The Future of Payments is Now: How Banks Can Keep Pace

Jim Marous (00:11):

Hello and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, owner, and CEO of the Digital Banking Report and co-publisher of the Financial Brand.

Jim Marous (00:20):

In this episode of Banking Transformed, we have the privilege of speaking with Jon Budd and Dr. Jorge Jimenez, the CEO and President of Juniper Payments, a PSCU company. The guests provide valuable insights into the evolving payments landscape, discussing the challenges and opportunities surrounding payments modernization, and offering advice to financial institution leaders looking to navigate these changes successfully.

Jim Marous (00:46):

The episode also provides perspectives on the technologies and trends poised to shape the payments industry's future from delivering instant payments to managing fraud, and the potential for alternative payment options.

Jim Marous (01:00):

There's a remarkable transformation happening in the payments industry. While there are a myriad of opportunities and challenges facing financial institutions, there are also multiple solution providers providing banks, credit unions, and fintech firms, and even non-financial organizations with the tools to become future ready.

Jim Marous (01:18):

The question becomes, what is the value proposition for becoming a payments leader? So, gentlemen, before we dig into the challenges and opportunities and payments as we leverage data technology and AI for better customer experiences, can you share a little bit about yourselves, your background, and a bit about Juniper Payments. First, Jon, why don't we go with you?

Jon Budd (01:39):

Yeah. Well, I've been in the industry 20 years. I don't know how far back in time we want to go, but I think it's important to say that I grew up in a small town in Kansas, farming community, and the company prior to Juniper was founded by some folks in that same small town that happened to be community bankers and farmers.

Jon Budd (02:01):

And I think we always take pride in figuring out better ways to do things with the resources that you have at hand. And I was the fourth employee at the original company, prior to Juniper called LendingTools.com back in 2003.

Jim Marous (02:18):

Jorge, how about your background?

Jorge Jimenez (02:20):

Well, I've been in payments infrastructure for about 20 years. I've been working for the Italian Central Bank, the European Central Bank, the World Bank, and the Federal Reserve. And so, I was involved originally when the Euro came into being in Europe, and we had to figure out how we're going to handle that mess and how our financial institutions from different parts of the European Union, were going to talk to each other.

Jorge Jimenez (02:50):

And here I am, in Atlanta and working in Kansas. So, world changes.

Jim Marous (02:55):

Yeah. And even before the hybrid work environment, that's the way many organizations were structured. So, Jorge, what are some of the biggest shifts you've seen happen in payments right now as consumers’ expectations and technology has changed, but also over the last five or six years, which is really a good snapshot on what's the trajectory is right now?

Jorge Jimenez (03:19):

Well, I think that the consumers have been used to using solutions such as Venmo, PayPal, and Zelle and so on and so forth. And I think there has been some friction of the financial institutions, banks, and credit unions actually catching up with that to a certain degree. And so, in fact, if banks and credit unions wanted to see now the amount of money they're losing to those kind of providers, that they would be very, very surprised.

Jorge Jimenez (03:50):

So, I think there is, without a doubt, a trend in the direction of facilitating instant payments that has originated from other countries starting with Europe and even Latin America and Africa. But it takes us in the United States a little longer because we tend not to legislate on these things, but we just kind of try to work on consensus.

Jorge Jimenez (04:14):

And for that matter, I've met with — Jon, I don't know when that was, but maybe it was probably 2014, '15, something like that. And at the time, LendingTools was already in the thick of working on instant payments and working in the direction of bringing the whole financial sector into the instant payments world. So, it's not an overnight thing. It's been like a matter of years and many years.

Jim Marous (04:40):

It's interesting, Jorge, when you talk about payments, I go back further than almost both you combined in the banking industry, and it's really interesting because back in the day when I started in banking, payments was a big part of the banking ecosystem.

Jim Marous (04:54):

And then they slowly let go of things like POS systems and all the things they used to do with vendors and all the ways they used to transact. And yes, they'd offer card services, but they even gave a lot of that away. And in the meantime, they gave away all that transaction data, all this stuff that now is so important overall.

Jim Marous (05:13):

So, Jon, where are we currently in the adoption curve of faster real-time payments capabilities? What's driving the momentum and the implementation curve?

Jon Budd (05:26):

I would say we are ... in fact, I've said this more than once recently, talking about FedNow and instant payments, as Juniper made the finish line, if you will, of July 20th of this year, becoming one of the first certified FedNow service providers along with another about 55 others. That finish line is really the starting line. We're at the very inception.

Jon Budd (05:58):

Now, let's give the Clearing House some credit as well, that product and that service has been around for several years. And even prior to that, the Federal Reserve started the task force of looking at faster payments in the landscape.

Jon Budd (06:11):

And to go back to actually one of Jorge's questions that him and I have some heated conversations about as well, when you look at the adoption curve and what happens in the U.S. and many times we talk about how other countries, even countries that are not that industrialized, are ahead of the United States in some aspect.

Jon Budd (06:30):

Well, the reason why I think they're ahead is there was a lack of choices. So, for example, when you look at how M-PESA and as a way that, it's the mobile phone system has really become the banking infrastructure, because there was no banking infrastructure, there weren't brick and mortar banks, there wasn't internet that everybody had access to. So, as a next best alternative, something else popped up.

Jorge Jimenez (06:53):

In Europe, Jorge, you'd have to remind me how many total banks there are in the European Union, but there's probably way less than there are in about three counties in Kansas.

Jorge Jimenez (07:04):

Oh, no, no, no, no, no. Are we getting-

Jon Budd (07:06):

But what I'm saying is we have 10,000 FIs in the United States. There were 20,000, 20 years ago. And we don't operate off mandate. We operate off enhancements to the rails, to formats. And then those tools now can be adopted by financial institutions.

Jon Budd (07:26):

And this most recent one I think will be a game changer in the long run. There's some big hurdles that we all need to get through, that are all achievable to get over these particular hurdles. But just by nature of how the United States operates and its free market, it tends to be here's your options now who's going to go after and win it and potentially rise to the top based off of service and pricing, and then how we're going to partner with others.

Jon Budd (07:56):

So, I think there's a little bit of a difference between where the U.S. is and others as a result of how many banks and financial institutions we have here, along with how the mandates or lack of mandates come down from the Federal Reserve.

Jorge Jimenez (08:10):

Well, and I would add to that if I may, is that apart from the over 5,000 financial institutions in Europe, that we're not going to get — is the fact that the United States have a financial system that where even though you don't have mandates, you have a lot of trust.

Jorge Jimenez (08:30):

And so, in a full faith credit of the U.S. Government, so today you can go to Walmart, pull out a check, or to Kroger or to Publix, whatever, and just pay for your groceries, and the store will take it. You are never going to be able to pull that off in any other country.

Jorge Jimenez (08:47):

And so, that in itself is amazing and fantastic, the fact that there is that level of trust in the financial system. And so, to Jon's point, there is, when you have market economy and you have innovation to pull forward and win, but where it's not just mandated by the government, things less happening at different way and at different speed.

Jim Marous (09:12):

It's interesting. We as consumers have become more and more used to instant transfers of money with Venmo, Zelle, and others, as well as a lot of things happening almost at the point of the time that we want it to happen across all kinds of transactions.

Jim Marous (09:29):

But when we don't get that, when there's transfers between organizations or when you're trying to pay somebody and it doesn't happen immediately, it's almost disruptive to the consumer. So, what unique challenges do community banks and credit unions face in upgrading their capabilities compared to large banks?

Jon Budd (09:46):

Yeah, and this is an important one, upgrading let's call it the interface to the core processing system. And every financial institution in the United States has a core ledger, credits, debits, got to even this out at the end of the day. And we've operated in a batch environment, for the most part, for decades.

Jon Budd (10:08):

Now, when we get to consumers relying on instant transactions, I think it's important to note it's the perception that it's real time. So, if we all have dinner and then we split it and it's 20 bucks a piece, and we're utilizing an app for a service provider like Venmo, it may appear that that money has in fact changed hands instantly, where it might not settle until the following day, or even a couple days.

Jon Budd (10:32):

What I do know would settle instantly is if I have cash, and I've given you that cash, now I'm done, my part of the equation's done, but not as many people carrying cash now.

Jon Budd (10:42):

So, the hurdle that financial institutions have, particularly the smaller ones, and it's the same with the bigger ones. It is upgrading the core processing systems along with the service providers that can act in a real-time environment. Because the critical component of instant payments as if I'm sending Jim, you money, and both of our institutions are part of this rail, let's say FedNow, then that money needs to be in your account and you can spend it in about 20 seconds, which is phenomenal, good funds.

Jon Budd (11:19):

That means it's in your account. And if you were to withdraw it from an ATM, the second you got it, you've got your funds and you can spend them on whatever you want, versus a memo post or something that says it's pending. So, that's a big change in addition to 24/7, 365 days a year.

Jon Budd (11:40):

Right now, banks and core processing systems and credit unions can kind of go to sleep at night, if you will, a little bit and on the weekends. And that's changing and that's going to have a big impact, positive impact, I think for consumers.

Jon Budd (11:55):

Also, consider the number or types of businesses that aren't open right now on a weekend, I'll use the example of a title company. Well, if you can't receive a wire on a Saturday or Sunday, there's no reason to really be open on a Saturday or Sunday.

Jon Budd (12:09):

That can have an impact. Just having this new rail available has an impact on businesses like that as well. But I think that's what the financial institutions are working towards and budgeting for as well right now is the upgrade in the core processing system, along with the service provider that might be providing that gateway to this particular rail that they need to interact through an API and even potentially an open banking system that Jorge will talk to about later.

Jon Budd (12:40):

But it's a significant upgrade in technology. And with that done, it's going to even provide future opportunities that we probably haven't even thought of yet. But that's the big one.

Jim Marous (12:50):

And Jorge, one of the things that's really interesting in that the last several years, third-party solution providers have enabled smaller organizations do things they weren't able to do before. Because they either couldn't partner with the big guys, or they certainly couldn't build internally.

Jim Marous (13:08):

So, Juniper Payments plays a crucial role in helping financial institutions adapt to these changes, but also provide instant payments. Can you provide an overview of how your firm helps financial institutions become more future ready?

Jorge Jimenez (13:24):

Wow, that's a loaded question. What I'll say is, as Jon was talking about, we've been thinking about instant payments, and we've been managing payments for a long, long time now, just managing the wiring infrastructure, the ACH infrastructure and now the instant payments infrastructure in the United States for thousands of financial institutions in this country.

Jorge Jimenez (13:49):

So, now what we've done is been trying to get ahead of things. We know what's happening, we know what's coming down the pipe. We've been part of the different user groups that knew what was going to be coming to the United States. And also, we've known from other countries what we were to be expecting.

Jorge Jimenez (14:06):

So, we've been developing things ahead of time, we've been developing things knowing what financial institutions should be looking for. And it's not just purely P2P account to account consumer transactions, is as you might know, is what the potential fraud or risk management tools that you need to be put in place, what kind of artificial intelligence tools might be needed in the near future as you're trying to kind of move from a batch process to a real time automated process?

Jorge Jimenez (14:41):

So, that's kind of things have that we've been giving a lot of thought of, because as you very well know, and as Jon was just mentioning, we're used to finding ourselves at 11:00 PM on a Saturday making a credit card payment or to something for our kids' camp or something. But we're not used to doing this on instant payments, wires, ACH, or anything like that, at all.

Jorge Jimenez (15:08):

And so, the question is, as we're changing the paradigm, how is everything changing? I always joke around that in 2017 when the Clearing House basically, came with real-time payment, the first instant payment systems in the United States, that finally financial institutions realized what an iPhone was.

Jorge Jimenez (15:28):

And by that, I mean, is that for many, many years, we have not acknowledged the presence of the internet. We have not acknowledged the presence of 24/7 banking. We have not acknowledged the fact that you can originate transactions on a cell phone, in a world with a lot of financial institutions are taking instructions at the branch. Because they are not allowing for online banking, origination of transactions.

Jorge Jimenez (15:54):

So, what we are going with this is, okay, Juniper's been in this game for 20 years, now, we are taking things to the next level as being part of the pilot for instant payments. And we realized that a number of things need to be in place for a financial institution to provide the services they need to provide to their members and customers. And that's what we do.

Jim Marous (16:18):

So, we hear a lot about payment rails and how they'll bring about changes to the banking landscape. Jorge, how do you see this playing out?

Jorge Jimenez (16:29):

So, it's going to be an interesting … there's a lot of different payments. And so, as we were just talking about instant payments themselves, just humor me for a second. Even when we're talking about ACH, which not everybody knows it as Automatic Clearing House, but they know it as, okay, this is how I get my paycheck in my bank account, or how I get refunds from the IRS.

Jorge Jimenez (16:57):

So, that's typically has been in people's perception a two or three-day process, even though it's a next day process. But the NACHA, the National ACH Association has also allowed for same day ACH transfer.

Jorge Jimenez (17:12):

So, this has not just been the Federal Reserve FedNow process or the Clearing House, RTP. There's other networks ourselves. We ourselves have our own networks for some of those transactions. Other providers have others.

Jorge Jimenez (17:30):

So, what this becomes, as Jon was talking about, exponential ubiquity and ability of the services is going to be about combining and allow me to call it routing transactions by use case rather than by silo. So, you're trying to figure out, hey, I want to do a transaction that is final and irrevocable and as fast as possible.

Jorge Jimenez (17:53):

So, you have FedNow, RTP, Unifunds, FedNow available, what route can I take to get that transaction into place? And that's that kind of transaction. There might be others where it says, well, I don't care for the final irrevocable, I just want it to get there as soon as possible.

Jorge Jimenez (18:12):

So, depending on the specifics of the transaction, because not the whole country is on the new FedNow system, or because they're not on the Clearing House system, you are going to have to mix and match a little bit, on how you're delivering those transactions.

Jorge Jimenez (18:28):

And you need a provider such as ourselves that is able to understand all the different rails and how to route transactions in the best possible ways in the available rails for that specific type of transaction.

Jim Marous (18:41):

So, Jon, can you discuss a little bit about how automation and cloud technology helps to enable future ready payments?

Jon Budd (18:50):

Yeah. I think, well, first of all, we'll start with the cloud technology. So, it's a powerful sky out there with the cloud technology, AWS, Microsoft, Azure, but also as service providers like ourselves, I mean, we operate as a software as a service provider. We host our own private cloud.

Jon Budd (19:13):

It gives you the ability to be nimble and agile and ensure that all of your end users of that particular product are on the same version, for example. We're not having to rely on micro updates or dealing with desktops or dealing with a particular server sitting at a certain location. So, the speed at which you can get to market, the speed at which you can test QA and get things production ready, seem to be much quicker utilizing cloud technology.

Jon Budd (19:45):

And it's also, I think the fear, I don't know if fear would be the right word, but the willingness to adopt it now as it was compared to 15 years ago is completely different. I mean, when I was selling some of our initial products, 20 years ago trying to get someone, a banker, for example, a community bank to use email, like hey, I don't touch email. If I need to talk to someone, I pick up the phone.

Jon Budd (20:16):

If you look at kind of the evolution of that, there's still financial institutions that don't originate ACH, they only receive. The cloud technology helps empower, get them to market, I think in a quicker aspect.

Jon Budd (20:30):

And then automation, looking at what Jorge was even speaking of the routing of particular transactions, I mean, this is typically done with I would call it a wire room. Or you've got the payments hub sitting at a financial institution, which tends to be people.

Jon Budd (20:47):

And this technology by embedding and creating these algorithms in there that can say, okay, well let's look what the different options are if this payment based on the amount and when it needs to be delivered. Well, I don't need to do for example, a fed wire or a RTP transaction because they don't need it until tomorrow, and maybe tomorrow is less expensive than today.

Jon Budd (21:11):

Well, let the computer figure that out, present the option to the user in an automated fashion. And so, it streamlines and creates a lot of efficiencies in the whole landscape.

Jim Marous (21:21):

So, it's interesting when we look at the payment solutions, a lot of third-party solution providers are making headway now because they allow the small and medium-sized organizations to stay on top of what's going on in the payment space through innovation, best in class solutions, best in class service, and things that really outperform traditional providers.

Jim Marous (21:47):

So, Jon, how does Juniper Payments address concerns such as security and staying on top of innovation in the payment space?

Jon Budd (21:57):

By never sleeping, not one iota. There's a phrase many people have probably heard at this point, which is faster payments equals faster fraud. And the fraudsters are always, rather than using their abilities for good, it's made many times used for the wrong reason.

Jon Budd (22:17):

So, how can we create ways to integrate ourselves, man in the middle, whatever it may be, into instant payments, with the knowledge that these payments are final and irrevocable. There's a lot of financial institutions, and I think, Jorge, between you and I and kind of our informal studies, I think we've figured maybe one in five FIs in the U.S. allow their end user, so a customer to get online and originate a wire from their online banking platform.

Jon Budd (22:54):

One in five, maybe it's one in four, something like along those lines. I know my community bank does it. I've got two or three different relationships and none of those, can I originate a wire online, I need to go to the FI, or I need to make a call.

Jim Marous (23:07):

Within their hours and everything else.

Jon Budd (23:10):

Yeah, the reason there's friction in there and tensional friction, and there's also a reason that the cost of a wire might be 15 to $30 depending on the financial institution is once that is sent, once it leaves the door, it's final and irrevocable.

Jon Budd (23:27):

So, if it accidentally went to the wrong person and that receiver of that money took that money and spent it, they actually didn't break any law. And that's a scary concept, especially if it's typically those wires were done with a high dollar transactions.

Jon Budd (23:45):

Now, FedNow and RTP is the same methodology, except I think even less friction is built into it. If you ever look at a wire form, it's a long, potentially complicated template to fill out. With an instant payment, put in the ABA and you get a thumbs up or a thumbs down whether a participant, DDA account number, name, it matches, that money can go.

Jon Budd (24:11):

It's not international. There's certain levels of layers and permissions that companies like us will run it through. So, we want to make sure to the best of our knowledge, it's going where it's destined to go. Making sure that the owner of the account that it's being sent to, the beneficiary is actually the owner of that particular account.

Jon Budd (24:31):

We want to look at anomalies. So, to see that, is this something that happens on a monthly basis, and if so, is it usually the same amount? If it is way greater, maybe we need to put a flag on it and say we need some more eyes on it.

Jon Budd (24:45):

There's going to be a lot of enhanced technology that needs to operate in real time before the transactions leave the door. So, many times today in payments, there's an analysis that happens at the end of the day and says, hey, of all these payments, these you might need to look at again, even though they already left.

Jon Budd (25:06):

And what needs to happen is more preventative technology and Juniper, and we're partnering with other companies as well that might risk store that transaction. So, before it leaves the financial institution and gets on that instant rail, that high speed tool, let's have as much confidence as we can have that the information is correct and it's going to the right place because it can be next to impossible to get that money back, if you will.

Jon Budd (25:32):

So, a lot of our capital R&D is going into fraud compliance and making sure that we can offer a confident product.

Jim Marous (25:42):

So, it's interesting, Jorge, a lot of what's going on in the payment space is being driven because of the consumer centric expectations that we're all trying to address. We're trying to make it as easy as possible for consumers because they get that in other areas of their life. What are some key customer-centric trends that you've seen in payments that financial institutions really today should prioritize?

Jorge Jimenez (26:07):

Well, as we were just talking about, creating an easy way to do account to account transfers, be it P2P or P2B, or B2B themselves. And I'm going to get to that in a second here, is going to be critical.

Jorge Jimenez (26:25):

And I'm going to play devil's advocate for a second, as we all talk about Venmo. And the funny thing about Venmo is that in essence is as if everybody opened an account with Bank of America. And so, everybody now has an account with Bank of America. So, there's no innovation there other than the fact that you do an internal transfer between that specific financial institution.

Jorge Jimenez (26:48):

But what people forget is the friction that is associated with getting the money in and out of Venmo. And there's a lot of people who are very frustrated on how that plays out and the cost associated with that and everything else.

Jorge Jimenez (27:00):

So, creating some P2P, B2B solutions in which you are able to move funds between financial institutions in real-time is going to be critical. I think one of the examples that we see in the use case beyond the pizza, beyond the poker games and everything else is, we see it a lot is if you are a financial institution and you want to do loans and you want to provide funding to an auto dealership on the weekend, how do you do that?

Jorge Jimenez (27:29):

And so, that creating these real-time systems is paramount in that direction. So, the banking needs to catch up to what has already been happening in the United States with some private sector solutions, as well as what has been happening in the rest of the world. If financial institutions want to stay relevant, because we have seen how credit unions have been consolidating even community banks that the number of financial institutions keeps going down on the one side associated with the cost of compliance.

Jorge Jimenez (28:07):

But on the other side, the trying to make sure that you have solutions that keep you relevant and competitive. And so, that's kind of one side of that. And yeah.

Jon Budd (28:19):

Yeah, I was going to add to that Jorge, as well, on the customer expectations. So, when you've been doing what we've been doing for so long, you're going to get calls and texts from family and friends and they want answers, how does this work? Why does it work this way?

Jim Marous (28:33):

Or why doesn't it work? Yeah.

Jon Budd (28:36):

Why doesn't it work? What's going on with inflation? Can you tell me what Jerome Powell ... no, I don't have that quite access guys, but with payments, I have a decent idea.

Jon Budd (28:46):

But a common one has been why is it take so long to move money from an account to account? So, an external account or an internal account to an external account. So, what's driving these high yield savings accounts? So, now you can get 5% on your money. When's the last time it could do that? 10, 15 years ago?

Jon Budd (29:04):

If your money's sitting in Venmo for a few days in a wallet, you don't have access to it. All of a sudden float means something. We haven't heard the term float in a long time because there hasn't been any float, or the float has been meaningless when interest rates are zero.

Jon Budd (29:18):

And yeah, and my answer has been, especially when you're opening a new account, again, it's called smart friction where that bank or credit union's going to do everything they can before they accept that deposit and confirm it, that you're not a terrorist. It's not for bad reasons that everything's are lined up.

Jon Budd (29:36):

And it typically takes three to five days right now. And I think that's going to be a very quick use case that'll be adopted, is moving money between institutions and installation.

Jim Marous (29:47):

Well, my personal example and my banking example is that my small business bank and my personal bank are both top six banks. They don't talk to each other. So, what do I do twice a month? I take this thing and I write a check to myself to be deposited elsewhere.

Jim Marous (30:04):

And I thought, well, maybe I'm missing something here. So, I go into my financial institution and find out that yeah, that's the way you have to do it. You have a small business. We don't allow the direct transfers if it's a small business going to personal account.

Jim Marous (30:15):

And there was one day that I even transferred within the organization that took a day for the transfer, and I go, I understood that because I'm a banker, so I know what goes on there as far as what you process first. But the whole transfer between institutions is hard to absorb when everything else is so fast.

Jim Marous (30:35):

So, Jorge, we referred to it earlier, open banking and API solutions, they're gaining traction. So, how does Juniper Payments navigate the open banking landscape and what benefits can financial institutions derive from actually embracing open banking?

Jorge Jimenez (30:54):

Alright, so I will throw a little definition at you because I think it's important as people understand it. To a certain degree, I feel it's kind of like the second episode of a movie, you have the instant payments is the first one, and open banking is the second one.

Jorge Jimenez (31:11):

So, we started with instant payments in 2008, and then we're starting with open banking in 2018 in Europe. And so, what it is when a service provider — it gets access to consumer banking transactions and financial data through the use of APIs, application programming interfaces.

Jorge Jimenez (31:35):

So, financial institutions hate this, hate the fact that there is somebody who has access to their financial information. And that's kind of something that is being required again by legislation in Europe, in United States, not so much, is more by agreement.

Jorge Jimenez (31:52):

But you are seeing that more and more. In fact, that happened the other day to me personally, I was like, alright, my credit card provider, I need to pay this credit card, I need to set up a new account where I'm paying from. And so, typically, you write the name on the financial institution, the routing number and the account number, end of story. And then it gets set up.

Jorge Jimenez (32:14):

So, what happened this time instead is they wanted to know which financial institution I was going to pay from. What's the user of password for my online banking for that financial institution, and what is my security code that I just received for that. So, it's like, that's a different way to set that up. So, that's happening now.

Jorge Jimenez (32:35):

Another situation where that happens is you might be banking with a financial institution like a bank or credit union, and they say, okay, this is the accounts you have with us. Would you like to add other accounts that you might have at other financial institutions? You have more of a comprehensive vision on that.

Jorge Jimenez (32:52):

And so, yeah, so you enter your user password for that financial institution, online banking provider situation. So, all of a sudden now you have the whole visibility of your financial situation at that one specific financial institution. So, magic.

Jorge Jimenez (33:06):

But what's happening is to a certain degree, you have fintechs that are helping financial institutions get access to that information. Not to point fingers, but sometimes it's hard to get your core provider to collaborate if you are a small financial institution.

Jorge Jimenez (33:28):

And sometimes it's easier to pay somebody to break in your own house than it is to have access to the key. So, this solutions such as Plaid for example, that you might have heard of, are those which are capitalizing on open banking solutions.

Jorge Jimenez (33:48):

So, we ourselves as Juniper are taking pause and capitalizing on those type of technology as we're looking to access multiple cores. So that, as we are in a situation where we need to connect to multiple counterparts, we reduce the amount of work we might need to do.

Jorge Jimenez (34:08):

So, open banking is something that we are also utilizing ourselves to facilitating bank implementations of instant payments and otherwise.

Jim Marous (34:17):

So, we're going to ask the last two questions of both you. So, I'm going to start with you, Jon, looking ahead three to five years, now I'd even go from now for three years because five years seems to be a long time away, what excites you most about the future of payments in banking?

Jon Budd (34:34):

I think in three years, my workload might be a little bit less right now. So, okay that's just personal.

Jim Marous (34:40):

But that excites you.

Jon Budd (34:42):

Oh yeah, it sure does. Yeah, absolutely. A personal experience, which is a real-life experience, which everyone will have a few times a year or we'll see how it's going to be. But I think a good one is if you're buying or selling something that has, let's say decent monetary value, maybe a few thousand dollars. Maybe it's a lawnmower.

Jon Budd (35:06):

An example I used recently is I bought a couple dirt bikes for my son and I, and let's say you're buying those from a private seller. Right now, if you're buying, you're making a private transaction, maybe it's Facebook marketplace, maybe it's some other site. Before you hand over those keys, you want title, before you're going to get title, they need good funds.

Jon Budd (35:28):

And right now, it's either cash and I don't recommend people walking around with a briefcase full of cash, or it's a wire, which is the other option right now, or third, a cashier's check. And if I asked any of my younger siblings, by the way, how those work, they wouldn't even have any idea how those particular things-

Jim Marous (35:47):

Or what they were, in some cases, a cashier's check.

Jon Budd (35:51):

Right. And as an example, one would be if I'm selling something and I'm on my phone and I'm like, alright, you owe me $1,000 for what I just sold you, and I can refresh my phone because I'm in my online banking app at the time, and both of us are again, a part of that FedNow or RTP rail or both, that as soon as I hit fresh, I drag down and my account refreshes. I can see that that money's in my account and it's good funds.

Jon Budd (36:21):

And when I say three now, is that available today? Yes. But in a very limited case, because the number of enabled institutions is low. Three years, the likelihood of that happening is going to be way higher as more adoption has occurred. And I think that's just a refreshing transaction that's going to be available to the market as an example.

Jim Marous (36:42):

Jorge, what excites you about the future?

Jorge Jimenez (36:45):

Well, I am excited about the possibility of smaller financial institutions being more competitive by having the instant payments capabilities and 24-hour processing capabilities, they're in essence becoming a big share branching mammoth that is now able to connect to every fintech in the world and every fintech in the United States and provide services and move beyond just deposits and loans.

Jorge Jimenez (37:20):

And I think that that needs to be recognized and that really is — float, interest and everything that is absolutely what financial institutions do. But I think we all recognize with all the different payment channels and Netflix and this and that, that we all want to have our life a little easier.

Jorge Jimenez (37:39):

And I think the ability for financial institutions to collaborate with fintechs and kind of facilitate and use their charter to make things happen, and create this, this amazing countrywide app store of financial services, that I think is a very exciting proposition to create a healthy and diverse financial infrastructure in this country.

Jim Marous (38:06):

It's interesting, and I'm going to go one step further, and I would just like to see uniformity of experience. So, the fact that I could go to one of my financial institutions, I can easily transfer money to the same organization. I can't do it with my primary banking relationship.

Jim Marous (38:22):

I want to see some uniformity. I don't want to have to get surprised by the adverse situation. Now, that maybe makes it so every finance institution feels alike, but there's other ways I want to differentiate besides the actual transfer of money and in the value transfer.

Jim Marous (38:41):

Blockchain allows some of this to happen, but so does the technology that you provide. So, as the last word, Jorge, one thing I want to find out from both of you is what initial right now advice would you offer to financial institutions as they try to become more future ready?

Jorge Jimenez (39:01):

Well, obviously as you can imagine, both Jon and I, live and breathe payments and payments innovation. So, I would say, don't take our words for it. Just go into your system and figure out how much of your deposits have moved to Venmo and so you can see how important this is for you to innovate in this direction.

Jorge Jimenez (39:28):

So, do that and make sure that you are given the right strategic importance to the user experience innovation. So, that would be my advice.

Jim Marous (39:39):

That's a great thing to look at because if you can evaluate the flow of funds, be it from PayPal or Venmo or any of the other payment in interaction devices, you really find out how much people are making their own decisions on who to partner with. Jon, what's your recommendation for financial institutions today?

Jon Budd (40:03):

Well, one thing that comes to mind, I don't know if you remember the movie Say Anything, Jim or Jon Cusack, there's a guy that kept trying to get the keys, and he grabbed them finally. He was like, "Just chill. You just need to chill."

Jon Budd (40:15):

The reason I'm saying that, I'm not saying all the bankers and smaller financial institutions need to chill, but there's been a message over the last several years that if you don't adopt this day one, your members and your clients might be running for the hills.

Jon Budd (40:30):

They're not. They're not. There's a lot of education that needs to come from the top down. This isn't necessarily a grassroots effort to have faster payments. I think there's always a grassroots effort to have more transparent payment and actually see what's going on behind the curtain.

Jon Budd (40:47):

But I would say that certainly now is the time to be planning ahead and budgeting for this type of innovation, because it will have some disruption. And really talking to the members and the customers that may be coming in, or whether it's through some creative online surveys, what would you like to see from our institution? How important would this payment, if it could clear in this period of time be to you, they might be surprised on, I didn't even know that didn't happen today.

Jon Budd (41:18):

But additionally, and I want to focus this on the smaller financial institutions, that right now, this innovation causes disruption. When you have disruption, you have new products that float to the top and create opportunity. And I think right now is a great one for smaller community financial institutions to attract small businesses.

Jon Budd (41:39):

And these new payment rails and options are great services that can be offered to small businesses. I mean, 95% of all businesses in the U.S. are 50 employees or less. And a lot of them can't afford sophisticated cash management tools or access to the online banking system or to the Federal Reserve in a cost-effective way.

Jon Budd (42:04):

And I think that's changing. And so, I don't want to lose sight of the community financial institutions remembering to serve those small businesses in their local towns as well. And this is going to help.

Jim Marous (42:14):

Gentlemen, thank you so much for being on the show today. It's interesting, Jon, you mentioned that don't think the sky's fallen if you don't implement right away. But on the other hand, be willing to embrace the change that's happening.

Jim Marous (42:28):

For me, at least in going around the industry, it is interesting how many smaller institutions have embraced real-time payments more than the bigger ones. The ability to embrace change, to look at things differently, to realize where as it was said to last week, I was up in Toronto, they said, "Go where the puck is going, as opposed to where it," is it Wayne Gretzky termed.

Jim Marous (42:52):

I might have botched it up a little bit, but the reality is, this is an area you can do that. And what's really nice is we have third-party solution providers such as Juniper, that can help them get there.

[Music Playing]

Jim Marous (43:03):

And you specialize in this area to such a degree that organizations don't have to relearn 80% of what's going on out there. They can find a partner that's going to get them there. So again, gentlemen: Jorge, Jon, thank you so much for being on the show.

Jorge Jimenez (43:19):

Thank you.

Jon Budd (43:19):

Thank you.

Jim Marous (43:21):

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. We appreciate the support we've received to make this endeavor a success.

Jim Marous (43:30):

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Jim Marous (43:36):

Finally, be sure to catch my recent articles on the Financial Brand and check out the research we're doing for the Digital Banking Report.

Jim Marous (43:43):

This has been a production of Evergreen Podcasts. A special thank you to our senior producer, Leah Haslage, audio engineer, Chris Fafalios and video producer Will Pritts.

Jim Marous (43:52):

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