August 6, 2024 • 29 mins
How did a payment system from Japan in 1973 pave the way for the digital wallet in your pocket today? Join us as we uncover the fascinating history and rapid evolution of faster payment systems worldwide. We take you on a journey from Japan's groundbreaking Zenjin system to contemporary giants like the UK's Faster Payment System, Brazil's PIX, and India's UPI. Along the way, you'll hear my firsthand experiences from a recent FedNow feedback session in Utah, featuring insights from industry leaders like MX and Galileo.
Ever wondered why some transactions are instant while others take days? We break down the complexities of payment systems, diving into the mechanics of ACH, RTP, and the newly introduced FedNow. Learn about the crucial differences between push and pull payments and how banks manage the risks and fraud associated with each type. Through real-world examples, we emphasize the importance of maintaining a balance between transaction speed and security. Discover why certain transactions might seem slow but are actually designed to protect you from fraudsters who adapt quickly to new systems.
Is FedNow poised to revolutionize the financial industry like Zelle or UPI? In our final discussion, we compare these two real-time payment platforms and debate FedNow's potential to become a game-changer. We invite you to share your thoughts and feedback via LinkedIn or Twitter, and suggest future topics you'd like us to cover. Don't miss this comprehensive exploration of faster payments, filled with intriguing anecdotes and expert insights. Thank you for tuning in, and we can't wait to hear from you on our next episode!
Hosts: Sam Maule & Maia Bittner
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Maia Bittner (00:06):
Hello, hello.
You are listening to theArtificially Intelligent podcast
.
I am one of your co-hosts.
Your perpetual fintech intern,Maia Bittner.
Sam Maule (00:18):
Hey everybody, and I'm Sam Maule, the other intern.
I need good t-shirts.
I really do.
I need t-shirts for this.
Maia Bittner (00:26):
It's probably the intern's job to make the
t-shirts.
Sam Maule (00:28):
Oh, you know what it makes me think of when I join
Google and you get the Googlehat with the stupid propeller on
it.
I do have it behind mesomewhere in that movie, the
Intern.
My daughter asked me if thatwas real and I died laughing and
said yeah, they really do.
They give you the hat.
That's a real thing.
Maia Bittner (00:44):
It is a real thing we need like branded
artificially intelligent podcastcoffee trays.
I love a good coffee tray.
I love a good coffee tray.
Right, I miss coffee trays.
Sam Maule (00:59):
Lord have mercy reminds me of growing up.
Well, Maia, I've got anexciting couple of days coming
up Tomorrow.
I jump on a plane and head toUtah.
Maia Bittner (01:09):
You know a lot of good fintech in Utah.
Sam Maule (01:12):
Oh man, silicon Slopes baby, I love me some Utah
.
Yeah, I'm flying out to join MXand Galileo and a bunch of
other folks because the teambehind FedNow so Mark Gold and
his team, mark is the chiefpayments executive for the
Federal Reserve FinancialServices System, or basically
FedNow, and they're kind ofdoing a tour around the US to
(01:35):
talk with folks in this space toget feedback, which I like
right.
It's a chance to sit down withthem, talk about payments, talk
about FedNow, what we've seenask them a ton of questions, and
so that made me think what agreat opportunity to tap into
the high brain that is MayaBittner to talk about faster
payments, talk about FedNow andwhere we think the US is on this
(02:00):
.
But I have a trivia question.
As always, I love doing this,everybody, I love doing this.
Do you know what was the firstpastor payment system that was
launched in the US?
Sorry, globally.
What was the first pastorpayment system globally?
What country had the first one?
And man, I hope I have thisright.
(02:20):
And you mean like bank payments, what we about is ach in the us
a 24 by7 300 365 type system.
I do believe I have this oneright.
What country?
Maia Bittner (02:42):
I'm gonna go.
I'm gonna go Japan damn it.
Sam Maule (02:46):
You know what?
We're gonna get a new showwhich is Sam Never Gets Anything
, by Maia Japan 1973, the Zenjinsystem.
I am so disappointed, as usual,that you got that right.
It's amazing, folks.
What college should you go toagain?
Maia Bittner (03:01):
because it's good esteemed, highly prestigious
Franklinlin w olin college ofengineering they, they rock
everybody.
Sam Maule (03:12):
I went to southern illinois and I didn't know that
and dang it, Maia got it that onright.
So yeah, it's funny, becausefaster it just makes sense.
Maia Bittner (03:21):
Faster payments was about the time when japan.
I mean Japan is no longer asdominant a world force, but the
70s and the 80s man Japan wasreally killing it.
They had a lot of innovation.
Sam Maule (03:34):
My first job out of the Navy was with the Japanese
company in 1994, katsushiro RoneCorporation.
I spent about a month studyingKaizen believe it or not, Maia
in Japan.
Wow, that's cool Because it washot as anything back then.
Maia Bittner (03:47):
Yeah, yeah.
Sam Maule (03:48):
Loved it.
Yeah, well you're right.
And Zenjin I'm sorry I'm sayingthat wrong 1973 in Japan, and
then you know there's beenmultiple others.
Like when I lived in the UK,they had the faster payment
system and that goes back to2008.
You've got what PIX in Brazilthat would be.
I think that was the secondlargest RTP market by volume.
(04:11):
Was PIX.
They're responsible forsomething like 90% of all RTP
volumes in Latin America, thebig one UPI.
So we're talking India.
It's a beast.
Upi is a beast, everybodyreally want to see a payment
system that just rocks it.
Maia Bittner (04:29):
UPI, yeah, and then in the US Really impressive
, admirable.
Sam Maule (04:36):
Yeah, yeah, I mean UPI is unbelievable.
They get like 400 million usersof over 500 banks and PSPs and
payment service providers thatare on it and it's really the
biggest in the world.
Interesting enough, it alsoprovided the framework for
Google Pay, my old alma mater ofall things.
So it was there and in the USRTP was, I think, 2017, if I
(05:02):
remember right 2015, by theclearinghouse.
Maia Bittner (05:07):
Uh, yes, that sounds right.
And, sam, you know I have a, Ihave a.
I have a silly question for you.
I know, so I know a lot aboutthe concept of getting paid up
to two days early.
I would say I probably knowmore about this concept.
I am probably one of the top 10most knowledgeable people in
(05:29):
the world on this concept, whichthe neobanks have really
popularized.
I think it was maybe firstinvented.
I actually am not sure on this.
I think Rushcard, if you knowthem.
Sam Maule (05:40):
That sounds right.
I worked for T-SYS back in 2010and 11 on their prepaid
platform, which Rushcard was on,by the way.
Maia Bittner (05:49):
Wow, I know.
Sam Maule (05:51):
Date myself.
Maia Bittner (05:52):
Hey, T-SYS.
You know, my first merchantbank account was through T-SYS.
Sam Maule (05:57):
There you go.
Maia Bittner (06:00):
So I know a lot about getting paid up two days
early we could talk about.
You know we should do an episodeon that.
It's a good concept, but one ofthe things in contrast to so the
neobanks have reallypopularized getting paid up to
two days early, so much so thatlots of traditional brick and
(06:20):
mortar banks also providepaychecks up to two days early
and getting paid two days early,which people really love.
But it's always in conflictwith having a reliable time you
get your paycheck and from myunderstanding that was always
one of the ideas with why ACHtook so long or was so slow.
(06:41):
It was that there was a ton ofslack built into the system so
that you could say you alwaysget your paycheck every other
Friday by 9 am or whatever timein your time zone and that
people could count on that.
They could plan on being at thegrocery store with their cart
of groceries in line at 9 amPacific and have the money to
(07:01):
pay for it.
Does RTP right?
Does it sort of erode thatvalue prop at all, or how do you
see it coming into fruition,given how much consumers like
the reliability of knowing whenan ACH payment's coming in?
Sam Maule (07:19):
Yeah, I think it gives you optionality around
that.
I don't think it's going todisplace it.
Um, you know, it's funnywhenever you talk about payments
, just like you were saying,right, um, real time, near real
time, why is there a delay?
Do we really need real-timepayments?
I mean, there's this has beenthe debate that's gone back and
forth on this and that's that'swhat makes um fed now really
(07:41):
interesting, because it's reallythe first new bank payment rail
in the US since the 70s,because, I mean, ach would have
gone back to what 1978, same dayACH was, I think 210.
And then you know, like wetalked about RTP, but that's the
clearinghouse.
I think it was 2017.
So this is the first coming outof the Fed payment rail that
(08:04):
we're talking about.
But I think there's some thingsthat we got to kind of talk
through.
We're talking about ACH andreal-time payments and FedNow
and all that, and it's reallythe difference between push and
pull payments.
Folks.
We're getting it in the weedsright now.
So payment geeks right, goingback and forth on this.
So you know, I don't know whatto say.
Get a cup of coffee, get acappuccino, sit down, grab a pen
(08:27):
and pencil, cause this shouldbe fun Cause it is kind of
important to talk about pushversus pull.
So when we talk about pushpayments, you know we're talking
about like bank transfers.
So you know you're going in andtelling your bank for funds
from one account to another.
This could be peer-to-peerpayments.
So everybody's favorite,because now we're talking like
(08:52):
Venmo, paypal, zelle, cash Appall of those Loan disbursements
is a really good one Once theloan's approved.
Pushing those funds out, ify'all don't know what I work for
Move, so we move money.
So this is the geek stuff thatI absolutely love to do.
Mobile wallet transfers that'sanother one.
So again we're still in thepush payments category, but now
you're sending money from onewallet to another.
So now we are talkingeverybody's favorite, apple Pay
(09:14):
or Google Pay or Samsung Paythat's examples of push payments
.
Poll payments are different,because on a poll payment,
that's where the payee, they'reinitiating the pulling of the
funds from the payer's account.
So we have this push versuspull type thing.
Maia Bittner (09:34):
One of the things I'm always telling people with
push versus pull is, from abank's perspective, they have
all of the risk of payments.
Well, let's see I want to becareful of how I say this, but
OK, well, generally they havethe risk of payments that they
initiate, right, and they holdmore liability for those and
(09:58):
ensuring that they're notfraudulent.
And so sometimes when peoplesay you know push versus pull
and you're talking about payerand payee but this is relevant
even when you're transferringmoney between two bank accounts
you own, or two wallets you ownPeople complain.
They're like, oh, I'm trying totransfer and you're
transferring money between twobank accounts you own or two
wallets you own.
People complain.
They're like oh, I'm trying totransfer in $5,000 from my other
bank account and it's takingforever.
(10:18):
And I tell them that's a muchriskier transaction.
Yes, if you want it to happenfaster, right, because slowness
is always friction introduced toreduce fraud and risk.
It's always friction introducedto reduce fraud and risk.
You go to your bank accountthat has the money and you push
the money from your bank accountto the destination bank account
(10:39):
and that is almost always goingto get your money transferred
faster just using traditionalACH rails than if you are at
your destination bank accountand that's where you initiate
pulling that transfer in, and sothis is a way that the push
versus pull even comes up are atyour destination bank account
and that's where you initiatepulling that transfer in, and so
this is I mean, this is a waythat the push versus pull even
comes up before we have RTP orFedNow, because banks introduce
(11:00):
delays along the way to mitigatetheir fraud exposure.
Sam Maule (11:04):
Yeah, and again, I can't stress that enough it's
you're introducing friction toagain reduce fraud, right,
Because that's what we weretalking about.
You're talking about real-timepayments, but then you've got to
include real-time fraud, right,Because, trust me, the
fraudsters are on top of this.
They know the regs, they knowISO 8520 better than any of us.
(11:24):
They're really damn good atunderstanding messaging
protocols and everything else.
So, yeah, they're really damngood at understanding messaging
protocols and everything else,so yeah.
So again with poll payments, nowwe're talking like direct debit
, preauthorized payments orstanding orders.
That's typically the categorieswe're talking about.
We're doing those.
So right there, you know.
(11:45):
We're talking about push versuspull.
So now you got to talk aboutACH versus RTP, versus FedNow,
because with ACH, one thingyou've really got to take into
account is that ACH isbidirectional.
It offers both push and pullpayments, and it's very
important to get in your head.
(12:05):
We just talked about what thoseare, right, when we're talking
about RTP and FedNow, that'spush payments.
So it's different.
But the funny part is that RTPand FedNow are really the only
two in the US are operating inreal time.
So ACH is still subject toeverybody's favorite thing
banking hours Monday to Friday 5to 7.
(12:30):
We're talking batch processing.
I was going to say we'retalking batch processing Batch.
Maia Bittner (12:36):
I was gonna say it's the batch system, right,
there's just only so many filesand only so many windows and
they've probably got 70s eracomputers just running through,
cranking through those files.
You either make the cutoff toget into the file you want or
you don't, and that batchprocessing I think is really
hard for don't.
And that batch processing Ithink is really hard for people
to understand because batchprocessing doesn't make sense to
(12:57):
us as people.
Right, it's like I sent apayment and it showed up, you
know, right away.
Or but like then I sent apayment later and it didn't show
up for a day.
And it's like, well, well, thelater payment, you initiated it
outside of banking out, right,it's subject to all of these
like um concepts that I don'tthink should necessarily apply
(13:19):
in today's always on 24, 7digital age yeah, I mean, we
constantly get that right.
Sam Maule (13:24):
I can.
I can go on whatsapp and sitthere and talk in real time.
Facetime I can send, I can, youknow, take a picture and send
it instantly.
Yet when we're talking aboutmoving money, especially from
that US perspective, we do havethese friction points or delays
built in.
And if you understand thesystem and you hit that first
(13:44):
batch file, you're in good shape, right, you hit it a little bit
earlier in that morning.
It might be next day.
It's somewhat like doing yourtaxes in the US.
Hey, irs, how much do I owe?
I don't know why.
Don't you go figure that out?
Take a mini guess.
We are pretty funny when itcomes to how we do this.
(14:04):
So FedNow gets interesting,right.
I mean RTP man.
I'm trying to remember numbershere and I don't have these on
top of my head, so listeners,don't hold me to this.
I want to say with theclearinghouse.
Well, actually we should definewhat the clearinghouse is, but
essentially we're talking aboutthe clearinghouse.
I think we're talking aboutwhat top 20 banks in the US that
make that up.
(14:24):
If I remember right Maia holdme to that it's a group of the
largest banks.
Essentially that is theclearinghouse.
So again, a little bitdifferent when we're talking
about what this means.
Maia Bittner (14:41):
Well, the clearinghouses exist, because
without the clearinghouses,basically, you know, there's
thousands of banks in the UnitedStates and if I write you a
check from my bank, which iscalled the Whatcom Educational
Credit Union, and you go depositit at your bank, what's your
bank called?
Sam Maule (15:02):
I bank at this really unknown one called USAA.
Maia Bittner (15:05):
Love it.
I'm such an old veteran here.
Usaa has to go call up WhatcomEducational Credit Union and
draw the money from them.
It turns out this is awell-known concept in computers.
It's like if you've got 5,000banks that all need to interact
with 5,000 banks.
It's a lot of connections andis a real pain in the ass.
(15:28):
The clearinghouses areintermediaries that help
facilitate that, so that everybank doesn't have to be able to
draw funds from every other bankin the country.
Sam Maule (15:40):
Yeah, and it's an important point, because the
clearinghouse we're talkingabout a private sector player in
here.
It's not the federal government, it's the private sector that
is doing this, which is a veryAmerican thing.
I'm a capitalist, I've got noproblem with that happening.
But that's what makes FedNowinteresting, because it gets
back to like FedWire.
Fedwire, if I remember right,was launched in 1970.
(16:02):
So again introducing a railthat more or less is backed by
the federal government, that'swhat makes this interesting.
What will make it even moreinteresting is adoption, because
it sounds great.
You've launched it, but how manybanks or credit unions are
actually on it?
Because in the US this numberalways gets tossed around.
There's somewhere in theneighborhood of about 9,000
(16:23):
banks and credit unions in theUS.
We are definitelya freak showas compared to any other country
in the world.
What is it?
Canada?
They have like five.
I think you can stand inToronto and like slap all of
them, you know, with a very longstick at the square.
In the US that's impossible.
Something like 4,400 banks andthen another 5,000 credit unions
, and they have to implement theFedNow standards in order for
(16:47):
that to be used.
So that's very important.
If you're using FedNow to movemoney, the other bank or credit
union has to be set up in orderto move that money.
It's back to messaging.
Maia Bittner (16:58):
What's involved in implementation?
Right, Like at a technicallevel, does it mean that their
core has to support it?
If their core does support it,do they just sign a doc and
they're on it?
Does their business team needto set up risk policies for this
new type of money movement?
You introduced thisconversation by saying that the
(17:20):
chair was talking to Galileo.
Right, that's a issuerprocessor.
Is Galileo going to besupporting FedNow and then all
of Galileo's clients willimmediately have access to it?
What does it look like from atechnical perspective?
Sam Maule (17:35):
Yeah, that's a really good question and I'm going to
preface this with at Move wedon't support FedNow yet, so it
isn't something that wecurrently have implemented.
Right, we get asked this a lot,right, do you support FedNow?
Can you do FedWire, you know?
Can you do OCT or ACT or theseother methods?
And the answer is for all theothers, yes, we don't have
(17:58):
FedNow yet.
So I think part of it that makesit interesting is understanding
the actual payment transactionflow for FedNow.
So again, I apologize everybody, I told you we're going to get
in the weeds, but the weeds arefun, everybody, sometimes you
need to be in the weeds.
So let me walk through thetransactional flow for this.
A couple of steps.
The first is, shockingly,authorization.
(18:18):
I don't think that's shockingto anybody.
So when you're initiating theFedNow payment and again we're
talking about messaging protocolhere, whoever the individual,
the entity, they have to obtainauthorization from the recipient
to debit or credit their bankaccount.
So that consent is goingthrough the messaging layer.
And then you jump from thereinto the initiation.
(18:39):
So the sender, which could be abusiness or an individual, is
initiating a payment via thefinancial institutions interface
.
There you go, Maia, so thefinancial institution has to
have an interface, has to havethe modality, a way for you to
actually initiate this and kickit off.
So for smaller banks, yeah,that would make sense.
(19:00):
It'd be like a Q recipient'sbank account information amount
to be transferred purpose ofpayment.
And that's all.
You're still outside FedNow, bythe way, this is just prepping
in order to get this system.
And then you have what are twophases of the transmission
(19:24):
Transmission phase one, which isthe sender institution, so
that's a bank or credit union,and that's it.
By the way, the bank or creditunion is going to submit the
payment message.
For all you payment geeks,that's an ISO 222 format.
Man, I was blanking out on whatthe ISO format was Somewhere.
(19:46):
Wade Arnold, the founder ofMove, is just shaking his head.
He's so disappointed in meright now that I forgot what the
format was.
I apologize to all you otherpayment geeks.
There's so many different ISOstandards.
Give me a break.
So they're going to initiatethat payment message via the
FedNow service and it's going tovalidate the payment message
(20:06):
and they'll actually make sureit's in a proper format, the
specs complies with allstandards, all information is
provided in that.
And then it goes through asecond phase, which is they're
going to send the contents ofthe payment message to the
recipient's FI to seekconfirmation, and basically
that's where the handshake isgoing to happen, where they
accept the payment.
And then we get into thewonderful settlement and
(20:27):
clearing.
So they're going to settle thepayment debit and credit the
master accounts within the FIs.
What's interesting is thetimeout right now is set at 20
seconds.
So if it doesn't occur within20, there's your real time,
everybody.
If the messaging doesn't syncand everything happened within
20 seconds, you're going to getthe error message to do this,
but then the settlement is goingto occur.
It's communicated by the Fednow.
(20:48):
So that's the flow for this.
So wonderful flow.
But you got to remember that theFI does have setup it needs to
do.
You're going to have to createthe equivalent of, if this was
business, a wire desk orsomething like that.
You're going to have to havethe capability to initiate this
and do the authorizations thereand push them through.
(21:09):
So what's interesting?
I took a look this morning.
I think it was 470 banks andcredit unions have now signed up
.
This was rolled out what July,I think, of last year, fednow,
remember right.
So you're up to about 470 banksand credit unions out of 9,000.
Doesn't sound like a lot, butto be honest, the take-up rate
(21:29):
on RTP is not huge either.
It just tends to be some of thebigger players.
Maia Bittner (21:33):
Right, right.
My question is you know so thetake-up rate hasn't been that
high, although you know, andyou've got to look at all the
different interactions becauseboth the sender and the
recipient need to have it.
I've got to admit, sam, thefirst thing I thought of was
fraud, right?
What does this do?
Well, we should.
Sam Maule (21:52):
It should always be the first thing you think of.
When I was at Google, when wetalked about Google Cloud, we
always started with this conceptof zero trust right, which I
love, love that.
Which is yeah, it's a cloudcomputing terminology, and, when
it comes to payments, the veryfirst thing we should consider
is fraud.
Maia Bittner (22:08):
Zero trust.
I mean, I feel bad about that.
I feel like the first thing weshould consider is consumer
value and what benefits peopleare getting.
But that's not the first thingI think of.
The first thing I think of isfraud.
How little space there is inthis new system to review and
account for fraud.
I got really hung up.
You said like consent, and I'mlike, oh man, I wonder about all
(22:31):
the details of that.
What recourse do you have ifyou say I didn't actually
consent to that?
Sam Maule (22:38):
Wonderful.
The FedNow transactions arefinal and irrevocable.
God, I can never say that word,but you went to a better school
than I.
By design they are.
So it's again.
I agree with you.
There's your pressure right,it's please understand.
This isn't like using yourcredit card where you can do
disputes and chargebacks.
This is, you executed it,congratulations.
Maia Bittner (23:02):
So Zelle payments started at what I would
pronounce as irrevocable and Idon't know if you saw they just
kind of clawed that back becauseit was unsustainable, it was
not meeting customerexpectations and people were
losing too much money on Zelleand they were losing trust as a
platform.
Sam Maule (23:23):
And the take up for Zelle has been let's be honest,
it's been a success, right, Iknow I made fun of it when they
named it People love Zelle.
Maia Bittner (23:31):
A terrible name, but when?
Sam Maule (23:32):
it first came out, we're going to call it Zell and
I'm like, as you know, as istypical, we're like that's the
best you could come up with.
How much money did you pay forthat?
And, by the way, I was in thecar with my 22 year old daughter
from school and we were talkingabout moving money and she goes
that's her preferred method forP2P is Zelle.
So congratulations for them andI think that movement toward
(24:00):
you know how do you?
You need those safeguards.
Let's just be honest, right,because the reality is, anytime
you introduce a new paymentmodality remember when Apple Pay
came out, the fraud rates werepretty damn high.
Maia Bittner (24:15):
Yes, I remember that yes.
Sam Maule (24:17):
And you're talking really the gold standard when it
comes to technology companies,and they took a massive hit.
Maia Bittner (24:25):
They were able to withstand it because they're
such a big company.
I actually think there could bea really cool opening here, for
you know, there's so many fraudstartups.
Is one of them going tospecialize in RTP?
Oh, I think that would be a bigpotential, because my guess is
that, without really investingin that, when banks implement
(24:50):
this RTPp standard, man, they'regonna start like losing their
shirts until they learn, and youknow what now I'm gonna have to
go do some research.
Sam Maule (24:57):
I mean, what's happened with, like pics and upi
and all these other systemsglobally?
Have there been startups?
I don't know the answer to that.
This is why we're the perpetualinterns.
Everybody you should see ourfaces, like Maia usually kicks
us off.
We're like like, oh my God,what a good idea.
So now you're going to make mego down the lines of are there
(25:19):
these one-off fintechs aroundpicks or UPI or you know, you
take your pick that have beenintroduced to manage that?
Hmm, I'm now stumped.
That's a really, really goodquestion.
Well, here's what I would say.
It's still early days, right.
It's not even been a year yet.
You know we used to joke aroundthat FedNow was going to be
FedNever, or you know that wasthe running joke, right, and I
(25:43):
know when they targeted for itto go live, we were all like you
know it's not going to beFedNow, it's going to be
FedLater.
I was one of those that choked.
Too Good on them for actuallygetting this out pretty much on
time or fairly close to it.
I think this is a wait and seeit's optionality and I'm okay
with it.
Maia Bittner (26:01):
I don't have an issue with it?
All right, so back to our whatare even the basic use cases for
FedNow.
Are payroll processors jumpingonto this?
Sam Maule (26:14):
I don't think anyone's, I wouldn't say jumping
on, but yeah, definitely from apayroll standpoint and from a
here's.
Where I think it getsinteresting is from federal
distributions right by the way,the federal government disperses
a lot of money.
It's like the bulk of the ACHsystem disperses a lot of money.
Maia Bittner (26:31):
It's like the bulk of the ACH system.
Sam Maule (26:33):
Yeah, if you really want to see some money flow,
check out your federalgovernment and even states,
right?
I mean, if you look at EBTprograms I love programs like
that because they're repetitive,right Every month you know what
that churn is going to be.
So, yeah, I do think those aregoing to be where you're going
to see more adoption, right?
This could be interesting for,like, gig workers Right, to get
(26:55):
their money a heck of a lotfaster, which we've.
You know there's beendiscussions around this over and
over and over again.
You know what's it going to be.
I think where it getsinteresting is what are the use
cases for SMBs.
So you know, businesses, thatcash flows, everything.
That's where I think this isgoing to be interesting.
Maia Bittner (27:13):
I feel like gig workers already get all their
payouts instantly now using pushto debit.
Sam Maule (27:19):
Yeah.
Maia Bittner (27:23):
But that is quite expensive for the platforms to
provide.
So if they could switch,they're saving money, which
means they're either making moremoney or, you know, maybe the
gig workers get better rates inmore money, or, you know, maybe
the gig workers get better ratesand so that could be really
interesting as if um like I, Ithink that's going to be the um.
I think one of the biggestimpacts will be probably hurting
visa and mastercard by cuttingout push to debit revenue yeah,
(27:46):
well, that and the uh, what isit?
Sam Maule (27:49):
um, what is it?
Uber and Airbnb have now rightthe bank payment side of this.
Use my bank.
I forgot how.
What do they call that?
Is it use my bank?
I can't remember what they callthat terminology, but that
optionality to basically justdebit my account in real time.
Yeah Right, so there you go.
Watch interchange justdisappear.
As an ex-TSIS person and I willtell you that 15 years ago we
(28:21):
looked at payment processing asa commodity and going to
continually see shrinkage aroundrevenues there.
It's fascinating to see theworld where the world of
payments is going um, which iswhy geeks like you and I just
get so excited when we see stufflike this roll out, and it'd be
great to see what adoption islike for this.
Let's give them a little bitmore time and I'll check back in
with you after the conversationthis week with the team and
some of the questions you'reable to ask them, but I think,
(28:43):
if we go any farther, down this.
This will be used as somebodytrying to go to sleep at 10
o'clock or 11 o'clock at night.
Listen to Maia and Sam talkabout ISO standards and
messaging layers.
All right, so that's it forthis show, fednow.
What do you think, everybody?
Is this going to be the nextZelle?
Is it going to take off?
Is it going to be the next UPI,or did we just get it wrong?
(29:05):
Love to get your feedback on it.
You want to reach out to me.
Linkedin is always fun, orTwitter, same with Maia.
I know that Everybody thanksfor listening.
We love having you here and,hey, give us some topics.
What do you want us to go deepon?
As long as it's not ISO 8520,we'd be happy to do it.
Hello, hello.
You are listening to theArtificially Intelligent podcast
.
I am one of your co-hosts.
Your perpetual fintech intern,Maia Bittner.
Sam Maule (00:18):
Hey everybody, and I'm Sam Maule, the other intern.
I need good t-shirts.
I really do.
I need t-shirts for this.
Maia Bittner (00:26):
It's probably the intern's job to make the
t-shirts.
Sam Maule (00:28):
Oh, you know what it makes me think of when I join
Google and you get the Googlehat with the stupid propeller on
it.
I do have it behind mesomewhere in that movie, the
Intern.
My daughter asked me if thatwas real and I died laughing and
said yeah, they really do.
They give you the hat.
That's a real thing.
Maia Bittner (00:44):
It is a real thing we need like branded
artificially intelligent podcastcoffee trays.
I love a good coffee tray.
I love a good coffee tray.
Right, I miss coffee trays.
Sam Maule (00:59):
Lord have mercy reminds me of growing up.
Well, Maia, I've got anexciting couple of days coming
up Tomorrow.
I jump on a plane and head toUtah.
Maia Bittner (01:09):
You know a lot of good fintech in Utah.
Sam Maule (01:12):
Oh man, silicon Slopes baby, I love me some Utah
.
Yeah, I'm flying out to join MXand Galileo and a bunch of
other folks because the teambehind FedNow so Mark Gold and
his team, mark is the chiefpayments executive for the
Federal Reserve FinancialServices System, or basically
FedNow, and they're kind ofdoing a tour around the US to
(01:35):
talk with folks in this space toget feedback, which I like
right.
It's a chance to sit down withthem, talk about payments, talk
about FedNow, what we've seenask them a ton of questions, and
so that made me think what agreat opportunity to tap into
the high brain that is MayaBittner to talk about faster
payments, talk about FedNow andwhere we think the US is on this
(02:00):
.
But I have a trivia question.
As always, I love doing this,everybody, I love doing this.
Do you know what was the firstpastor payment system that was
launched in the US?
Sorry, globally.
What was the first pastorpayment system globally?
What country had the first one?
And man, I hope I have thisright.
(02:20):
And you mean like bank payments, what we about is ach in the us
a 24 by7 300 365 type system.
I do believe I have this oneright.
What country?
Maia Bittner (02:42):
I'm gonna go.
I'm gonna go Japan damn it.
Sam Maule (02:46):
You know what?
We're gonna get a new showwhich is Sam Never Gets Anything
, by Maia Japan 1973, the Zenjinsystem.
I am so disappointed, as usual,that you got that right.
It's amazing, folks.
What college should you go toagain?
Maia Bittner (03:01):
because it's good esteemed, highly prestigious
Franklinlin w olin college ofengineering they, they rock
everybody.
Sam Maule (03:12):
I went to southern illinois and I didn't know that
and dang it, Maia got it that onright.
So yeah, it's funny, becausefaster it just makes sense.
Maia Bittner (03:21):
Faster payments was about the time when japan.
I mean Japan is no longer asdominant a world force, but the
70s and the 80s man Japan wasreally killing it.
They had a lot of innovation.
Sam Maule (03:34):
My first job out of the Navy was with the Japanese
company in 1994, katsushiro RoneCorporation.
I spent about a month studyingKaizen believe it or not, Maia
in Japan.
Wow, that's cool Because it washot as anything back then.
Maia Bittner (03:47):
Yeah, yeah.
Sam Maule (03:48):
Loved it.
Yeah, well you're right.
And Zenjin I'm sorry I'm sayingthat wrong 1973 in Japan, and
then you know there's beenmultiple others.
Like when I lived in the UK,they had the faster payment
system and that goes back to2008.
You've got what PIX in Brazilthat would be.
I think that was the secondlargest RTP market by volume.
(04:11):
Was PIX.
They're responsible forsomething like 90% of all RTP
volumes in Latin America, thebig one UPI.
So we're talking India.
It's a beast.
Upi is a beast, everybodyreally want to see a payment
system that just rocks it.
Maia Bittner (04:29):
UPI, yeah, and then in the US Really impressive
, admirable.
Sam Maule (04:36):
Yeah, yeah, I mean UPI is unbelievable.
They get like 400 million usersof over 500 banks and PSPs and
payment service providers thatare on it and it's really the
biggest in the world.
Interesting enough, it alsoprovided the framework for
Google Pay, my old alma mater ofall things.
So it was there and in the USRTP was, I think, 2017, if I
(05:02):
remember right 2015, by theclearinghouse.
Maia Bittner (05:07):
Uh, yes, that sounds right.
And, sam, you know I have a, Ihave a.
I have a silly question for you.
I know, so I know a lot aboutthe concept of getting paid up
to two days early.
I would say I probably knowmore about this concept.
I am probably one of the top 10most knowledgeable people in
(05:29):
the world on this concept, whichthe neobanks have really
popularized.
I think it was maybe firstinvented.
I actually am not sure on this.
I think Rushcard, if you knowthem.
Sam Maule (05:40):
That sounds right.
I worked for T-SYS back in 2010and 11 on their prepaid
platform, which Rushcard was on,by the way.
Maia Bittner (05:49):
Wow, I know.
Sam Maule (05:51):
Date myself.
Maia Bittner (05:52):
Hey, T-SYS.
You know, my first merchantbank account was through T-SYS.
Sam Maule (05:57):
There you go.
Maia Bittner (06:00):
So I know a lot about getting paid up two days
early we could talk about.
You know we should do an episodeon that.
It's a good concept, but one ofthe things in contrast to so the
neobanks have reallypopularized getting paid up to
two days early, so much so thatlots of traditional brick and
(06:20):
mortar banks also providepaychecks up to two days early
and getting paid two days early,which people really love.
But it's always in conflictwith having a reliable time you
get your paycheck and from myunderstanding that was always
one of the ideas with why ACHtook so long or was so slow.
(06:41):
It was that there was a ton ofslack built into the system so
that you could say you alwaysget your paycheck every other
Friday by 9 am or whatever timein your time zone and that
people could count on that.
They could plan on being at thegrocery store with their cart
of groceries in line at 9 amPacific and have the money to
(07:01):
pay for it.
Does RTP right?
Does it sort of erode thatvalue prop at all, or how do you
see it coming into fruition,given how much consumers like
the reliability of knowing whenan ACH payment's coming in?
Sam Maule (07:19):
Yeah, I think it gives you optionality around
that.
I don't think it's going todisplace it.
Um, you know, it's funnywhenever you talk about payments
, just like you were saying,right, um, real time, near real
time, why is there a delay?
Do we really need real-timepayments?
I mean, there's this has beenthe debate that's gone back and
forth on this and that's that'swhat makes um fed now really
(07:41):
interesting, because it's reallythe first new bank payment rail
in the US since the 70s,because, I mean, ach would have
gone back to what 1978, same dayACH was, I think 210.
And then you know, like wetalked about RTP, but that's the
clearinghouse.
I think it was 2017.
So this is the first coming outof the Fed payment rail that
(08:04):
we're talking about.
But I think there's some thingsthat we got to kind of talk
through.
We're talking about ACH andreal-time payments and FedNow
and all that, and it's reallythe difference between push and
pull payments.
Folks.
We're getting it in the weedsright now.
So payment geeks right, goingback and forth on this.
So you know, I don't know whatto say.
Get a cup of coffee, get acappuccino, sit down, grab a pen
(08:27):
and pencil, cause this shouldbe fun Cause it is kind of
important to talk about pushversus pull.
So when we talk about pushpayments, you know we're talking
about like bank transfers.
So you know you're going in andtelling your bank for funds
from one account to another.
This could be peer-to-peerpayments.
So everybody's favorite,because now we're talking like
(08:52):
Venmo, paypal, zelle, cash Appall of those Loan disbursements
is a really good one Once theloan's approved.
Pushing those funds out, ify'all don't know what I work for
Move, so we move money.
So this is the geek stuff thatI absolutely love to do.
Mobile wallet transfers that'sanother one.
So again we're still in thepush payments category, but now
you're sending money from onewallet to another.
So now we are talkingeverybody's favorite, apple Pay
(09:14):
or Google Pay or Samsung Paythat's examples of push payments
.
Poll payments are different,because on a poll payment,
that's where the payee, they'reinitiating the pulling of the
funds from the payer's account.
So we have this push versuspull type thing.
Maia Bittner (09:34):
One of the things I'm always telling people with
push versus pull is, from abank's perspective, they have
all of the risk of payments.
Well, let's see I want to becareful of how I say this, but
OK, well, generally they havethe risk of payments that they
initiate, right, and they holdmore liability for those and
(09:58):
ensuring that they're notfraudulent.
And so sometimes when peoplesay you know push versus pull
and you're talking about payerand payee but this is relevant
even when you're transferringmoney between two bank accounts
you own, or two wallets you ownPeople complain.
They're like, oh, I'm trying totransfer and you're
transferring money between twobank accounts you own or two
wallets you own.
People complain.
They're like oh, I'm trying totransfer in $5,000 from my other
bank account and it's takingforever.
(10:18):
And I tell them that's a muchriskier transaction.
Yes, if you want it to happenfaster, right, because slowness
is always friction introduced toreduce fraud and risk.
It's always friction introducedto reduce fraud and risk.
You go to your bank accountthat has the money and you push
the money from your bank accountto the destination bank account
(10:39):
and that is almost always goingto get your money transferred
faster just using traditionalACH rails than if you are at
your destination bank accountand that's where you initiate
pulling that transfer in, and sothis is a way that the push
versus pull even comes up are atyour destination bank account
and that's where you initiatepulling that transfer in, and so
this is I mean, this is a waythat the push versus pull even
comes up before we have RTP orFedNow, because banks introduce
(11:00):
delays along the way to mitigatetheir fraud exposure.
Sam Maule (11:04):
Yeah, and again, I can't stress that enough it's
you're introducing friction toagain reduce fraud, right,
Because that's what we weretalking about.
You're talking about real-timepayments, but then you've got to
include real-time fraud, right,Because, trust me, the
fraudsters are on top of this.
They know the regs, they knowISO 8520 better than any of us.
(11:24):
They're really damn good atunderstanding messaging
protocols and everything else.
So, yeah, they're really damngood at understanding messaging
protocols and everything else,so yeah.
So again with poll payments, nowwe're talking like direct debit
, preauthorized payments orstanding orders.
That's typically the categorieswe're talking about.
We're doing those.
So right there, you know.
(11:45):
We're talking about push versuspull.
So now you got to talk aboutACH versus RTP, versus FedNow,
because with ACH, one thingyou've really got to take into
account is that ACH isbidirectional.
It offers both push and pullpayments, and it's very
important to get in your head.
(12:05):
We just talked about what thoseare, right, when we're talking
about RTP and FedNow, that'spush payments.
So it's different.
But the funny part is that RTPand FedNow are really the only
two in the US are operating inreal time.
So ACH is still subject toeverybody's favorite thing
banking hours Monday to Friday 5to 7.
(12:30):
We're talking batch processing.
I was going to say we'retalking batch processing Batch.
Maia Bittner (12:36):
I was gonna say it's the batch system, right,
there's just only so many filesand only so many windows and
they've probably got 70s eracomputers just running through,
cranking through those files.
You either make the cutoff toget into the file you want or
you don't, and that batchprocessing I think is really
hard for don't.
And that batch processing Ithink is really hard for people
to understand because batchprocessing doesn't make sense to
(12:57):
us as people.
Right, it's like I sent apayment and it showed up, you
know, right away.
Or but like then I sent apayment later and it didn't show
up for a day.
And it's like, well, well, thelater payment, you initiated it
outside of banking out, right,it's subject to all of these
like um concepts that I don'tthink should necessarily apply
(13:19):
in today's always on 24, 7digital age yeah, I mean, we
constantly get that right.
Sam Maule (13:24):
I can.
I can go on whatsapp and sitthere and talk in real time.
Facetime I can send, I can, youknow, take a picture and send
it instantly.
Yet when we're talking aboutmoving money, especially from
that US perspective, we do havethese friction points or delays
built in.
And if you understand thesystem and you hit that first
(13:44):
batch file, you're in good shape, right, you hit it a little bit
earlier in that morning.
It might be next day.
It's somewhat like doing yourtaxes in the US.
Hey, irs, how much do I owe?
I don't know why.
Don't you go figure that out?
Take a mini guess.
We are pretty funny when itcomes to how we do this.
(14:04):
So FedNow gets interesting,right.
I mean RTP man.
I'm trying to remember numbershere and I don't have these on
top of my head, so listeners,don't hold me to this.
I want to say with theclearinghouse.
Well, actually we should definewhat the clearinghouse is, but
essentially we're talking aboutthe clearinghouse.
I think we're talking aboutwhat top 20 banks in the US that
make that up.
(14:24):
If I remember right Maia holdme to that it's a group of the
largest banks.
Essentially that is theclearinghouse.
So again, a little bitdifferent when we're talking
about what this means.
Maia Bittner (14:41):
Well, the clearinghouses exist, because
without the clearinghouses,basically, you know, there's
thousands of banks in the UnitedStates and if I write you a
check from my bank, which iscalled the Whatcom Educational
Credit Union, and you go depositit at your bank, what's your
bank called?
Sam Maule (15:02):
I bank at this really unknown one called USAA.
Maia Bittner (15:05):
Love it.
I'm such an old veteran here.
Usaa has to go call up WhatcomEducational Credit Union and
draw the money from them.
It turns out this is awell-known concept in computers.
It's like if you've got 5,000banks that all need to interact
with 5,000 banks.
It's a lot of connections andis a real pain in the ass.
(15:28):
The clearinghouses areintermediaries that help
facilitate that, so that everybank doesn't have to be able to
draw funds from every other bankin the country.
Sam Maule (15:40):
Yeah, and it's an important point, because the
clearinghouse we're talkingabout a private sector player in
here.
It's not the federal government, it's the private sector that
is doing this, which is a veryAmerican thing.
I'm a capitalist, I've got noproblem with that happening.
But that's what makes FedNowinteresting, because it gets
back to like FedWire.
Fedwire, if I remember right,was launched in 1970.
(16:02):
So again introducing a railthat more or less is backed by
the federal government, that'swhat makes this interesting.
What will make it even moreinteresting is adoption, because
it sounds great.
You've launched it, but how manybanks or credit unions are
actually on it?
Because in the US this numberalways gets tossed around.
There's somewhere in theneighborhood of about 9,000
(16:23):
banks and credit unions in theUS.
We are definitelya freak showas compared to any other country
in the world.
What is it?
Canada?
They have like five.
I think you can stand inToronto and like slap all of
them, you know, with a very longstick at the square.
In the US that's impossible.
Something like 4,400 banks andthen another 5,000 credit unions
, and they have to implement theFedNow standards in order for
(16:47):
that to be used.
So that's very important.
If you're using FedNow to movemoney, the other bank or credit
union has to be set up in orderto move that money.
It's back to messaging.
Maia Bittner (16:58):
What's involved in implementation?
Right, Like at a technicallevel, does it mean that their
core has to support it?
If their core does support it,do they just sign a doc and
they're on it?
Does their business team needto set up risk policies for this
new type of money movement?
You introduced thisconversation by saying that the
(17:20):
chair was talking to Galileo.
Right, that's a issuerprocessor.
Is Galileo going to besupporting FedNow and then all
of Galileo's clients willimmediately have access to it?
What does it look like from atechnical perspective?
Sam Maule (17:35):
Yeah, that's a really good question and I'm going to
preface this with at Move wedon't support FedNow yet, so it
isn't something that wecurrently have implemented.
Right, we get asked this a lot,right, do you support FedNow?
Can you do FedWire, you know?
Can you do OCT or ACT or theseother methods?
And the answer is for all theothers, yes, we don't have
(17:58):
FedNow yet.
So I think part of it that makesit interesting is understanding
the actual payment transactionflow for FedNow.
So again, I apologize everybody, I told you we're going to get
in the weeds, but the weeds arefun, everybody, sometimes you
need to be in the weeds.
So let me walk through thetransactional flow for this.
A couple of steps.
The first is, shockingly,authorization.
(18:18):
I don't think that's shockingto anybody.
So when you're initiating theFedNow payment and again we're
talking about messaging protocolhere, whoever the individual,
the entity, they have to obtainauthorization from the recipient
to debit or credit their bankaccount.
So that consent is goingthrough the messaging layer.
And then you jump from thereinto the initiation.
(18:39):
So the sender, which could be abusiness or an individual, is
initiating a payment via thefinancial institutions interface
.
There you go, Maia, so thefinancial institution has to
have an interface, has to havethe modality, a way for you to
actually initiate this and kickit off.
So for smaller banks, yeah,that would make sense.
(19:00):
It'd be like a Q recipient'sbank account information amount
to be transferred purpose ofpayment.
And that's all.
You're still outside FedNow, bythe way, this is just prepping
in order to get this system.
And then you have what are twophases of the transmission
(19:24):
Transmission phase one, which isthe sender institution, so
that's a bank or credit union,and that's it.
By the way, the bank or creditunion is going to submit the
payment message.
For all you payment geeks,that's an ISO 222 format.
Man, I was blanking out on whatthe ISO format was Somewhere.
(19:46):
Wade Arnold, the founder ofMove, is just shaking his head.
He's so disappointed in meright now that I forgot what the
format was.
I apologize to all you otherpayment geeks.
There's so many different ISOstandards.
Give me a break.
So they're going to initiatethat payment message via the
FedNow service and it's going tovalidate the payment message
(20:06):
and they'll actually make sureit's in a proper format, the
specs complies with allstandards, all information is
provided in that.
And then it goes through asecond phase, which is they're
going to send the contents ofthe payment message to the
recipient's FI to seekconfirmation, and basically
that's where the handshake isgoing to happen, where they
accept the payment.
And then we get into thewonderful settlement and
(20:27):
clearing.
So they're going to settle thepayment debit and credit the
master accounts within the FIs.
What's interesting is thetimeout right now is set at 20
seconds.
So if it doesn't occur within20, there's your real time,
everybody.
If the messaging doesn't syncand everything happened within
20 seconds, you're going to getthe error message to do this,
but then the settlement is goingto occur.
It's communicated by the Fednow.
(20:48):
So that's the flow for this.
So wonderful flow.
But you got to remember that theFI does have setup it needs to
do.
You're going to have to createthe equivalent of, if this was
business, a wire desk orsomething like that.
You're going to have to havethe capability to initiate this
and do the authorizations thereand push them through.
(21:09):
So what's interesting?
I took a look this morning.
I think it was 470 banks andcredit unions have now signed up
.
This was rolled out what July,I think, of last year, fednow,
remember right.
So you're up to about 470 banksand credit unions out of 9,000.
Doesn't sound like a lot, butto be honest, the take-up rate
(21:29):
on RTP is not huge either.
It just tends to be some of thebigger players.
Maia Bittner (21:33):
Right, right.
My question is you know so thetake-up rate hasn't been that
high, although you know, andyou've got to look at all the
different interactions becauseboth the sender and the
recipient need to have it.
I've got to admit, sam, thefirst thing I thought of was
fraud, right?
What does this do?
Well, we should.
Sam Maule (21:52):
It should always be the first thing you think of.
When I was at Google, when wetalked about Google Cloud, we
always started with this conceptof zero trust right, which I
love, love that.
Which is yeah, it's a cloudcomputing terminology, and, when
it comes to payments, the veryfirst thing we should consider
is fraud.
Maia Bittner (22:08):
Zero trust.
I mean, I feel bad about that.
I feel like the first thing weshould consider is consumer
value and what benefits peopleare getting.
But that's not the first thingI think of.
The first thing I think of isfraud.
How little space there is inthis new system to review and
account for fraud.
I got really hung up.
You said like consent, and I'mlike, oh man, I wonder about all
(22:31):
the details of that.
What recourse do you have ifyou say I didn't actually
consent to that?
Sam Maule (22:38):
Wonderful.
The FedNow transactions arefinal and irrevocable.
God, I can never say that word,but you went to a better school
than I.
By design they are.
So it's again.
I agree with you.
There's your pressure right,it's please understand.
This isn't like using yourcredit card where you can do
disputes and chargebacks.
This is, you executed it,congratulations.
Maia Bittner (23:02):
So Zelle payments started at what I would
pronounce as irrevocable and Idon't know if you saw they just
kind of clawed that back becauseit was unsustainable, it was
not meeting customerexpectations and people were
losing too much money on Zelleand they were losing trust as a
platform.
Sam Maule (23:23):
And the take up for Zelle has been let's be honest,
it's been a success, right, Iknow I made fun of it when they
named it People love Zelle.
Maia Bittner (23:31):
A terrible name, but when?
Sam Maule (23:32):
it first came out, we're going to call it Zell and
I'm like, as you know, as istypical, we're like that's the
best you could come up with.
How much money did you pay forthat?
And, by the way, I was in thecar with my 22 year old daughter
from school and we were talkingabout moving money and she goes
that's her preferred method forP2P is Zelle.
So congratulations for them andI think that movement toward
(24:00):
you know how do you?
You need those safeguards.
Let's just be honest, right,because the reality is, anytime
you introduce a new paymentmodality remember when Apple Pay
came out, the fraud rates werepretty damn high.
Maia Bittner (24:15):
Yes, I remember that yes.
Sam Maule (24:17):
And you're talking really the gold standard when it
comes to technology companies,and they took a massive hit.
Maia Bittner (24:25):
They were able to withstand it because they're
such a big company.
I actually think there could bea really cool opening here, for
you know, there's so many fraudstartups.
Is one of them going tospecialize in RTP?
Oh, I think that would be a bigpotential, because my guess is
that, without really investingin that, when banks implement
(24:50):
this RTPp standard, man, they'regonna start like losing their
shirts until they learn, and youknow what now I'm gonna have to
go do some research.
Sam Maule (24:57):
I mean, what's happened with, like pics and upi
and all these other systemsglobally?
Have there been startups?
I don't know the answer to that.
This is why we're the perpetualinterns.
Everybody you should see ourfaces, like Maia usually kicks
us off.
We're like like, oh my God,what a good idea.
So now you're going to make mego down the lines of are there
(25:19):
these one-off fintechs aroundpicks or UPI or you know, you
take your pick that have beenintroduced to manage that?
Hmm, I'm now stumped.
That's a really, really goodquestion.
Well, here's what I would say.
It's still early days, right.
It's not even been a year yet.
You know we used to joke aroundthat FedNow was going to be
FedNever, or you know that wasthe running joke, right, and I
(25:43):
know when they targeted for itto go live, we were all like you
know it's not going to beFedNow, it's going to be
FedLater.
I was one of those that choked.
Too Good on them for actuallygetting this out pretty much on
time or fairly close to it.
I think this is a wait and seeit's optionality and I'm okay
with it.
Maia Bittner (26:01):
I don't have an issue with it?
All right, so back to our whatare even the basic use cases for
FedNow.
Are payroll processors jumpingonto this?
Sam Maule (26:14):
I don't think anyone's, I wouldn't say jumping
on, but yeah, definitely from apayroll standpoint and from a
here's.
Where I think it getsinteresting is from federal
distributions right by the way,the federal government disperses
a lot of money.
It's like the bulk of the ACHsystem disperses a lot of money.
Maia Bittner (26:31):
It's like the bulk of the ACH system.
Sam Maule (26:33):
Yeah, if you really want to see some money flow,
check out your federalgovernment and even states,
right?
I mean, if you look at EBTprograms I love programs like
that because they're repetitive,right Every month you know what
that churn is going to be.
So, yeah, I do think those aregoing to be where you're going
to see more adoption, right?
This could be interesting for,like, gig workers Right, to get
(26:55):
their money a heck of a lotfaster, which we've.
You know there's beendiscussions around this over and
over and over again.
You know what's it going to be.
I think where it getsinteresting is what are the use
cases for SMBs.
So you know, businesses, thatcash flows, everything.
That's where I think this isgoing to be interesting.
Maia Bittner (27:13):
I feel like gig workers already get all their
payouts instantly now using pushto debit.
Sam Maule (27:19):
Yeah.
Maia Bittner (27:23):
But that is quite expensive for the platforms to
provide.
So if they could switch,they're saving money, which
means they're either making moremoney or, you know, maybe the
gig workers get better rates inmore money, or, you know, maybe
the gig workers get better ratesand so that could be really
interesting as if um like I, Ithink that's going to be the um.
I think one of the biggestimpacts will be probably hurting
visa and mastercard by cuttingout push to debit revenue yeah,
(27:46):
well, that and the uh, what isit?
Sam Maule (27:49):
um, what is it?
Uber and Airbnb have now rightthe bank payment side of this.
Use my bank.
I forgot how.
What do they call that?
Is it use my bank?
I can't remember what they callthat terminology, but that
optionality to basically justdebit my account in real time.
Yeah Right, so there you go.
Watch interchange justdisappear.
As an ex-TSIS person and I willtell you that 15 years ago we
(28:21):
looked at payment processing asa commodity and going to
continually see shrinkage aroundrevenues there.
It's fascinating to see theworld where the world of
payments is going um, which iswhy geeks like you and I just
get so excited when we see stufflike this roll out, and it'd be
great to see what adoption islike for this.
Let's give them a little bitmore time and I'll check back in
with you after the conversationthis week with the team and
some of the questions you'reable to ask them, but I think,
(28:43):
if we go any farther, down this.
This will be used as somebodytrying to go to sleep at 10
o'clock or 11 o'clock at night.
Listen to Maia and Sam talkabout ISO standards and
messaging layers.
All right, so that's it forthis show, fednow.
What do you think, everybody?
Is this going to be the nextZelle?
Is it going to take off?
Is it going to be the next UPI,or did we just get it wrong?
(29:05):
Love to get your feedback on it.
You want to reach out to me.
Linkedin is always fun, orTwitter, same with Maia.
I know that Everybody thanksfor listening.
We love having you here and,hey, give us some topics.
What do you want us to go deepon?
As long as it's not ISO 8520,we'd be happy to do it.
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