The introduction of real-time payments in the U.S. market has been unfolding for several years now, but it seemed to pick up momentum in the last year as FedNow came to market. We now have over 1,000 banks live with real-time payments (at least for receiving) and a solid majority of transaction accounts are now reachable via FedNow, The Clearing House’s RTP system, or both.

We wanted to understand whether we might be reaching the elusive “tipping point” for real-time payments in the U.S. and which players and what kind of use cases might be driving the growth. So, we turned to an old and respected friend of Glenbrook to share a perspective.

In this episode, we go deep on the state of real-time with Dimitri Dadiomov. Dimitri is CEO at Modern Treasury, which gives him a birds-eye view of transaction trends as his company connects major corporations and leading-edge fintech platforms to a growing set of major banks in order to enable and streamline the origination of many money movement use cases.

Bryan Derman: Hello, everyone. I’m Bryan Derman, a partner at Glenbrook and your host for this episode of Payments on Fire. One of the white hot topics in payments for the last few years has been the advent of real-time, 24 by 7, account to account transfers, suitable for even small value payments.

These payments go by a variety of labels, which we’ll use more or less interchangeably in today’s discussion. They can be called real-time payments, faster payments, instant payments. Those are a few of the popular terms you’ve probably heard. In your personal life, you may have experienced these kinds of payments via things like the Zelle network for person to person or small business payments. Or perhaps you’ve received a payment into your checking account from some kind of an enterprise that directed the money to your debit card, which caused it to land in your checking account. Well, that same type of technology is now making its way into the domain of more serious commercial payments through the introduction of what are the first wholly new set of payments rails to be introduced into the US in several decades. We now have in operation both The Clearing House’s RTP system and the FedNow system from the Federal Reserve. These systems not only move money between end user accounts in real-time, but also affect settlement between their banks instantaneously. RTP has been around since 2017 and has been gradually gaining traction, particularly with TCH’s large bank owners.

FedNow was brought to market about a year ago and now advertises some 900 banks live on its system. This means a large majority, perhaps almost three fourths of transaction accounts, are now available to at least receive real-time payments from one or both of these brand new networks.

Now, new payment systems don’t spring to life very often. I was privileged to watch and play some small role in the development of the debit card products in the US back in the 1990s, when they first came into common usage. These were new products, but not really wholly new systems, as they really leveraged either the existing ATM networks and later the existing credit card networks.

Even then, debit cards took some time to become a mainstream payment method, and I’d argue are still growing into their natural share of the retail payments market in this country, where consumers were traditionally very comfortable with credit products. It took time and some money for the public to understand and accept the products.

I can recall the Visa network running TV commercials with everyone from Bob Dole to Bugs Bunny in order to explain how their new check card worked. The challenge of driving adoption for new commercially oriented real-time payment products is arguably much greater. They do something that has never really been done before and use a whole new infrastructure and approach. First the systems had to be built, then banks had to begin supporting it, and then we could finally start promoting it to end users.

And one counterintuitive phenomenon we’ve noted repeatedly at Glenbrook is that business users can often be even more change resistant than consumers. Their processes are designed to operate at scale and over time become finely tuned to the needs of each particular business. No one wakes up in the morning hoping to alter those workflows.

To justify a change, the benefits must be significant. And even then, the migration will usually be gradual. A lot of thought has been going into what it will take to get traction for real-time payments, but there’s now some growing evidence that the herd is beginning to move. To get some more insight and texture on how, where, and why this is happening, we wanted to speak to one of the companies that is helping to make it happen.

We’re delighted to welcome back to Payments on Fire an old friend of Glenbrook, Dimitri Dadiomov. Dimitri is co-founder and CEO at Modern Treasury, a company that represents critical connective tissue that joins many leading banks with a group of cutting edge payments companies and their users to make transaction banking, well, modern.

Dimitri, welcome, or actually, welcome back to Payments on Fire.

Dimitri Dadiomov: Glad to join you, Bryan.

Bryan Derman: Great to have you here. Dimitri, we love to start out these interviews by asking our guests how they found their way into the once obscure field of payments. Was this something you always knew you wanted to do from the time you were a very small child?

Dimitri Dadiomov: So I grew up really being interested in startups and tech. Both my parents are software engineers. I grew up with a lot of tech talk around the dinner table, just people visiting and talking through all sorts of things that I got to overhear and I got interested in startups. And so I worked for a number of companies. At some point in 2015, I joined an online mortgage company and in running an online mortgage marketplace, I was a product manager and responsible for the investor side of it, and there was wires and ACHs and paper checks flying around. And, so, really had a lot of the problems that Modern Treasury set out to solve around payments and reconciliation and tracking and that really led me to payments and to founding Modern Treasury.

Bryan Derman: Interesting. We’re going to talk today a lot about real-time payments, some of it in relation to the markets you mentioned, but ahead of that, let’s just set some context so we understand the perspective you’re bringing here. I’ve heard your company, Modern Treasury, described in a lot of different ways.

Some people have said it’s a BaaS company, Banking as a Service, or it’s some kind of a treasury workstation or that’s where I get my APIs. I’d love to have you in your own words describe to us what Modern Treasury is.

Dimitri Dadiomov: Yeah, certainly. At the most basic level, Modern Treasury builds software for companies that move money. And that’s a pretty generic description. So if you kind of double click into it, we offer a payment operations platform for companies that need to integrate with banks, send instructions for payments, ledger them, track them, and reconcile them to the bank statements and offer all of this as a modern API.

And so doing all of this well is very much necessary to this coming world of instant payments, which we’ll talk about, but it’s relevant for every payment type. Any business that moves a lot of money needs to have good tracking of what goes on and needs to have easy and simple ways to both send payments and payment instructions to the banks and to reconcile them.

Bryan Derman: Very helpful. Thanks. With that understanding of what you do, let’s start to deep dive on real-time or instant payments. I believe I read recently that Modern Treasury’s customers are now moving over a billion dollars annually over the faster payments rails, and by that I mean Clearing House RTP and the FedNow system.

There’s been some debate over the years about how badly those systems were actually needed in the US, and we were clearly slower than a lot of countries to put them in place, controversy about what use cases really required real-time clearing and settlement. Can you tell us a bit about what your customers are doing with the real-time rails?

Dimitri Dadiomov: I think, to start with, when I think about instant payments, I think a little bit of how Jeff Bezos talked about when Amazon was growing, that something you know for sure about customers in the future is that will want their goods cheaper and faster.

There’s not really a scenario in the world where you’re going to want something not cheaper and not faster and I think the same is true for payments. And so when we talk about the need for instant payments and a lot of other geographies, they’ve really taken root very quickly and gotten adopted very quickly.

And I think something similar might happen in the US and, of course, that’s something that we’re very much here to drive adoption for. But to set the stage, in theory, in the protocol level, you can send money or you can pull money over these rails. In practice today in 2024, it really works in the send direction and we can get into the details of why that is. But when we talk about the billion dollars a year that we’re doing with our clients, really that is all in the send direction. So I’ll give you a few examples of what type of send direction kind of use cases exist. There’s a SaaS platform that might want to pay out to workers on its platform and the ability to send money instantly, perhaps real estate agents getting paid commissions, the ability to send money instantly is much more delightful for the end customer and allows them to build kind of market share and provide a better customer-led experience. And another example might be a HELOC company, a home equity line of credit company, that allows you to access your home equity line on the weekends, which over the traditional wire, kind of ACH flows, you can’t do that.

So all of a sudden you have the capability to be open for business seven days a week, not five days a week. A title and escrow company that sends some payments instantly to be cheaper, faster, and more delightful, and again, potentially on the weekend which opens up opportunities. We’re seeing companies using instant payments for micro deposits.

So when you’re authorizing and verifying an account of yours, traditionally, oftentimes there’s the two kind of ACH micro deposits, and that means that as a user, you have to exit the experience and come back and do that the next morning or something. And so being able to send that over instant payments means you don’t have to leave the experience, you get verified instantly. So those are all examples of where sending money in instant payments is really valuable.

Bryan Derman: Yeah,there’s a couple of interesting things going on there. We normally think about the pure speed attribute of real-time payments that, I can send you money in a few moments, a few seconds from now. It will turn up in your account. But the related but different attribute is that we can do that 24 by 7 now with the new rails and compare that to the wire systems which sent money relatively immediately, but kind of only during bankers hours.

Dimitri Dadiomov: That’s right.

Bryan Derman: So the two attributes really work together if we’re doing it in real-time, we can think of it as real-time all the time, and that changes certain businesses. Like, great example of a real estate closing happening on a weekend instead of having to be in the conference room at 11 AM while the bank was open.

So those are some of the here and now use cases. What are you looking forward to as some of your future use cases? Or if I asked you, what’s the next place we might see the real-time systems gain some traction? What are you looking forward to in your crystal ball?

Dimitri Dadiomov: Yeah, there’s a lot of use cases for the send direction that still haven’t been fully adopted. So something that’s really interesting that goes on right now in the investment and retail investing world is brokerage firms that are moving from what’s called T plus one settlement to same day settlement.

So let’s say you’re selling Tesla shares or something, and you want to get the funds out. Both on the settlement side inside between the brokerage and the exchange and then obviously between your kind of account or wallet at the brokerage and your actual bank account, that’s moving from a next day mode to a current kind of real-time mode.

And that’s something that’s really interesting because when you think about the velocity of money in the investing system, obviously anytime you can make decisions faster and not sort of wait for the processing period, there’s a big, big, big advantage for investors.

Bryan Derman: Right, right, because price discovery happens in real-time, so ideally payments would support that.

Dimitri Dadiomov: Yeah, I mean, float also, right? Just the ability to get an extra day of funds in your account used to not be valuable very much, but as rates have gone up all of a sudden, if you start adding a day to every transaction and you get, you know, 4 or 5% of it, that might actually be quite meaningful.

So there’s a lot of those types of use cases where it’s just accessing money that is already yours and just is sort of stuck in transit.

Bryan Derman: Yeah, we sometimes call those the me to me payments.

Dimitri Dadiomov: Exactly.

Bryan Derman: You know, the price of Bitcoin dips and I would like to jump in and take advantage of that. You can imagine uploading money from your bank account to your Bitcoin wallet, to your exchange in order to catch that pricing, which happens in real-time, 24 by 7, right?

Dimitri Dadiomov: Yeah. I think it certainly also works on the lending side. When you think about something like payday loans and the ability to access funds, I mean, it’s in the name, of getting access because you’re going to get paid later on, a few days, and you need to have funds to bridge a few days. Again, access to funds, Friday after work hours is a real differentiator, changes people’s lives, changes the ability of how people can kind of make financial decisions. So I think there’s a lot of places where the send direction has a lot of room to grow. And then of course, we can talk about what happens when the ability to pull funds instantly becomes real, which is in the works right now, but it’s not quite there.

Bryan Derman: Maybe tell us a little more about that. I assume you’re thinking here about the Request for Payment kind of functionality.

Dimitri Dadiomov: Yeah. So Request for Payment is supported by the protocol, as I mentioned before, but it’s not actually like fully live in the sense that the receiving account, the bank app of the actual user has to be able to support that and approval of that and be able to kind of pop up a notification and say, yep, go ahead and initiate that payment.

But that modality, that request for pay modality, is something that has to be built into the bank app. And once it’s there, it really can change our day to day behavior. We’ve seen what happened with Apple Pay and being able to tap your phone instead of swiping a card. When those types of user experience become super simple, whether it’s QR codes, whether it’s, Apple actually recently said that the Apple Pay ecosystem will be a little bit more open, you can start imagining some pretty powerful use cases. And I think it’s clearly the case that in the US, there is a lot of historical user behavior trained on credit cards. There’s a lot of incentives and rewards and so on that are built into that. But at the same time, that’s a very expensive platform to run. And so there’s a lot of incentives for merchants to switch things into a pay by bank world, especially if it’s riskless in the sense that that actual transaction settles right away. I do think that we have a steeper battle on the kind of customer to in-store pay in the US than some other geographies that, kind of leapfrogged the credit card era but at the same time, I think that the B2B and the B2C flows are so huge that for the time being, there is no need to really compete and disrupt card payments.

Bryan Derman: Yeah, you’re touching on what’s sort of the third rail for a lot of investors around whether real-time rails bleed into what we would call the purchasing domains, point of sale payments, eCommerce purchases, those sort of things.

Dimitri Dadiomov: I think that it’s one of those things that the incentive is less strong versus ACH, wire, and check. So when you think about the replacement, either the efficiency value or the customer delight value that you get from going after use cases that are currently run over ACH, wire, and check, it is very, very clear where the benefit is. And again, whether it’s a 24 7 aspect of it, the weekend aspect, the instant, we didn’t talk about, but the ability to sort of reconcile things much more simply is actually a pretty significant value for B2B use cases because ACH gets batched and becomes an issue.

There are issues with cards like chargebacks. So there is reason to switch over as well.

Bryan Derman: Depending on which stakeholder’s perspective you take, chargeback might be a bad or a good thing, depending on the scenario. So probably use cases that are riper, we’ll say, before purchasing comes into focus. Also, a point that’s been made to me, and we tend to look a lot to the UK and Europe since they’ve had these systems a lot longer than they’ve been here in the US, and colleagues over there will make the point to me that curiously the factor that holds back faster payments from the retail part of the economy is particularly the fact that debit card costs are regulated in those markets, right? So if you have the regulators keeping debit cheap, it, in a way, suppresses the business case for real-time payments in traditional debit card sort of scenarios.

So it’s interesting how they work against each other, but we’ll have to find where the bottom is. As we get ready to potentially reduce debit card interchange again in this country, it’ll be interesting to see how this washes out. Okay. So you present a number of compelling use cases here. Then I switch over and ask myself, well, why has this taken so long, right? We processed our first real-time RTP payment as it was, I think in late 2017. We’re getting onto late 2024 here and feels like we’re just starting to ignite here. What’s taking so long to catch fire, as we like to say on Payments on Fire?

Dimitri Dadiomov: Yeah, well, payment innovations do take time certainly. And especially so in the US where you have, we have around 3,000 banks, so it’s a lot of coordination between 3,000 banks and so reaching ubiquity is hard. It’s exceedingly rare that something novel like this shows up. I mean, really the last time was ACH in the seventies was probably the true kind of base layer innovation that came into the payment system. But this, the real-time payment kind of change or revolution has happened elsewhere.

You can take what happened in India or Brazil or Singapore and all these other countries’ payments got taken over by storm and the Federal Reserve has gotten behind that. So I think the biggest difference between what was going on in 2017 and what’s going on today is that about a year ago, the Federal Reserve has set out a vision and launched FedNow.

And so I think that at the end of the day, the way the U. S. banking system works, the banks sort of do and operate by the rules that the Fed has, lays out for them. So really the Fed launched FedNow a year ago, they have passed I think a thousand banks already, and so with RTP already in place with the big banks and FedNow kind of catching a lot of the longer tail of banks very quickly, I believe the figure between the two systems now is something like 72 percent of end user of checking accounts are connected. And that’s pretty fast for what I kind of think of as really a year.

So 72 percent means practically for us is means that our customers can actually start using it. If you think about a system that sends out a lot of wires, you know, 72 percent of the cases, this works, you can have a failover to wires. And that’s a pretty significant amount. And so that to me is really the thing that’s changed.

It’s kind of like we’re coming over the inflection point. The path to adoption, once the banks are live, is to enable companies to actually use it. So just because it’s available at the bank doesn’t mean that companies have the software and the systems and the user behaviors to run with it, and that’s really our mission.

I just saw a study that Deloitte had put out where they estimate that they’re going to see about 18 trillion dollars of payments switch over to instant payments by 2028. And they have kind of an aggressive scenario that says 37 trillion of payments. I mean, those are really big numbers that you couldn’t really imagine until you had some penetration of bank accounts that is on the order of 70, 80%.

So the way I see, we’re here to pull the instant payments economy forward and to give companies the tools that they need to make all of this work. And once it’s the available option, then it’s relatively simple. One remaining kind of bid that I think happened in a lot of other countries that we haven’t quite seen in the US yet is, there’s sort of a Cambrian moment when governments start embracing it for various kind of government benefits and pension fund and those types of use cases, tax returns.

Again, it doesn’t make sense until you have that 70, 80, 90 percent coverage, but we’re getting there. And so time will tell if that happens in the US, but if there’s government agencies that start distributing funds or doing tax returns over FedNow and RTP, then I’m sure that it is going to push a lot more people along to start supporting it as well.

Bryan Derman: Yeah, I’d love to echo a couple of points you made there. Zelle is a sort of a real-time system. I think you might describe it more as a scheme than a set of rails. But I think Zelle sort of found its tipping point as it geared it up toward 60, 70 percent of accounts available. It had a nice consistent branding and people can start to talk to each other about, does your bank accept Zelle? And when the answer gets to be yes 60, 70, 80 percent of the time, the system seems to tip. So maybe that’s just what we’re seeing here with FedNow bringing on more banks. And then the point you make about government as a user of payments is something we talk about a lot and goes back to a lot of different use cases.

The one that springs to mind is, and this goes way back, but the advent of direct deposit of payroll got a lot of its impetus from the government deciding that it would pay its own employees electronically. So adoption by the government does tend to be kind of a shaping factor for new payments behaviors.

Dimitri Dadiomov: Yeah. And it’s interesting because there’s so many use cases. I mean, obviously there’s social security and Medicare and Medicaid and those types of systems that ultimately are pay out from the government to various individuals or organizations. But then there’s cases like, for example, FEMA, right?

Like when you have a hurricane and you’re trying to get funds to somebody quickly, it’s so important to be able to do that on the weekend. Saying, oh, well, you know, it’s too bad that this hurricane hit on a Friday night so we can’t send any payments out until Monday morning, is a little bit crazy.

There are cases like this that are just, I think are, once again, once the option is there, why would you pick the slower version? At the end of the day, it’s not really something that we’re going to see behavior of.

So, it’s interesting, you made that point about Zelle. I think 70 percent practically just means that most of the time it works. It’s not yet 99%. It’s not something you can a hundred percent rely on. So we have to build software to do fail over kind of cases where you look over the routing number, you know whether it’s going to be FedNow and RTP enabled, if not, then you kind of have this failover plan to say, I’m going to send it over ACH or same day ACH or wire, depends on the use case of what actually makes sense. But, you have to be able to handle those cases.

Bryan Derman: Yeah there was something similar in Zelle. I don’t know how heavily it was used, but Zelle had a fall over to the debit rails in order to complete a transaction. If your bank was not enabled on Zelle, you could have the money directed to your debit card, which effectively puts it in your DDA. Have you actually built the logic within Modern Treasury to interrogate the destination account, understand what systems are available, and you’ll get it there in the fastest way it can go?

Dimitri Dadiomov: That’s right. Yeah. We give our customers all the kind of tools to set their own rules and settings for how they want to handle this, but yes, we can tell whether a routing number for a specific bank, which represents a specific bank is enabled or not.

If yes, then we send the funds over. Again, it depends. Depending on the bank that, the originating bank that the client uses, there’s different options. And so that also kind of goes into the factors of what is available to you. So people can build their own tree of decisions as they want to.

But yes, we’ve built out all of this logic and again, this is the part about making it easy for enterprises and for companies and for startups to start using these rails. The use case might be a weekend, it might be a cost thing, it might be a time thing, but no matter what, you have to be able to send those instructions.

And then the other piece that’s really important as well is reconciliation. If you are going to run a business in real-time, just conceptually, you need to reconcile and track it in real-time. Because if you don’t, you run the risk of blowing up at some point. You don’t have real-time visibility into things.

So even in the case of a double payment or a fraud case or something, you really need to have real-time visibility into what’s going on and the learning and so on. So that’s the other part of this, is you do need to have the software system around operating this type of environment.

And a lot of things that used to be batch based now are real-time. So all of a sudden from a business process perspective, you don’t just come in to work the next morning and see what piled up, you sort of have to have some software system that either makes algorithmic decisions and can make decisions on its own, or it’s kind of putting things in a queue and holding them and there’s sort of a software system for workflow. A lot of these types of things are very exciting for those of us who get excited about business models changing, but they do have a back office impact that needs to be thought about.

Bryan Derman: Yeah, and there probably is a lift in the treasury department at a lot of your clients here because so many of those processes grew up around a batch mindset. I come in the morning and a bunch of money has arrived or on Friday afternoon we do what was once called the check run or the ACH approvals or whatever it is and now I think we’re doing that all day long. Some of that can be adapted. I could still wait till Friday afternoon to launch all my real-time payments, I guess, but –

Dimitri Dadiomov: I have a regularly reoccurring arguments with my mom about the DVD versus streaming world where she loved the fact that you could just have the Netflix DVDs pile up and you don’t have to think about anything and you can just go sort of on a batch process, like receive these DVDs and watch them whenever, in some order.

And while obviously all those things are available in real-time and you can stream them, it’s a different behavior. So, there’s definitely aspects of that that organizations have to learn and improve and get more efficient, which is a good thing, but it is, it is change.

Bryan Derman: It is and something we’ve learned is businesses adapt slowly. And we’ve seen so many cases where you show consumers a better mousetrap and educate them on how to use it and they’ll go and do it. Businesses have more processes to adapt, so that I would guess will be a little bit of a break on the pace of innovation here.

Companies, some of them will learn the hard way that if you have a stream of real-time payments coming in, you better get to reconciliation, because the problem will get worse, not better, as more of them come in.

Dimitri Dadiomov: That’s right. But when your competitors are open on the weekends and you’re not, it’s going to be really hard for you to compete. So I think the disruptions are pretty real.

Bryan Derman: Yeah, that brings it home, doesn’t it? We’ve talked at a couple of points here about how the US compares to other markets and we’ve been down this road on a few different things where the US appeared to be slow. What’s your thought, one of the distinguishing characteristics about the US is we feel we’ve always got to have two systems for every type of payment, right? We’ve got two or maybe more big card systems. We’ve got the same two players, the Fed and, The Clearing House providing services for ACH and wires, and at one point even check clearing. How do you think about the effect of having to coordinate two real-time networks? Is that a hindrance to adoption? A lot of discussion in professional circles about the need for them to be interoperable. There are some different models there.

Dimitri Dadiomov: Yeah, there’s definitely a lot of discussion between, in the payment kind of nerd community about it. I don’t think it matters a ton. We have two major card systems, maybe three. We have two ACH systems. If you kind of look into it, there’s the Fed ACH part that’s being run by the Federal Reserve and there’s the private option that’s being run by TCH. Same thing with wires, with Fedwire and CHIPS. At the end of the day, mostly only us payments nerds really know this, and I don’t think that anybody goes into a bank and says, I really need my wire to be a CHIPS wire versus Fedwire, like, I don’t think that that’s really like a practical thing. So for most people, you tell the bank, can you send a wire, they do the routing over the right network. It’s kind of an optimization decision that they make internally. And I think the same thing will happen with instant payments. And it’s actually already happening where the end client doesn’t need to know exactly what bank settles with what other bank over what rail.

Bryan Derman: I think I agree with that. If the use cases are there, the interoperability tends to get worked out, right?

It’s, at the customer level, it’s, I need to be open on the weekend and I need my bank to support that, figure it out.

Dimitri Dadiomov: Yep.

Bryan Derman: Or get Modern Treasury to help you figure it out or whatever the answer might be.

Maybe related to that, we’re talking around the two ACH systems. What do you suppose becomes of the US ACH system if we play out your crystal ball or Deloitte’s and say that real-time is going to grow at a pretty significant rate over the next, pick a number, five years, ten years. What happens to ACH volume over that same period?

Dimitri Dadiomov: One saying that we have around here is that payment systems don’t die. So it’s not like ACH is going to go away. It’s not like, again, these changes are pretty real for companies and so as fast as instant payments might be growing, it’s still going to be a relatively small share of all the other systems. I mean, we still have paper checks around and we’ll probably have as many of them as we did 20 years ago, if not more. That’s something that, I don’t think that it’s really, yes, it’s going to take some market share in the sense of certain use cases will be more, there’ll be more motivation for payors to switch over to instant payments. So I think that’s definitely true, but that’s going to happen from wires to instant payments, from ACH, from checks, from cards. But, I don’t think that the ACH system is going to go away anytime soon, for decades, if ever

Bryan Derman: Well, I think I’d probably agree with that here. The outcomes will probably be different across other countries. I probably would not want to have a career that depended on working in the Brazilian ACH system, because the way things play out down there, Pix just seems to be a force of nature.

Dimitri Dadiomov: True. Yeah, I think Pix is at like 45 percent or something of all volume, of all transaction counts.

Bryan Derman: And it’s just a dominant solution compared to what was available before there in terms of the old Dock system or boletos. It’s a dramatic modernization of those. I think the evidence in the UK was that Faster Payments had a very aggressive trajectory, but the BACS system, their ACH system, did not disappear, but sort of flatlined.

It was gradually sort of contained to the use cases where it really made sense and was a very efficient way to do some pretty basic kinds of transactions. So almost like a disruption pattern where Faster Payments gobbled up all the growth and ACH may be on a very long, slow decline, but still has a role to play for a few years to come.

Dimitri Dadiomov: Yeah, I’d like to think that the US economy is a little more dynamic than the UK, so I’d like to think that we’re going to be somewhere between the UK and Brazil on that. And Brazil obviously was, the adoption of Pix was obviously driven very much by the central bank, but also COVID kind of coincided with that, so you saw some really rapid behavior change, because of lockdowns and things like that.

But I do think that the US economy, once this is ubiquitous, which it’s getting there, is going to adopt things faster than the European economies might.

Bryan Derman: Something I find people cling to, at Glenbrook, we work with a lot of merchants and billers. And they do love their so called merchant initiated transactions. They do enjoy the transaction where you can sort of set it and forget it, right? I grant you permission to just debit my account on the first of the month, pull my mortgage payment, pull my insurance premium, whatever it is and that’s very friendly to the ACH system. ACH debits were sort of built for that kind of transaction, so I would guess those will go away a little more stubbornly, but I suppose the path by which they go away takes us back to what you said before about Request for Payment being the way we will effectively pull money.

And I think we’ve seen some early experiments with sort of pre-approving, Request for Payment transactions in Europe for the recurring sort of scenarios. You know, we’ve become such a kind of subscription economy in just the last few years that if faster payments are going to play a role in that, RfP is really going to have to come along.

Dimitri Dadiomov: Right. It’s not too hard to imagine a system that allows you to automatically approve all the PGD transactions or have authorized debitors or something like that. And I think that there’s an element of, to bring in the other kind of buzzword of the days, like AI really can power a lot of this stuff, right?

So when you think about having a kind of a copilot in your financial world, in your banking world, as a consumer, that helps you run your daily life, I mean, this is a perfect example where in the automatic ACH debit world, maybe you don’t actually want somebody to have the ability to debit you 30 times a month.

Sometimes you hear cases where some enterprise has a bug or they double collect something and you actually didn’t implicitly say that you’re okay with them pulling in three mortgage payments a month, you said once is good and you can have X thousand dollars a month.

And so there are places where you can imagine that decision-making living, not necessarily, literally with the person approving it every time, but living on the side of the bank app or the kind of the personal financial manager app that allows for those types of debit mandates to really be a little bit smarter.

That’s a pretty hazy view into when that actually happens, how that happens, but it’s realistic.

Bryan Derman: That certainly resonates with me, particularly in terms of business accounts, where the protections are not as extensive as they are on consumer accounts and as a business, you really have to keep an eye on your accounts and people take some strange actions to protect accounts, the accounts that can post no debits or where the money gets sweeped out.

Dimitri Dadiomov: Zero, ZBA, zero based accounts.

Bryan Derman: Exactly. Yeah. You might be able to simplify a lot of that if you just said, no, we’re not gonna post debits to most business accounts. Send me an RfP. I’ve got the staff or the AI agents to approve it appropriately and I don’t have to give other people access to my account. I can pretty firmly control it.

Dimitri Dadiomov: Right? You give them access, subject to your own decision-making.

Bryan Derman: Rule set. Yeah. Exactly. Well, we’ve covered a lot of ground here. Any other points about real-time that you were hoping to make here?

Dimitri Dadiomov: Well, I think that RfP is huge. And I think that that’s definitely something that, the ubiquity that we have or we’re getting to on the send side is really exciting. And you see these projections, I mean, when you think about 20, 30 trillion dollars of any payment type moving over, that’s a really aggressive scenario that people are starting to project.

I think that once RfP is up and running, it really opens up the whole card ecosystem for disruption. And all of a sudden points of sale, stores, restaurants, et cetera, can be paid over RfP and what that does to the incentives and the rewards and all that kind of card ecosystem is super interesting, but I think that’s a little ways off.

The reality is there’s these really far reaching effects of all this stuff on the way that businesses run their business. And one of our clients, Doug Anderson, who’s the Chief Product Officer of Avid Exchange, has a really kind of good way of talking about when he really compares it to what the Interstate Highway Act did for America, where all of a sudden you had this fast freeway instead of a one lane road or a gravel road or something, and it really changes how we live, how we work, where we work, where we live, how we vacation. It enables new business models like drive-thru McDonald’s type of cases that weren’t, didn’t make sense before. And I think the same thing is true for payments. And I think that when you can send money instantly, when you can do it 24 7, when you can do it on the weekend, the velocity of money grows and the speed of commerce grows and ultimately the economy grows as a result.

So yes, there’ll be some cannibalization of payments, and other transactions that are modalities, but it’s also going to unlock some really interesting new use cases. And you’re seeing this with instant wage access and what if you got paid every day instead of once every two months. Those types of use cases are just something that is hard to imagine right now because the transaction costs and the overhead of reconciling and managing payments is actually not insignificant, but that’s going to change quite a bit.

Bryan Derman: Yeah, we definitely see that in some of the work we do at Glenbrook in emerging markets, you see the impact more clearly because the change is so dramatic. More along the lines of Brazil, where it’s not just speeding up payments for people who were doing things all along, but dragging whole segments of the population into the banked segment of the world and giving them capabilities they’ve never had before.

Dimitri Dadiomov: And plugging them, I think, into the expectation that we as consumers now have of the instant economy, that you’re able to get things delivered same day or within 15 minutes. Why is the payment settling in three days? Why is the collection happening in a month? I mean, a lot of that stuff can be more in tune, I think, with how the economy actually operates.

Bryan Derman: It’s a very macro version of friction reduction, right? Just the trouble it takes to make a payment that just goes way down along with the time.

Well, Dimitri, what a fantastic overview. We could probably go on and on here, but we are going to need to wrap up. Thanks so much for being with us. I hope you’ll come back again soon.

This is going to remain a hot topic for the next several years and we’re going to need your perspective on where things stand. Thanks again so much for joining us.

To everybody listening out there in Payments Universe. Thank you for joining us. Keep up the good work and until next time, we wish you all the best.

Bye bye for now.