The evolutionary process of payments in banking has always required early adopters and innovators with the courage to advance to that next point of efficiency and value for business clients. Like all innovation, there is a good deal of trial and error, and in payments, that can prove costly.
Move too fast, and you could overlook some critical aspect of attaining a solid, secure and effective solution. Move too slow, and you may find your windows being boarded up. But if you move methodically and prove your vision at each stage of the process, you can secure both growth and a strong reputation as a financial services leader in the communities you serve.
Avidia Bank, a $1.4 billion-asset community bank based in Hudson, Mass., is one institution that’s thinking strategically about its technological offerings. It teamed up with California tech company linked2pay to serve as an incubation site for the development and deployment of linked2pay’s Bank Centric Payments, a comprehensive payments platform (see case study at end of article).
ICBA Bancard watched this experiment with interest, seeing the platform’s potential to be a simplified on-ramp to the small-business payments space for community banks, helping to streamline community banks’ processes, achieve an almost immediate ROI and provide positive results for both community banks and their customers.
How it Works
“As an industry, many banks are cultivating innovation that builds upon the ACH Network and safely supports small businesses in the payments ecosystem, such as how Bank Centric Payments created an ‘ACH in a box’ solution for small businesses to make ACH more accessible with less friction,” says NACHA president and CEO Janet Estep. “As faster payments such as same-day ACH embedded in well-presented solutions become the norm, having them delivered by community banks is just good business.”
Bank Centric Payments, a single platform for banks, resellers and clients, operates in real time within a secure cloud-based environment. Banks can enroll as a sponsor, originating depository financial institution (ODFI), corespondent or payments services reseller. Payment solution providers can register with a bank to greatly improve upon the traditional merchant services delivery found in the agent bank model.
Community banks’ business clients on the platform benefit from the seamless delivery of card and ACH, giving them a more convenient and affordable way to employ business payment solutions that are faster, safer and more secure than checks. Payments can be accepted or sent via mobile, text, online forms, a virtual terminal or email.
The fintech-hub approach of Bank Centric Payments also enables community banks to compete by gaining early market-ready access to faster-payments innovations like same-day ACH and real-time payments without having to rely on third-party providers for payment solutions. The platform’s payment options enable acceptance of credit cards, ACH, real-time payments, remote deposit capture and cash.
Real-time automation on the Bank Centric Payments platform starts when a business client registers online for payment solutions. The information the client provides is validated and generates a score that is automatically compared with the automated acceptance criteria set by the bank operating as the ODFI. Unlike paper processes, if the customer scores above the minimum threshold, it is approved and onboarded instantly. Business clients that score below the automated acceptance criteria are prompted to provide additional information digitally. Risk-management-enabled forms support and confirm the approval criteria.
“The value of data integrated to a live registration, underwriting and onboarding process is a prime example of how solution providers can bring improved efficiency and KYC [Know Your Customer] elements to financial institutions while enhancing the service delivery for their clients and reselling partners,” adds Bradley Blacker, director of alliance partners and integration at LexisNexis Risk Solutions.
ICBA Bancard is offering Bank Centric Payments as a white-label platform to all ICBA member banks. This allows community banks to work within a risk level they are comfortable with. The goal is for the community bank to be the go-to place for its local business clients to find the best solutions to solve current and future payment challenges.
Now that the platform has evolved and matured, the ROI is attractive for banks of any size. Resellers can break even with as few as three business clients.
“The development of the platform has been a catalyst for bringing together innovative solutions within an architecture that accommodates the advances we know are headed our way,” says Richard McShirley, chief marketing officer of linked2pay. “A great example is how the Enhanced Due Diligence [EDD] built into our client registration serves as the ideal on-ramp for real-time payment solutions from our partners at Push Payments.”
The ICBA Bancard approach focuses on small-business accounts receivable. There are more than 28 million small businesses in the United States, representing 57 percent of the workforce. This market is large and underserved in terms of electronic payments automation.
Widespread ACH adoption is a critical component to small-business payments solutions, since it is more secure than checks. Many community banks themselves don’t originate ACH transactions for their customers because of the cost, and the platform can change that with a significantly lessened risk and cost impact.
In 2015, the board of Avidia Bank in Hudson, Mass., tasked its executive management with building its position in the lucrative payments business. The executive team began the process by providing underwriting as an ACH originating depository financial institution for payments providers. That August, its COO saw a press release about the launch of linked2pay’s Bank Centric Payments solution, and he contacted the company to learn more. After an initial call and follow-up demo of the solution platform, a relationship was formed and the evergreen development of the platform kicked into high gear.
“When we started to venture into payments, like many others, we found ourselves lacking a scalable method to grow our payments business without growing our back office,” says Bart Murphy, executive vice president of commercial banking at Avidia Bank. “The platform solved that problem for us and gave us the scale to extend our reach and automate many aspects of the process for ourselves, our partners and our business clients.”