Digital Money Movement
Written by Susan Foulds, Managing Director
In the banking and brokerage industries, online and mobile money movement and payments have considerably expanded in the last few years. Consumers and small business owners are confronted with a somewhat confusing assortment of options through different channels to make payments or transfer funds via online and mobile banking or third-party fintech apps. Financial institutions face the challenge of presenting a simplified digital customer experience through the UI and navigation path for money movement to help their customers select the optimal service for a particular payment recipient or funds transfer—typically from four or five electronic money movement channels offered through digital banking: bill payment primarily to businesses (both electronic and paper checks, though the latter is waning), inter-institutional account-to-account (A2A) ACH transfers, peer-to-peer (P2P) payments, wires to accounts owned by others, and global remittance services.
The primary benefit of online bill payments, typically through banks and credit unions, is 1 - 2 day delivery of electronic payments to large national and regional billers, such as credit cards and utilities. For smaller billers and individuals, a paper check can be sent from the bank through the mail which provides a certain level of convenience, however, it can take up to five days to be delivered, while other payments are more faster and more efficient after a one-time set-up for the payee.
External inter-institutional ACH transfers between customer-owned accounts at different financial institutions (also known as A2A or account-to-account transfers) are not new to online banking and are increasingly offered through mobile channels. These A2A transfers have seen increased consumer adoption as families and business associates are separated and branches are closed during the pandemic, engendering new digital transaction habits as people come to appreciate the convenience and low cost of these transfers—especially for larger transaction amounts.
Though person-to-person (P2P) payments, made popular by third-party fintech apps such as Venmo, entered the stage mostly for the purpose of enabling consumers to send small personal payments and share expenses, they now also support larger transaction amounts for e-commerce and online auctions, and routine payments such as rent and funds transfers between family members and friends. The bank-owned P2P Zelle platform is widely available now to mobile and online banking users, and the larger banks support daily transaction limits ranging between $500 - $5000 with monthly limits ranging from $5,000 - $20,000. An important benefit is not having to share bank account information with the sender—only an email address or mobile number is required, and the P2P platform keeps the account information private in a separate secure network.
Domestic and international wires, along with global electronic funds transfers, are also offered by many of the larger financial institutions. They are costly (domestic wires typically starting at $30) and are largely utilized by high net worth and small business customers versus the average consumer. Online initiation of domestic wire transfers is offered to consumers by nine of the 22 banks covered in the Keynova Banker Scorecard (May 2020). International wires, Western Union, and the less costly global electronic funds transfers are offered through online banking by even fewer banks but can be especially valuable to people who regularly send money to family members outside of the U.S. or for business purposes. Notably, global remittances are currently facing a historic decline as the pandemic has forced many individuals out of their jobs. Wire transfers can be somewhat daunting even for the practiced digital banking user—entering one wrong digit can send the funds wayward to an unintended account and often the funds cannot be retrieved.
To help its online banking users navigate the array of money movement options offered, Citi recently released a new payments dashboard that incorporates several best practices. The primary bill pay screen is designed with tiles for payees—each one containing key information like last payment date and amount and scheduled and recurring payments. The dashboard also includes links to Zelle and A2A inter-institutional ACH transfers.
Citi recently released a new payments dashboard for their online banking users that simplifies the presentation of payment and transfer options.
P2P is certainly preferable over sending a bill payment to an individual which arrives as a check in the U.S. mail. However, the recipient must be enrolled in the same P2P platform as the sender. Family members and close friends will often settle on one or two P2P providers, like Zelle and/or Venmo, but not necessarily the home service business who mows the grass or washes windows.
The good news for people receiving checks in the mail—they can use their phone banking app to deposit the checks—a huge advantage while most branches are closed. Mobile check deposit arguably experienced the most rapid increase in adoption by banks and consumers than any other preceding digital banking service. (Some might recall when banks actually paid customers to try bill pay in the nascent days of online banking at the turn of the century.) Those mobile check deposit numbers will further jump up as customers with smartphones, who are late adopters, will likely come to rely on it and treasure mobile check deposit like the rest of us.
Much like other shifting habits necessitated by COVID-19, banking customers who may not have had a strong motivation in the past to change their payment habits from checks or bill pay, may find alternative money movement paths come in very handy while branches are closed or with limited hours, and financial institution call centers are overwhelmed; or while working from home or under other constraints. This pandemic has wrought changes throughout society and digital banking will be no exception. All financial institutions—especially smaller community and regional banks and credit unions—will need to reevaluate or step up their digital banking and money movement capabilities to meet changing digital financial needs.