Hi guys welcome to the Fintech Coffee Break I’m your host Isabelle Castro. This week I shared my coffee break with Craig Ramsey, Global Head of Real-Time Payments and Banking at ACI Worldwide.
With the FedNow Network launching this month, real-time payments are front of mind. ACI Worldwide is a real-time payment solutions provider for businesses and was part of the FedNow Pilot program that was launched in early 2021.
I spoke to Craig about their experience, what he expects the impact of FedNow in the US to be, and where it will fit into the global ecosystem of real-time payments.
Isabelle Castro: 0:01
Hi, Craig, how you doing?
Craig Ramsey: 0:43
I’m great. Thanks.Good morning, Isabelle.
Isabelle Castro: 0:45
Good morning.Nice to have you on the show.
Craig Ramsey: 0:48
Thanks for having me here.
Isabelle Castro: 0:49
Um, so to begin with, I want to start with our opening question, what gets you up in the morning?
Craig Ramsey: 0:57
Oh, wow. We live in just such a busy world. It’s that thirst for knowledge that really excites me. Every day as I wake up, literally, I’ve already got activity and interest of what’s been going on in Asia Pacific overnight, I’m based in the UK, we move rapidly to the Middle East, through Europe. And then, you know, to close off the day, we’re on the east and the west coast of the US. It’s it’s such a 24/7 world that we live in. And I think when you think about payments,the industry that I’m in, on the face of it doesn’t actually strike you as something that’s so super exciting. But actually,I think you could challenge any industry to come up with more innovation on a daily basis,more countries doing brilliant things with with payments for consumers and merchants, new ways to engage customers, we’ve got digital currency, we’ve got central bank initiatives, just the amount of change is really what gets me up in the morning and just seeing that develop through to actually benefiting people on the ground consumers financial inclusion. I think it’s such a dynamic industry that we work in.
Isabelle Castro: 2:13
Yeah, I agree. Payments, it seems like the whole sector is doing something new every single day. Almost half of what I report on is payments. And for you that you work for the global economy. It must be even more fast-paced. So tell me about your journey to ACI Worldwide.
Craig Ramsey: 2:39
Well, it all started in the mid 1980s as a as an apprentice, essentially to the Lloyds Bank, IT department in London. And it was actually here at Lloyds that I first came across ACI as Lloyds were ACI as first customer in the UK to deploy base 24 And and back in the late 80s. We were just developing debit cards and even ATM usage was still fairly new.So ACI provide the base 24 to Lloyds Bank, and I was part of the team that was busy deploying that for the customers. And I still remember back to the big launch parties of when those debit cards first went live in the late 80s. But just as I really started to get to my wings at Lloyds, I also moved on to cash management projects, and home banking solutions. So we’re already starting to see some real innovation even even back then, within how banks were engaging with customers and merchants. And it was exciting to see after Lloyds I moved, I moved to a company called NDC based in the US, which actually later went on to form global payments. And I was there for about 11 years since 2000. I’ve been at ACI supporting corporate and account to account payments.And then I took a leadership role at ACI to really drive their real time payments initiatives since around about2010 2012. Since then, delighted to see that that’s been a very successful business at ACI. And we’ve moved the business forward now to being live with customers in 17 Different countries supporting 25 different instant real time payment initiatives,and has really accelerated ACI to be the leader of leading provider leading provider of real time payments across the world. And I’m delighted to stand here today as head of real time payments at ACI.
Isabelle Castro: 4:44
Yeah, it’s a great accomplishment. Why did you focus on real time payments in specifically?
Craig Ramsey: 4:51
You know, it was it was quite obvious that the payment systems that existed for accounts for account payments Were not the hotbed of innovation that we were seeing around the world RTGS payments,although were were very dominant was still limited to business hours, essentially, ACH payments were, in some jurisdictions,especially in the UK will take three days to settle. You know,and it was when you look back up, why does it take three days to settle in the UK, I come back to one of my favourite facts in the whole wide world. And the reason it’s three days in the UK, was because that’s how long it takes you to ride your horse with the paper instrument, from the farthest reaches of the British Isles to central London.And for me, that was no way to,to run a modern economy, quite frankly. So there was initiatives underway to replace,and not to replace, excuse me to supplement ACH payments in the UK, with alternative faster ways of making money, and moving money, excuse me. And then that’s what’s was, was what really resonated with me. If I was thinking about how I was,you know, interacting with, with things like Amazon and stuff, I,I was able to see where my parcels were, and what was happening to them. Why couldn’t I do that with my money? Why could I not get something moved instantly? Why? Why was it taking so long to move? I remember asking years ago, and I’ve learned the error of my ways. Years ago, I asked one of my sons to go find the chequebook in the office. And he just looked at me as if I had six heads, he just couldn’t do what the earth you’re talking about. And then I explained checks to him. And suddenly, I was even more archaic than he thought I already was with that method. So I was excited to see that the progress of change of digital payments. And it was quite clear that something that moved money faster, was a revocable was in most cases cheaper to use, and gave kind of the instant information and therefore that instant gratification around a payment.That was quite obviously the way forward. And that’s why ACI invested heavily back in real time payments, and why we’ve made it such a key area for us to focus on not just the movement of the money, but also the Overlay Services that surround those, those new ways of moving money to give customers merchants and corporations a phenomenal digital experience around moving their money faster and more conveniently for that.
Isabelle Castro: 7:42
No, absolutely.It makes a lot of sense. Well,in the US, they’re still kind of, in some places three days,kind of moving times for money.There’s still use of checks quite a lot. Compared to UK. I’m used to UK. So that jumped out to me. But they are introducing FedNow soon. And you guys have been involved in the pilot project. That’s correct. Yes.What are the major insights that you have from being part of this pilot programme so far?
Craig Ramsey: 8:24
So yes, we joined the FedNow pilot, just over two years ago, and we’re excited to see FedNow will launch to production in July 2023. And it is a big step for the US. Now let’s be very clear, the US has already got a Clearing House real time payment network. And in some people refer to Zelle also, as a real time network,there’s a whole other conversation about whether it is or it isn’t. But there are ways of moving money faster in the US. But those don’t always happen through banks, we often see digital wallets take the money out of the banking system,essentially, and move it within the digital wallet rather than within the banking system. Which obviously banks don’t want to see, necessarily because that means that they don’t have the information on the payment. They can’t support customers in the payments. And of course, they’re essentially their customers are then doing financial transactions outside of that which which they don’t want they like nice sticky customers within the system. So we recognise that the US was going to be no different to anywhere else. Yes, it was behind other countries adoption of Faster Payments. And even with the clearing house and Xcel initiatives, there’s still more room to grow in the US as we see more consumers and urgence looking for alternative ways to pay that using a cheque, or cash or a digital wallet or things like that. The Fed were very excited to see a pilot. They recognise that not only did we have a phenomenal US business and reach to banks, and merchants and billers in the US,but we were also able to bring that experience of what we’ve seen as we’ve supported other central banks around the world as they look to bring their own instant payments, their own real time payment networks,domestically. So we were a keen supporter of the Fed now programme and still are I myself, I’ve just been told that I’ve been a awarded, if that’s the right word, that the label of a Fed now pioneer for the Federal Reserve, and I’m pretty excited about that, because I may be the only non US citizen that is that I don’t know. But we’ll see. But certainly, we’ve been very keen to support the Federal Reserve, in the FedNow programme continuing decades of support with the Fed. Because part of the other part, another part of the business that I look after is our RTGS payments or wires as they refer to them in the US and still to this day,ACI supports banks to the point where around about two thirds of all wire traffic passes through the ACI system in order to get settled. So we’ve had a long, a few decades of support with the Federal Reserve, and therefore adopting and supporting fed now was an obvious path for us.
Isabelle Castro: 11:43
I’m actually quite glad that you brought up the clearing house, because I believe that the adoption of the Clearing House wasn’t fantastic.People adopted it, but it wasn’t kind of the adoption that you’ve seen in other areas around the world. Do you think FedNow will be different to this? Do you think it will have more adoption? And if more, why will it have more?
Craig Ramsey : 12:09
I think what we’ll see with FedNow is more of the smaller financial institutions that credit unions that I’ll use the label and I hope it doesn’t offend anyone, but almost the the tier two tier three banks in the US adopting it, because they want to be able to compete with the larger tier one banks, who,who are also the clearing house customers, you know, I want to go on record. Now, this isn’t anything against what the clearing house of the clearing house have done a phenomenal job bringing a modern real time payment network to the US. But the US is a big place. And it has you know, over 10,000financial institutions 1000s of credit unions. So to reach everyone, it’s hard. And fed now will help support that growth in the US of instant payments, it will enable the smaller institutions to compete with the larger financial institutions who essentially have a branch next door. And I think that’s that’s where fed now will be very successful as it is supporting those institutions that want to offer great products and services to their consumers that, that they’re used to only seeing in the larger banks. I think that’s a key key driver for it. The other thing that we must see, though,to be successful in the in the US is something that’s still missing. And that is actually interoperability between the two networks, I think we we’re gonna, we’re gonna see the US held back without interoperability of the networks so that, you know, as a consumer, if I’m in the US making a payment, I don’t want to worry as to whether my, the Bank of my customer, the bank of the person I’m sending the money to is, is on the Clearinghouse network or the Fed network, that that’s just awkward. So, you know, one of the things that ACI are doing and recognise that others are doing it too, and some of the financial institutions are doing is offering support to both networks, to try and take that pain point away from consumers.So we’re gonna see heavy adoption of real time payments,network support. It’s gonna take a few years, I think, to see the kind of growth of instant payments that we’re seeing in other countries, where, you know, in some countries, in some jurisdictions, we’re seeing instant payments being mandated by the central banks or the government. I don’t think we’re going to see that in the US.That’s not the US way of doing things. So it will be pure market forces that drive adoption of FedNow. But those market most those market forces CES will be strong, with consumer and merchant demand for new and faster ways to pay.
Isabelle Castro: 15:08
There’s obviously you mentioned Zelle,there’s other real time payments fintechs. What do you think will be the effect on these fintechs that are already existing in the ecosystem? And will continue to exist, but will have these other very significant real time payments systems, in the banks in the small banks? And how are they going to compete? And do you still think they have a place within the ecosystem
Craig Ramsey: 15:42
Fintechs are probably the one of the most important players in the payments ecosystem. They and they don’t all necessarily need access, direct access to the clearing, and settlement networks such as such as the Fed now or clearing house, we do see that happening in some places in Europe, in the UK, we see, for example, the government and the authorities directly encouraging direct connectivity by fintechs,into the networks. But that’s not I don’t think that’s necessarily the the critical point here. fintechs are the place of innovation for customer products. And I hope my customers don’t take offence to this. But banks can’t always be the only sole source of innovation. So it’s important that we embrace the fintech community, and the propositions that they bring to market.Because that’s where we will see the innovation and the growth of instant payments. The way I liken it, I use the analogy around, you know, building train tracks rooted in the railroads,in the 19th century, there was a race to build, train tracks that join day to be places a to b.But those, those rails did nothing for anyone until someone built the train services and the stations and the coffee carts and, and the carriages and the freight services on top of them.And it’s exactly the same with payments. What we’re seeing with fed now and from the clearing house and and over 70 countries around the world is countries establishing a new way of moving money in this instance, from A to B, so they’re establishing the rails. But it’s only when someone brings the innovation on top of those rails, in this case, the FinTech community, do we actually see the growth in instant payments happening, and it doesn’t necessarily mean that they need to be the ones that just that final message transfer into, into the clearing and settlement mechanism mechanism that could be a bank that can still be a bank, and banks should be working with fintechs to bring that innovation to the ecosystem genuinely, in my opinion.
Isabelle Castro: 18:09
Okay. And well,in some of the conversations that I’ve been having about fed now with other people, there was this concern that perhaps the banking system isn’t ready,because they’ve got all these legacy systems, which need to be kind of like, incorporate these new rails. Do you think the banking system is ready? Are they going to have to go through quite a lot of upheaval? And is it worth their while to do so
Craig Ramsey: 18:39
it’s more ready than it used to be for sure. And there are always places that every financial institution should just make sure that they can operate in a new 24/7 world of payments. Now, that’s not to mean that every payment instrument has to be 24/7. So although you may use fed now24/7. If you’re supporting corporate based payments, and offering a product to that corporate as a bank, offering that product to that corporate,that provides the additional governance and controls that they’re used to seeing on wires,then just continue to do that doesn’t mean you have to do it at 3am in the morning. If the network’s available, you may offer p2p payments, more consumer retail like payments24/7. And that’s fine, too. I think it’s all about the choice of how you choose to engage with FedNow, that said, there is enough technology from providers like ACI that can also protect your back office in this 24/7world. Because if there’s a big technology overhaul in the back office, that may be holding some banks back from adopting instant payments. And it doesn’t need to, there are ways that we can manage the ecosystem to provide a 24/7 service to customers,their customers, whilst protecting their back office from that. And as I said, I think it’s a lot better than it used to be. If we think back just 10 years, many banks didn’t have 24/7 core banking systems.Many were trying to shoehorn payment types into their core banking system. But most modern banks have recognised that they need to separate the payments processing from the core banking. So the as the payments,regulations and rules change quite dynamically when a new scheme like fed now first launches, they’re actually able to just focus on the payments processing separately to having to retest their entire their entire core banking system as well. So I think there are ways to make even the even a bank that’s got no 24/7 capability support fed now, and the Clearinghouse real time payments, and Zell to provide those great products to customers.
Isabelle Castro: 21:12
Okay, great.And another concern that has kind of come up in my research is the issue of fraud. These are instant payments, you can’t take them back. How are we? Well, how are businesses going to protect customers against fraud and themselves as well?
Craig Ramsey: 21:33
Yes, so they’re instant payments in the same way as cash is an instant payment or slightly less convenient instant payment, in my opinion, but it’s still an instant payment. And of course, the the fraud that seems to be hitting or impact in many real time schemes, is authorised to push payment AP fraud, where if you look at the payment itself, it’s it’s actually not a fraudulent payment. The payment as it stands is a perfectly fine payment. It’s the circumstance around the payment that’s fraudulent, it’s a it’s a scam,as opposed to being a fraudulent payment. So it’s important that banks apply risk scoring to their transactions, which by the way they’ve been doing for decades with credit cards, and debit cards. And we’ve been providing those services. And one of the things that we’re launching with our own fed now support is built in risk scoring of every transaction incoming and outgoing. We believe that that’s critical to providing consumers and merchants and corporations with confidence around using a new payment type.Because unfortunately, when anything new is launched, it’s also a target for fraudsters and scammers, because they will, you know, they will play on a lack of education by consumers of the new payment type. And that’s when that’s when customers are most at risk. So it’s critical that appropriate risk scoring is added to to the FedNow processing. And that will help protect consumers and give them the confidence to use the payment type again.
Isabelle Castro: 23:16
Sounds great.You guys at ACI did a recent report on real time payments around the world. It was a great report. It said in the report that the sector is about to embark on a new phase of growth.Tell me about this growth. And what does this mean for the wider economy?
Craig Ramsey: 23:39
Yes, we’ve been publishing now Prime Time for real time report now for four years. And we’re actually working on what next year’s report looks like at the moment.And we originally started because there was a general lack of information in the in the industry, around growth rates and different use cases and different reasons why people were using real time payments in different countries. So we decided that we would embark on some of our own research. And we worked with global data, who some of the data for us. And now the report covers over 70countries providing insights into why our country has been successful on real time payments, and it’s a freely available report, we don’t charge for it. We believe the more knowledge out there and more educational real time payments, the higher the growth.So it’s available on ACI website completely free of charge. One of the things that this year’s report highlighted was that by2027, around about 25% of all electronic payments globally would be instant real time payments, wow. Which is a huge growth compared to where we are now. Of course, that differs in different countries. So places like India It will actually be around about four fifths, four and five transactions will be an instant payment. Because they’ve seen such growth in India, and places that Brazil, that we’ve seen merchants, consumers,everyone engaging in the real time experience. And that’s driven huge growth. It’s in,it’s even evolved financial inclusion in those countries to drive more of the unbanked community into the banked world and the provision of financial services to those customers. So we’re very excited about what it why there’s a growth or sorry,the the amounts of growth, but of course, it still comes back to why. And that is due to the benefits to the to the customer base, whether I’m a consumer wanting to move money instantly between friends or family or pay a bill or a merchant looking at ways of accepting payments cheaper and more conveniently than needing to stand up a credit card on a website or even in store, for example, or corporations looking to manage their own liquidity by making payments when they want the payment to be sent and arrived at their, their supplier, rather than having to send them in three days earlier, or send a batch file or, you know,whatever the way is. So we’re seeing those, those use cases,driving that growth back to those those freight cars and the passenger services on the rails.There’s more and more of those happening, which is generating more reasons to use the rails in the first place.
Isabelle Castro: 26:38
Okay, great.And where does the US fit into this? Do you think
Craig Ramsey: 26:45
Catching up and catching up rapidly, okay. They I have worked in the US now for decades and have many, many US colleagues and friends. And they’re the first to tell me that the US is, is typically not an early adopter of new payment types. And we’re also pretty bad in the US is shutting down old payment types as well. So there’s a long list of support required in the US. But real time payments won’t replace everything overnight in the US it’s I’m not going to suggest it would do despite my my best intentions. But credit cards and debit cards are a widely used in the US they have incentives attached to them that are funded by our interchange, which real time payments won’t have so merchants or need to find different ways to incentivize customers to use or an instant real time payment versus a credit card. And that can be done through loyalty points and discounts even at the point of sale if they choose a cheaper payment method for the merchant.Checks are still used although decreasingly cash is still used to low ever decreasingly I,myself, I travel to the US quite regularly. And I don’t remember the last time I carried cash,the only time you need to carry cash in the US is probably for tips or hotels and things like that, but just a few bucks in your pocket. But I notice where that cash economy in the in the UK, buskers on the underground accepting cash, they don’t they don’t take cash anymore, they expect you to tap a card and walk away. So I think it’s only a matter of time before we see something similar in the US. The US is catching up for sure. But existing payment types, credit cards, ACH transactions, they have their parts of play in the financial ecosystem in the US.Ach in particular, has done some phenomenal innovations around same day Ach, which is which means you’ve got a super cheap payment method, ultra reliable.Customers, corporations know how it works. And therefore it’s going to continue to do probably the lion’s share of account to account payments in the US for for some years to come.
Isabelle Castro: 29:13
Okay. What’s your advice to financial institutions going forward preparing themselves for increased real time payments?What should they be doing for the next year to five years?
Craig Ramsey: 29:29
Well, I’m going to strangle that analogy as much as I can, the train is leaving the station. Either get on it or be left behind. So there is gonna be a land grab. There’s always a land grab when real time payments launch in any country.And so in the US, it’s not going to be any different. There will be consumers and corporates will say I expect modern digital services from my financial institution. And that’s why the smaller banks are so excited about fed now because they see that their path To compete, head on with some of the larger financial institutions. So they,they want to offer those services to customers, because customers want those services.And if a financial institution doesn’t provide those services,the consumer will go elsewhere.And we’ve seen that already in the US customers adopted Venmo very strongly until Zelle was launched by AWS and the banks.And now Zelle is is, you know,considerable, considerably stronger payment type now than Venmo. As turned out to be, and that’s because they tackled it and offered the customers what they wanted. So if ACUs if a bank isn’t already considering its journey on how it will not just receive instant payments,but how it will support its customers in sending instant payments, they need to start,talk to us find out how to do it and get ready for that. Because if you don’t, if you don’t have a strategy on instant payments,I can assure you your competitive financial institutions are getting a strategy, and you’re going to be left behind. And we used to, I used to talk internally with my team. What is the business case for instant payments? It’s very simple. The business case for instant payments is staying in business, you’ve got to remain relevant to what the the services your customers want.
Isabelle Castro: 31:28
Okay, so it’s being current and playing the long game kind of thing.
Craig Ramsey: 31:33
And it’s a lot less expensive than you think it might be. So it’s either get on board now or be left behind.
Isabelle Castro: 31:39
Okay, cool.Okay, great. So we are getting to the end of the podcast episode. So I’ve only got a few more questions for you. This time, I’m turning the focus on to you. So first of all, what’s your favourite quote?
Craig Ramsey: 31:56
Oh, gosh, you know, I’m I’m absolutely appalling. That stuff like I went, I did English back at school. It’s best that we don’t discuss my mic grades on that. I think so. So quotes are not something I’m very hot on. I have to admit I had a, what I like is a nice inspiring quote.Something that I can kind of read between the lines and interpret it, however, I want to interpret it.
Isabelle Castro: 32:24
Nice. Yeah.Yeah, I put you on the spot. So I know. Just out of the blue.
Craig Ramsey: 32:30
briefing on that one.
Isabelle Castro: 32:32
Sorry about that. I’ve got a curveball question. That was not your curveball question. If you could invite someone to dinner, alive or dead? Who would you invite?And why?
Craig Ramsey: 32:49
I think the obvious answer is always Winston Churchill, though I’m led to believe he was an absolutely appalling dinner guest not not hesitating to speak his mind.But actually, I love that I love someone that’s just completely honest and will speak their mind. And you know what you get there? And truth is everything.
Isabelle Castro: 33:10
No, I agree. I agree. It can be quite jarring. But it is in the long run better for sure. So how can people get a hold of you your personal self or ACI?
Craig Ramsey: 33:25
You know one thing I pride myself as in keeping in touch with people so can always send me an email directly at Craig.Ramsay@ACIworldwide.com.The ACI website is a great source of information. And you can find me on there too. We have the social channels out there. I’m on LinkedIn and Twitter as you might expect, and I’m sufficiently old that you won’t find me on Tik Tok on Instagram, but you will find me on those other platforms. And I’d be more than happy to engage with anyone that wants to talk about the growth of instant payments.
Isabelle Castro: 33:57
Okay, great.Thank you so much. You’ve been a great guest. It’s been really nice to have you on. And yeah,I’m gonna let you go. Thank you.Thanks very much. As always, you can reach out and chat with me or my personal LinkedIn or Twitter @IZYCastrowrites. But for access to great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook,or Instagram. You can also sign up for our daily newsletter bringing new straight to your inbox. For more fintech podcast fun, check out the website,where you can find more fascinating conversations posted by Peter Renton and Todd Anderson.
That’s it from me. Until next time, enjoy your downtime.
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