An early FedNow participant plans the next step | Payment source

An early FedNow participant plans the next step |  Payment source

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Enabling faster payments will help banks retain their upper hand in the financial ecosystem, said Booshan Rengachari, founder and CEO of payments-focused fintech Finzly.

In the late 1990s, long before he founded Finzly, Booshan Rengachari arrived in the United States from India at the age of 21, with no friends and just $500 to his name. He first started in software engineering, but several years later began a new career in a bank.

“I saw that there were a lot of problems to solve in the banks and how far behind the US was in payments technology compared to China, India and Brazil,” said Rengachari, who worked at banks including Wachovia and Wells Fargo before launching a payments-focused fintech in 2012.

Originally called SwapsTech and focused on providing banks with a turnkey approach to handling cross-border payments, Rengachari’s company – now called Finzly – pivoted in 2019 to offer banks a service that can broadly accommodate domestic and international payments for consumers and corporate customers.

Last month, Finzly was among the first to provide its bank customers with an API link to FedNow’s Faster Payments pilot, through Finzly OS, a parallel core platform banks can use with their existing core platform to access a multi-rail domestic and payments hub. , according to Rengachari.

“Most banks still offer different payments – cross-border or treasury services – through different channels, but we have created a single point where they can add any combination of rails as needed,” Rengachari said.

Rengachari’s zeal to be at the forefront of faster payments dates back to 2015, when he was a founding member of the Faster Payments Task Force, a group of 300 financial technology firms and experts that contributed to a key white paper that helped lay the foundation for FedNow.

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“The task force’s work ended a few years ago, but being a part of it helped me envision what the future of faster payments would look like,” Rengachari said.

With its zippier name and tighter focus on customizing faster payments, Finzly has signed deals with 27 different banks that can use its single API connection to access ACH, Fedwire, RTP, FedNow and Swift to support cross-border payments with foreign exchange, trade finance and treasury services, which can be customized by adding or subtracting features as needed, he said. RTP is The Clearing House’s real-time payment network.

The 110-person firm’s clients include Pittsburgh-based First National Bank of Pennsylvania, Phoenix-based Western Alliance Bank and Dallas-based Veritex Community Bank.

Veritex is using Finzly to consolidate its ACH and Fedwire payments into a single platform, with the option to add RTP and FedNow later, the bank said in a press release. The bank’s commercial customers can access treasury services through Finzly’s hub, which is embedded in Q2, Veritex’s core provider, according to the bank.

Since rolling out the API link to FedNow last month, several of Finzly’s customers have extended the emerging rail for faster payments to their commercial and fintech customers, Rengachari said. “We’re sending and receiving messages in test mode until FedNow goes live and banks see the benefits,” he said.

Banks will likely start with just a few FedNow-powered services, which will likely take years for most banks to adopt, according to Rengachari.

“The immediate use cases for FedNow are in commercial payments and disbursements such as insurance and loan disbursements, but we expect to eventually see it adopted for request-to-pay services at the POS, for e-commerce, bill payment and wages,” he said.

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Many banks are likely to adopt faster payments more slowly, he added.

Finzly adds new costs, but it dramatically reduces the work required to support separate, legacy payment systems, according to Rengachari.

“Not all banks want to add FedNow right away, but they would like to have the option, so we ask them to start with RTP and they can add other features later,” Rengachari said.

Corporate banking customers are another force driving banks to modernize their commercial and cross-border payments, according to Neil Hartman, a senior partner in financial services technology and innovation at Chicago-based consulting firm West Monroe.

“The banking customer’s experiences with the Amazons and the Apples have really shaped the way they look at all financial interactions, and banks need to catch up. This is an area that is really ripe for disruption, and even in the commercial payments space, banks are getting help from fintechs,” said Hartman.

The upcoming launch of FedNow and new, more flexible cross-border payment options could prompt more fintechs to partner with banks to support faster payments and app-powered transfers, Hartman said.

“Fintechs that work with banks to lift the whole wave of the financial industry through collaboration are going to see strong results as faster payments expand,” he said.

Rengachari says that as banks continue to be rocked by economic shocks and non-traditional rivals chipping away at their revenue streams, faster payments offer a huge opportunity to take back control.

“By working with fintechs to make faster payments more accessible and versatile for their customers, banks can maintain their upper hand in the financial ecosystem,” he said.

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