“Payment services hub” can mean different things depending on who you are talking to and what time period you’re looking at in payments industry history. The term first appeared in the analyst community to describe the consolidation of systems supporting Fedwire and ACH processing, helping large financial institutions bring together their commercial payment operations. This complex consolidation was feasible because both systems operated in similar windows (the time in which the network can accept and process a payment), allowing financial institutions to align cut-off times, run their large overnight batch processing operations, and reconcile their internal core systems—and be ready to do it all over again when the window opened the next business day.
Today, “payment services hub” represents an even broader concept, combining not just heritage payment types like ACH and wires, but also supporting new real-time payment rails, including The Clearing House’s RTP® network, the reverse debit networks Visa Direct and MasterCard Send, and forthcoming networks like the FedNow ServiceSM. A payment services hub is a single centralized platform to connect the financial institution to multiple rails and centralize payment management and operations. These new platforms, like everything else in this new era of payments, are cloud-based, enabling them to rapidly scale as unknown volumes turn into tomorrow's revenue streams.
The new real-time and faster payment networks are all built on the modern ISO 20022 standard, making the transition from the traditional payment services “hub” space to the modern platform discussion even more imperative. The new payment ecosystem also means credit unions have more choices when it comes to participating in new rails or networks. Choice doesn’t necessarily mean one rail is better than the other, but having flexible rail options creates opportunities, including smart routing capabilities, that can’t be ignored. The result—smarter, faster payments.
New options present a challenge for credit unions—how can they offer various payment products without confusing members? An end-to-end payments platform simplifies both the front end and the back end, which creates cost savings and opens up revenue opportunities. For instance, a credit union may have to pay more to make an immediate payment but can charge its member for the expedited payment. Smart routing can also imply “least-cost routing” made popular with debit transactions. However, smart routing goes beyond choosing the cheapest rail to ride, balancing time, dollar value, and consumer and institution preferences.
Alacriti recently expanded its unified payments platform for the FedNow Service, and was also featured in the Federal Reserve’s FedNow Service Provider Showcase. Modern payment services hubs, or “flexible payments platforms,” are important for the future success of credit unions. They deliver future-proofing so functions and features, as well as new rail connectivity for processing, can be added without full rip and replacement of point solutions. As a result, credit unions can reduce transaction costs and, more importantly, be set up to stay ahead in innovation.
Kristen Jason is an Associate Director of Product Marketing at Alacriti.
Alacriti’s centralized payment platform, Cosmos Payments, provides innovation opportunities and the ability to make smart routing decisions at the credit union to meet their individual needs. Credit unions can unify payment processing all in one cloud-based platform—ACH, the FedWire Funds Service, The Clearing House RTP® Network, Visa Direct, and soon the FedNow ServiceSM. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or firstname.lastname@example.org.