FIS has a long history in the financial services sector, serving more than 14,000 institutions in 100 countries. Dedicated to banking and payments technologies, the Jacksonville, FL-based company recently announced the launch of PayNet, the industry’s first global real-time payments network for domestic and international money movement for both retail and commercial trade. Peter Gordon, Senior Vice President, Payment Network Group, FIS, talked about PayNet and how it is a game-changer for the payments industry.
AH: Let’s talk about PayNet. What led to the development of this payments network? Why do we need it?
PG: Many countries around the world are moving to a real-time payments infrastructure and are far ahead of us. Many have been government regulated like Faster Payments in the UK. Mexico and Australia just came out with a regulatory approach. Latin America is ahead of us; Brazil is in the process. The US is falling behind in how you move money.
AH: What standard do we use now?
PG: We are following a 30-year-old industry standard based on a batch environment, typically done on ACH. Funds show up a day or two later because of the batch-oriented payments solution, currently in the market today. What we are trying to do with PayNet is move into a digital world of real-time payments and immediacy like folks experience in other types of things they use online, email and texting, and with mobile communication. The industry has been asking for a new digital network to move money in real-time. With PayNet, there is an immediate response, funds show up in real-time.
AH: I thought that when I go to a store now and swipe my card, the funds go to the merchant immediately.
PG: No. Funds show up a day or two days later. Products now just simulate movement but are holding the money.
AH: Why do we need to move money in real-time? The traditional ACH is such a long-standing system. Is there a consumer demand?
PG: The world has moved into a digital mode, like email and texting, which is in real-time. The need from a consumer’s perspective is that folks want their bank account experience to be like what they have with mobile phones, email and texting. People want bank accounts to act like other things in the digital mode. They want an immediate response and they are disappointed when funds show up a day or two later using the batch-oriented payment solution. We need to move into a digital mode. There are no non-card-based solutions in the US for E-commerce, person-to-person (P2P), bill pay, mobile and international money movement. PayNet is a non-card based solution that simplifies payments within E-commerce.
AH: When you say non-card-based solution, does that mean it works in digital situations where you are not able to show a card for verification?
PG: Yes, correct. However the applications will be issued by the financial institutions, merchants, or third party that participate (P2P, Wallets, mobile payments) in the PayNet Network.
AH: How will PayNet change global money movement? For instance, how can a consumer send money to another person – across the globe – and have it in real time, or pay a bill through bill pay and have the money arrive in real time?
PG: Through traditional ACH methods, consumer payments can take days to process depending upon payment destination. Digital payments and mobile are simplified with real-time verification of funds. PayNet connects directly to deposit accounts within a financial institution to enable real-time transaction verification as an alternative to ACH or wires.
AH: How will PayNet work at the retail point-of-sale?
PG: PayNet is a non-card-based solution. The PayNet solution needs to be integrated into POS applications that are evolving, like Mobile Wallet. Merchant processors and financial institutions will ultimately decide how and if PayNet is accepted directly at the POS. This will be a long term evolution based on how mobile payment offerings evolve.
AH: What about compliance with Dodd-Frank requirements?
PG: PayNet will also ease financial institutions’ ability to comply with Dodd-Frank requirements for international money transfer.
AH: How is that?
PG: PayNet was designed with Dodd-Frank in mind. It includes items such as the right to cancel a transaction up to 30 minutes after transmission and full fee disclosure at the point and time of origination.
AH: I read that the system does not need a credit card processor. Please explain that.
PG: PayNet does not need a credit card processor to handle transactions because we are not going over credit card rails. Payments are going over existing Electronic Funds Transfer (EFT) debit rails, directly to financial institutions. We are leveraging existing EFT rails, otherwise called debit rails and we are using our ETF infrastructure of which FIS is a significant player because of the network we own -- NYCE. Faster Payments is also on the same infrastructure. So the UK solution is based on the same technology as EFT processing that is done on NYCE. The processing used for PayNet is based on this 30-year debit card processing technology.
AH: Does PayNet work like PayPal? How is it different than PayPal?
PG: PayNet is the network. PayPal is an application that would use a network. It is a customer of PayNet and uses a network like PayNet to transact payments between people.
AH: Is PayNet for person to person payments online and at the POS?
PG: Again, we’re the network. FIS powers the end user brands created by financial institutions and program managers. We power $6 billion in processing for banks. Providers can integrate PayNet into their front end applications from the network just like they do with Visa and MasterCard. What PayNet does is allow their customers to have a better user experience because we can real-time credit or debit the bank account.
AH: What does PayNet mean for prepaid cards?
PG: PayNet will allow prepaid cards to have additional functionality. Money can be moved outside the closed loop construct and moved into a bank account in real-time. Or you can load from a bank account in real-time.
AH: So you can load funds from a bank account onto a prepaid card or send money directly to the bank account? What about a prepaid card on a mobile wallet?
PG: Yes. That is correct. With a mobile wallet, PayNet can enable funds in and out. When value is stored somewhere, PayNet can enable the real transaction.
AH: Consumers are worried about security. What about the security factor?
PG: The security relies on the applications we support. The network monitors fraud but does not have financial information about the individual. This responsibility goes back to the financial institution or E-commerce companies. The good funds model* reduces risk for many transactions. Also the faster money moves, the less fraud.
AH: What stage is PayNet in? Has it been implemented and where? Will it be in stores?
PG: FIS has announced the network. We are in the rolling out, pricing, and onboarding process. In early 2013 PayNet is expected to be available industry-wide.
AH: Finally, where are we moving in the payments world? Is PayNet the model for a new dawn?
PG: We think so. PayNet will increase the velocity of payments. No vehicle is able to move payments in real-time in today’s payment infrastructure. We are very excited as we move into 2013 to enable this new payments model. •
*The good funds model allows the financial institution to verify that a member’s account has the funds needed to pay the bill before funds are sent to the payee.
Peter Gordon is Senior Vice President, Payment Network Group, at FIS. Visit FIS online at www.fisglobal.com.