didn't talk a lot about that.

Matt Vanhouten: 01:08:15

Right.

Matt Vanhouten: 01:08:15

I think actually that's one of the key features of, um, cause we

Matt Vanhouten: 01:08:19

like to focus on the tech, right?

Matt Vanhouten: 01:08:20

Like, um, but one of the key features that's going to make it work is that

Matt Vanhouten: 01:08:23

people feel safe when they use it.

Matt Vanhouten: 01:08:25

And that if you feel protected if something bad happens and until

Matt Vanhouten: 01:08:28

they have that and they have a lived experience of like okay I can try

Matt Vanhouten: 01:08:32

this and I and I and I know i'm going to be okay if something If somebody

Matt Vanhouten: 01:08:36

does something wrong and it's not me.

Matt Vanhouten: 01:08:39

I won't be responsible, right?

Matt Vanhouten: 01:08:41

I think that that is definitely a big area that that will um need to be unpacked.

Tedd Huff: 01:08:45

I, and in that whole piece, it, we also have to think about, it didn't

Tedd Huff: 01:08:50

work the way I, way I expected it to.

Tedd Huff: 01:08:52

And so that they're going to want to have some sort of protections around.

Tedd Huff: 01:08:56

I expected it to work this way.

Tedd Huff: 01:08:58

You didn't tell me it wasn't going to work the way I was expecting to.

Tedd Huff: 01:09:02

How, how can we make, how can you make me whole?

Tedd Huff: 01:09:05

And I, that comes in that trust piece of it, but It's not.

Tedd Huff: 01:09:08

Something nefarious happened or something happened that was intentionally bad,

Tedd Huff: 01:09:13

but this is like an unintentional consequence of not fully describing how it

Matt Vanhouten: 01:09:18

like oh I made a mistake help me help me help

Matt Vanhouten: 01:09:20

me recover from the thing.

Matt Vanhouten: 01:09:21

I I screwed up

Dean Nolan: 01:09:23

And,

Matt Vanhouten: 01:09:23

me, help me fix it.

Matt Vanhouten: 01:09:24

Ha

Tedd Huff: 01:09:24

a decimal place was too far to the right type stuff.

Dean Nolan: 01:09:27

you know, and it saying that too, it reminds you a topic that we didn't

Dean Nolan: 01:09:31

cover on as well was the education side.

Dean Nolan: 01:09:34

And over the next three years, the industry is going

Dean Nolan: 01:09:37

to need to spend, you know,

Dean Nolan: 01:09:38

invest in educating consumers and educating merchants as

Dean Nolan: 01:09:42

to how this is going to work.

Dean Nolan: 01:09:44

And I'll draw back to the days of debit as debit cards were coming to bear.

Dean Nolan: 01:09:49

You know, and the amount of energy that Visa and MasterCard spent

Dean Nolan: 01:09:52

promoting zero liability production.

Dean Nolan: 01:09:55

And we now call it zero liability because that's what they branded it when they

Dean Nolan: 01:09:59

promoted it and told people about it,

Dean Nolan: 01:10:01

but it provided that level of protection that in the comfort.

Dean Nolan: 01:10:05

And there's going to be whatever that is in the pay by bank world.

Dean Nolan: 01:10:09

There's going to have to be that education of people.

Dean Nolan: 01:10:11

And that's going to be a big part over the next three years on top of the technology.

Tedd Huff: 01:10:15

Well, guys, I appreciate you guys coming together with me on this one.

Tedd Huff: 01:10:19

Definitely had me challenging the way that I look at pay by bank and change.

Tedd Huff: 01:10:24

My definition really is what it did today.

Tedd Huff: 01:10:28

So I appreciate the.

Tedd Huff: 01:10:29

The insights and the contribution to the conversation.

Tedd Huff: 01:10:33

And I look forward to, uh, catching up with you guys later.

Tedd Huff: 01:10:36

So that's another episode of FinTech Uncut.

Tedd Huff: 01:10:39

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Tedd Huff: 01:10:43

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