To get to real-time payments ubiquity across any number of use cases, as Cyrus Bhathawalla, J.P. Morgan Chase managing director and global head of Real-Time Payments, told Karen Webster: Don’t just run the “old” payments train car on “new” tracks. Think differently and run the “new” payments train car on those “new” tracks.
To that end, the banking giant’s newly announced service has launched in pilot — enabling corporates to send requests for payment to the bank’s 57 million retail customers who, in turn, can pay those invoices immediately — represents a milestone on the road to real time.
Read more: JPMorgan Piloting Real-Time Payment Service
The Corporate Version Of A Zelle Payment Request
The natural progression, according to Bhathawalla, will be to move from its current pilot phase to full scale launch with other The Clearing House (TCH) Real-Time Payments (RTP) participant banks, and eventually move from B2C to B2B use cases, leveraging connectivity that’s already in place with real-time rails.
“It’ll be the corporate [or merchant] equivalent of a Zelle payment request,” he said.
In terms of mechanics, the service, where the first client is a yet unnamed FinTech, leverages the Chase Mobile Banking app and website to present the requests. The network, he said, is predominantly send capability. Request to pay represents a logical next step as a collection mechanism. When a consumer receives that request for payment, it will pop up in their mobile banking app.
The messages requesting payment themselves, said Bhathawalla, are data rich, opening a world of use cases beyond B2C, spearheading a transformation of the B2B space, particularly for smaller firms that have had to grapple with the paper chase and the fees tied to automated clearing house (ACH) and wire payments.
To be sure, the banks could use a technological leg up on the way to capturing more of their customers’ bill payment activity. In a separate interview between Webster and BillGO CEO Dan Holt, a majority of Americans used to manage their bills through bank bill pay; that number is only about 25 percent today. They’ve been encumbered by legacy technology.
The conversation with J.P. Morgan’s Bhathawalla came across a backdrop where B2B beckons as a greenfield opportunity for a digital, real-time payments transformation, where paper checks and invoices dominate the B2B landscape. As many as 42 percent of B2B payments are done using paper checks.
He told Webster that J.P. Morgan has hit the ground running with real-time payments, having been among the earlier banks to link up with TCH’s RTP network four years ago. That set the stage for sending requests for pay (RfPs) to Chase retail customers at scale.
“Most of the banks don’t have that luxury,” he said, referring to the retail customer base, and eventually “we’re going to go live to the rest of what we call ‘general availability’ — the rest of the TCH participant banks.”
Bhathawalla noted to Webster that companies can wait several days to receive funds from consumers and other corporates; using RfP, that payment can happen in a matter of seconds.
At a high level, Bhathawalla told Webster, “both consumers and corporates want additional options — they want more payment methods for different use cases and different user experiences.”
The RfP service, he said — with its eventual, natural expansion into B2B adjacencies — represents an illustration of J.P. Morgan’s technological approach that there need not be separate rails built for separate use cases or bifurcated between corporate or consumer clients.
The client solution-centric approach, marked by a single application programming interface (API) integration point (and online banking portal), will allow corporates to embrace real-time options on a case-by-case basis, with 24/7/365 functionality, he said.
A Single Network For Interaction
It’s also a way to bring several far-flung stakeholders together, he said. The consumer-to-business payments landscape is marked by a wide variety of banks, of billers with various (internal) technological capabilities (linking to receivables platforms or third-party providers) and biller directories. Connecting to the RTP network allows an ecosystem to be created, bringing all those entities into cooperation and collaboration with one another.
And with that connectivity, he said, comes the opportunity to move beyond bill payments — the old train car on new tracks — toward his desire to put new cars on new tracks.
As he pointed out to Webster, a handful of use cases are burgeoning and beckon in the B2B space. Those use cases will demonstrate how real-time payments can improve the buyer/supplier relationships that in turn can make supply chains (and cash flow) more transparent and efficient.
He expanded on a currently friction-filled interaction in which a gas distribution company replenishes a gas station’s tanks. The way it works now, the depot truck driver pulls up to the station, fills the pumps, and the paperwork between the gas station and distributor commences, with scores of forms involved.
It takes as many as 10 days for the distributor to get paid because of the paper invoicing involved, Bhathawalla said. With RfP, the supplier can send a digital invoice via tablet on the spot, with the correct dollar amount (tied to the exact amount of gas that’s just been supplied), delivered through a small business internet or mobile banking channel. The gas station can make the payment on the spot. The reconciliation is automated due to an end-to-end transaction ID that flows between buyer and supplier, between accounts payable (AP) and accounts receivable (AR) departments and back-office functions.
“The speed and the digital nature of requests for pay really starts to solve certain complicated problems,” said Bhathawalla, who added that by starting with the consumer side of RfP, “we think we can kickstart that innovation in B2B.”
Other verticals can benefit from that speed and transparency, he said, with a nod toward rent, which has been notoriously entrenched in paper conduits. Tenants receive invoices and may typically opt to make ACH direct debits every month. The landlords and the management companies would rather receive payments other than ACH (which have attendant fees) and thus have gravitated toward checks.
But as he noted, digitization can improve those economics.
“If we can replace the check with a request for payment message, then you can start to not only have the reconciliation benefits, but the speed, convenience and cashflow management benefits too,” he said.
A third industry set to be transformed by RfP: car buying. Recent earnings reports have spotlighted the growing comfort level consumers have with buying these big-ticket items online.
Traditionally, noted Bhathawalla, vehicles have been paid for with cashiers’ checks, ACH or wires. Those methods are inconvenient and are certainly not available 24/7 (in contrast to the always-on nature of the car buying platforms like Carvana or Vroom).
“Let’s get rid of that friction point and use request for pay for a 24/7 irrevocable real-time confirmed payment,” he said.
But it is within the actual real-time payments themselves, he said — no matter the initial use case — that the flexibility and ability to transform more aspects of the commerce experience lie. The payment messages are data rich, carrying information about buyers and sellers that can open a broader range of business transactions (while the instant nature of the payments removes credit risk from the equation).
Using that vehicle buying process as an example, he said, a J.P. Morgan corporate client — a dealership or an eCommerce firm — might be able to wrap other transactions, such as buying insurance, financing, or getting registration and title, into the mix.
As he told Webster, “We could package all of that, using the payment rails because it’s the ubiquitous network that everyone’s connected to. It’s no longer about the funds transfer. I’m now looking at the broader business transaction.”
Delving into the roadmap ahead for RfP, he said merchants, billers, and J.P. Morgan’s corporate customers will take the white-labeled service and brand it themselves.
By launching RfP at scale ahead of most of the other banks, and doing it internally with its consumer bank, he said, “we’re hoping that this is going to drive excitement and drive demand from corporates and merchants … There fundamentally is more value inside our real-time and RfP network than just moving money.”