Booshan Rengachari, CEO of Finzly, joins Glenbrook’s Elizabeth McQuerry and Simon Skinner to discuss how software, fast payments, and open banking are reshaping the banking industry and the way we think about financial services.

Tune in as they cover the challenges of modernizing legacy banking systems, the rise of fast payments, and the potential of open banking to integrate banking services into everyday life. The episode also explores fraud prevention in fast payment systems and the evolving role of banks amidst competition from fintech companies.

Elizabeth McQuerry:

Hello, I’m Elizabeth McQuerry, a partner at Glenbrook, and I’m going to be the host today for this episode of Payments on Fire. We have a great opportunity today to focus in on the big transformation underway in software for banks as well as real-time payments, open banking, and how they’re reshaping the payments industry. I am delighted to have Simon Skinner, my co-worker, senior engagement manager at Glenbrook as our co-host. Welcome Simon.

Simon Skinner:

Thanks, Elizabeth. Great to be joining you on the show today, I’m looking forward to our conversation. I think it’ll be a really good opportunity to discuss the trends that are quietly, or maybe not so quietly, reshaping the industry and the way that we’re thinking about financial services, and ultimately how we interact with banks.

Elizabeth McQuerry:

Fantastic. And of course, very delighted to have with us, Booshan Rengachari, from Finzly. Booshan, you’re the founder and CEO of Finzly, and we welcome you to Payments on Fire today.

Booshan Rengachari:

Thank you, Elizabeth. Glad to be here. Thanks for having me on the show.

Elizabeth McQuerry:

Well, we’ve got a lot to chat about, so let’s just go ahead and jump in. So many great topics. Booshan, you and I know each other from the Faster Payments Council here, and that’s something I really want to get into. But let’s set the stage first of the larger transformation underway, and what it is that you and Finzly are really working on. So bank transformation, that’s kind of an oxymoron for a lot of us, right? Of course, I’m joking a bit, but we have this vision of dusty old machines and pipes for payments at banks these days, but I guess that’s really not the case. So tell us what Finzly is doing and this concept of payments, what does that really mean?

Booshan Rengachari:

Sure. So if you look at the banking industry, if you go inside what’s happening, you will see systems that have been built like 20, 30 years ago. Almost every one of those systems were built several decades ago, but the market has changed, the customer expectations have changed, the banking experiences are totally different than what it should be, what it was before. So if you just take payments, the way banks have been operating is they have a wire system, and then they will throw a wire experience to the customer, and then they may have an ACH system, and then they will give that ACH experience to the customer, and then later they have Zelle.

And then you see a Zelle experience. Now we have RTP, FedNow, new RTP, FedNow experiences for checks. It’s a check, different experiences. If you look at it, what all we have been doing here is from the banking side, we have built all these products, and then we are pushing these products with the customers, and that’s not exactly customers are looking for. Customers come to the bank to take care of their business, to take care of their banking needs. When it comes to the payments, people, they just want to move the money, “I want to move money from my account to someone’s account. I really don’t care what’s a wired RTP, FedNow.”

If you go and ask my uncle or my grandma, “Hey, do you want send it through FedNow?” They’d say, “What? I just want to send the money.” So we need to speak in simple terms that people can understand. We are still using those mainframe systems, whereas the industry has moved to mobiles, iPhones, which is like, we have been using iPhone for the last 20 years, but in banks we still use those mainframe systems. Customers are looking for a very simple experience, a simple way to move their money, a simple way to do the banking.

But banks are not equipped because they are still stuck with those 20, 30-year-old systems. So when we looked at it, we said, “Hey, we don’t want to just keep on doing it this way. We have to start looking at what the customers are looking for.” So apply first principles, forget about what is there in the market, think about needs, think about the technologies that are available today, and then bring both of them together, and then provide you a solution that meets the customer’s expectations. So when we looked at that one, when we realized, hey, we need all of those payments in a single system, because customers, they don’t care about how you send they money, they care about two things.

One is, “Hey, how fast it can go, and then how much it is going to cost me.” Just like FedEx, you don’t have to go and tell FedEx, “Send it by ship or by flight or by train.” So likewise, when it comes to the banking, I don’t have to go and tell, “You want to send it by wire or ACH or Zelle?” It really doesn’t matter. And I have to provide meaningful information that banks can take and then process it. So you start from there, and then you come to the back end, in the back end you don’t want to deal with multiple systems, so you won’t have one consolidated payment processing because all that is different is messaging, you message it differently for wires, you message it differently for ACH, it’s different for Zelle, that’s how all these things are paying out.

So when we looked at, hey, if you want to give that kind of unified experience, you need to have a unified platform that can handle that payments, irrespective of the rate. So we started from there. We reimagined how the payment should flow, how the payment should operate, and started building this payment hub platform. So in a payment hub, people say, “Are you the first one to do that one?” No, we are not the first one. That concept has been there for more than 10, 15 years, but we are the first one to make it implemented practically live with multiple rates, because the challenge is that ACH is kind of a dinosaur. It’s a very, very old payment processing system.

Wires is like an elephant, and then you have Zelle, bring a cow and a chicken and a horse, you put all of this together in a single system. It’s not easy, but that’s all about engineering, engineering is all about making complex stuff very simple and easy to do. So we brought all of these things together and created a unified platform that can process payments. So I think what it does is, for example, we talk about latest experience right now. I met with the bank, they have like 40, 45 people. Most of who have been operating the system for several decades, and it’s all mainframe systems.

So you bring someone from college, and then you give that job, “Hey, I want you to start being a payment wire operator.” The chances are that that person is going to leave next day because no one wants to use that outdated experiences, because these kids, they are used to having Instagram, everything’s kind of instant and simple, easy to use. So it is important that we move on from those legacy systems to help our customers and to provide a better experience for our own employees and associates. So that’s all that thing that we do, kind of optimizing the operational efficiency, and then providing the better user experience. Those things are super important for banks.

Elizabeth McQuerry:

So this sounds like a no-brainer from a customer needs perspective. We have old technology, I mean, I started my payments career in ACH, so I understand a thing or two about how legacy systems are still ingrained in our market. So customer perspective, win-win, banks get modern systems that make things probably cheaper and more agile for them. But why is this taking so long? What are the friction points here? Because we hear about how it’s taking, banking modernization is such a monumental effort, some folks are not even dipping their toes yet. Help us understand that.

Booshan Rengachari:

I think there are two type of scenarios. I think it depends, it depends on the banks and it depends on the size of the bank’s complexity in their operations. If you go to much larger and larger banks, what happens is you have hundreds of systems all talking to let’s say a wire platform. You don’t know, “Hey, where these wires are coming from and what are all the middle wires here and there?” And there are not people, the people who ever built that one, they are retired, and all the people who are there now, they are just maintaining it, keeping it up, whatever.

All they know, that system owner, all they know is who is sending this one and where do we have to send it. That’s all they know. They’re operating in a silo. There are not many players who knows the entire understanding of the complete architecture, “Hey, do you really need this one?” I think if you want to go to a larger bank, and you want to rip and replace this wire system, “I want to rip and replace this ACH or PEP+ systems.” Like that, it is going to be a very, very huge, huge project. And if you want to rip and replace, I would say a hundred percent, I can guarantee it’s going to be a failure.

You could never rip and replace that system. But what you can do is you can slowly lead it to death, because you have your parallel modern platform. So let’s say I have a hundred business units, I’m serving wires or I’m serving payments, I will start migrating one business unit at a time, or five business unit at a time. That gives you the, hey, because everybody wants to get rid of it. And I usually jokingly say everyone want to get rid of their core, but no one wants to get rid of their core because it’s just so complex.

But there is a path. The path that we are giving them is run the same parallel, start migrating a little bit at a time, and then after that you have nothing left in the whole systems, and you are running on your modern platform. It is going to take time for large banks. At the same time you go to mid-size banks, and mid-size banks, they’re not that complex. They have your digital banking platform, and then maybe payments coming from their loans department, payments coming from their branches. So that’s it, nothing much.

So the way that we are going approaching them is, “Hey, here is this operating system, here is the bank operating system that you can use, where one is for the payment operations, here is for tellers, here is online channels. They can send it.” So we can typically implement for those banks in a matter of like four, six months. So we have been successfully doing that one, but if you go further down, much smaller banks, they are much simpler. The complexity for banks comes into integrations, integrating with OFAC, integrating with AML, integrating with fraud, and then core systems. So those things are usually most complex.

So what we did was we created a factory of all these connectors, who’s your OFAC provider? Who is the AML provider? Who’s your fraud provider or core provider? We can just pick and choose these connectors and it makes it much easier. So I think that, and again, if you want to do the same thing the same way, you’re not going to get any different results. So you have to reimagine how we are going to approach the transformation, how we are going to approach an implementation, and that is the only way we can change. So there are better ways that we can help banks to transform faster. It used to be tough, but I don’t think it is tough anymore, at least with us.

Elizabeth McQuerry:

A very changed environment from my impression before.

Simon Skinner:

Let me jump in here and maybe switch tacts a little bit or try and make a segue in the conversation, and discuss some of the trends running through the payments space currently. In the segue back to some of your characterization of banks, I spent many years working in large banks, and so some of those things run true. Equally, I’m a pretty strong proponent of the role of banks and the important role that they play in the payments ecosystem. But I think we’ve seen over the last period of years that there’s a volume of payments that are happening outside of that traditional domain of banks, and many consumers seem comfortable with that. And so as we look forward, do we think it’s too big of a stretch to think that banks can actually reclaim that payment volume, particularly in the embedded commerce context?

Booshan Rengachari:

That’s a great question, Simon. If I go back to my previous statement I made, customers are looking for simple experiences, simplified experiences, and banks were not offering that one. And fintechs came up with those nice, cool-looking product, few touch payments are out. And when that started happening, payments started shifting away from the banks and started happening outside of the banks. Who launched the first P2P instant payments? Venmo. And after Venmo, and Zelle caught up later, “Hey, all these payments are happening outside of the banks.”

Now, Zelle was introduced by the banks now. If you look at it, Zelle volume is much higher than the Venmo. Usually technology players lead the way. Banks are not typically, their mindset is not innovative or forward-thinking. So this happens outside of the banks, but my take here is even though it starts outside of the banks, eventually all these things will move to the banks. The reason is this, eventually they will catch up and they have the money power, they have that authority of FDIC regulated and that insurance, all this stuff, the confidence, the trust of the customer.

If I want to store my money, where do I store the money? I won’t store it with your third party provider, like which we have seen in a lot of fintech players, like Synapse, which went bankrupt, all the money is lost. So from a customer trust perspective, everybody wants to keep their money with the bank, and also even though you have all these fintechs operating outside, they are operating through the bank again. So if you layer the fees, economies of fintechs plus bank, there’s always a additional fee, when you directly work through the bank it just makes it much, much easier. So it is still the case, still a lot of payments are happening outside of the banks because of the better user experience, but over a period of time all those things will again shift back because the bank will catch up and they will deliver that better experience and better value.

Simon Skinner:

So banks still have that advantage of the trust, and to some extent the relationship, but focus on user experience and I guess the modernization of the underpinning tech stack.

Booshan Rengachari:

Absolutely, hundred percent.

Simon Skinner:

Shifting on to another dimension, you mentioned, and I think Elizabeth characterized ACH as being old and wires and maybe even older than that. Do we see a day when in the U.S. we might see a consolidation of payment systems? So do you think we might see the retiring of ACH or checks in favor of the fast payment systems, or do we think there’s inherent value in the differences across those systems that means they might remain?

Booshan Rengachari:

Yeah. And I don’t know about the retirement of the ACH network, but I see value and use cases in each and every payment system. I mean, we have been talking about the death of the checks for over a decade, but it’s still there. There are use cases. I don’t think it’ll ever be dead. There’s going to be some use cases where, “Hey, I have to just send a check. I just need to know the address, name, and just mail it.” So those use cases will be still there unless we replace it with a better experience. Obviously people are going to move towards whatever is convenient, better for them. So the volume will start going down, down, down. But I think it will still, maybe when it reaches totally negligible level, people will say, “Hey, I’m not going to support anymore.”

But we are in a country where the economy decides what is best for the country. It’s not like other countries where it say, “Hey, checks should be removed by end of next year or 2026.” It doesn’t happen here. So in that sense, the market decides what is good for them. If there is a need for checks, the checks survives. If there’s people who provide better solutions, better products, it’s going to be gone. But what I see is real-time payments is taking up, it is we have two payment networks, and the volume is increasing, and recently RTP has increased the payment limit to $10 million, which is going to open up a lot of new business use cases where the payments are in much larger amount.

So it’s kind of building the foundation. The foundations are being built, but we move trillions of dollars through a ACH system. It’s not all going to be migrated to RTP, FedNow in three, six months or one year, it’s going to take a lot of time to find use cases, “Hey, what I can do better?” For example, I’m filing an insurance claim and then can I get the insurance payment instantly. Today the payments are sent through checks, and then if the insurance company decides, “Hey, I want to give a better option for my customers so that I can compete better than other insurance company providers.” So in that case, the insurance company decides, “Hey, I want to start using RTP payments or FedNow payments.”

So now that ACH volume is going to shift towards that one. But if you take payroll, a company wants to pay 50,000 payments at a time, they’re not going to call that many API calls, usually it’s going to be coming through files and it will certainly get processed through ACH like that. But if you look at a business use case where I want to pay the tips same day, or I want to pay my employee every day, or as soon as they are done, that use case, you’ll use instant payment network. So I think in my view, all these payment networks has a use case. Every rates will be supporting some business use cases, but instant payments will become more and more adopted because people want instant satisfaction.

Simon Skinner:

Some folk may think the pace of change should be in the months and not, I think for those that have been around the payments industry for a while will understand that it typically takes years for new systems to come in and embed and customer knowledge, awareness, and comfort with those new systems. But also as you mentioned, the need to consider the individual use cases and make sure that the new solutions are actually a better experience and solution than the old legacy to enable that to migration across.

Booshan Rengachari:

Absolutely.

Elizabeth McQuerry:

I do want to talk about faster instant payments, but since we’ve gotten into ACH, this is, to me, one of the most interesting developments in recent years is, honestly the resurgence of ACH and faster payments, and I’m making some air quotes here, “same day” ACH is a tremendous success. I mean, I think this is a true statement, but I sometimes jokingly say it’s the most popular faster payment in the United States, and it really speaks to this broader conversation of what banks are integrated into.

So every financial institution, 99.9% of them have a connection into ACH, so they can send and receive files without a thought. It’s just second nature to what a financial institution does today. And the fact that when we’re having all of these other options now, that same day ACH has just become tremendously useful and ingrained in the market. These are the decisions that really a lot of banks are making for their customers, that sort of customers want it faster, so they gave them, “Okay, this is fast enough,” and more or less.

Booshan Rengachari:

So again, you’re absolutely right, almost every financial institution is connected with the ACH, but surprisingly not everyone can support same day ACH, because all those systems, they are still using older systems, upgrading them is going to be a challenge, but a majority of the financial institutions are supporting same day ACH, and we do see a lot of volume coming through the same day ACH platform. And I think that was one of the better move, and I wish it was done much, much earlier, but I think at least Nacha did that one to at least to stay competitive and provide a better option.

But it’s still, it’s same day, “I’m waiting for a payment to come. I need to make the purchase now, what can I do?” I think that instant payments are totally different in totally different use cases. So you are closing the house, now all these things are happening through wires. I was part of your closing process just a month ago. I was at the law office and waiting, waiting, waiting, because it has to go through its own process, but I think it will become much, much easier, “Hey, the payment is sent,” it’s all rules-driven, and payment is received instantly, and I just go in and walk out.

Some of the things will change based on the demands of the customer. Someone will change. If the banks don’t change, fintechs will change. Since fintechs will change, banks will change. Eventually banks will adopt the new standards and new experiences, new ways of doing payments. But as you said, ACH volume is continuing to increase, “Hey, we have two new payment rates,” but volume is increasing, because we are one of the largest economy, as the economy scale grows and there are other volumes, but some will shift, but ACH will continue to play an important role in our economy.

Elizabeth McQuerry:

Oh, absolutely. I think one also another interesting aspects of the faster payment revolution, if you will, if we can call it that, is that we’re just making more payments. It’s easier, it’s cheaper, so the multiplier is growing as well, right? So different use cases. Different needs.

Booshan Rengachari:

Yes, absolutely.

Elizabeth McQuerry:

As I’ve mentioned, you and I have met each other through the Faster Payments Council. I know you’ve been a huge supporter of this initiative in the industry. Tell us where you think we are in our faster payment journey here in the United States, another area where it can be stubbornly protracted?

Booshan Rengachari:

I think we have come a long way before RTP, before FedNow, Fed started this process of, “Hey, we need to have instant payments in our country.” I think it was 2014, that’s when they asked the public, “Hey, what do we have to do?” They asked the industries, “We need instant payments. Everybody’s starting to have instant payments. We need to start thinking about that one.” I think since that time. So I was part of that initial faster payment task force, have been deeply involved since then. We talked about everything that we need to have, and then RTP came and then now we are FedNow.

And I’ve been part of this Faster Payment Council from the founding, remember I’m one of the board member right now. We do a lot of work there. I think as an industry, as an organization, FPC, what we do, we participate in a lot of educational activities, research activities, and then finding out what is happening in other countries and what do we have to do. But one thing I would say is a lot of people compare the U.S. with other emerging markets, India, Brazil. And people even make some funny comments and sometimes feel like, “Hey, they don’t understand the U.S. economy.” Because people say India moored this much money, this money volume of payments, and the U.S. did only very little in instant payments.

And then they don’t understand the infrastructure that we already have in place. Those countries, they had no infrastructure, and it is easier to build something new and then move everything over there, and then all those new payments are coming there. And you also get the government support of regulations and kind of forcing, mandating certain things. But when it comes to the U.S., it’s a free economy. Free economy, and economy decides and the industry decides, the market decides what is good for them. So the ACH system is, I would say it’s working, but is it perfect? We deal with, and the thing I don’t like about ACH is it’s kind of a lot of fraud.

Fraud is the only thing that, because we did not fix that one, all these things were built like 20, 30 years ago. Checks, again, another high fraudulent payment network. What I like about instant payment is it is authorized, and I have to send that payment, just because you have my routing number, account number. Let’s say I gave my routing number, account number, a Spotify subscription like one year ago, and the payment keeps on going, and I have to keep track of, “Hey, who I’m paying?” And is the subscription, whoever, not whoever, I don’t know.

Just because you have my routing number, account number, the money is, you can take money, but with RTP, FedNow I cannot, that doesn’t happen. I have to push that payment. I have to say, “Make this payment to Elizabeth’s account.” I have to say, “Make this payment to Simon’s account.” I have the control. So that is very important. That is very important because I can control my money. The money is my money, right? No one can take, I can authorize. So that’s why the concepts of the send-only payments, plus we have requests for pay, people can request money, but I have to still authorize.

So these things are two powerful concepts in this instant payment network that I love about, and that is going to eliminate a lot of friction, a lot of fraud and other things that we see in other payment rates. And it is instant and it is faster, it is cheaper. So eventually I will say there’s going to be more and more adoption of instant payment networks, and as I said, other payment rates will survive, but you can start seeing more and more adoption in these two payment networks.

Elizabeth McQuerry:

So you said two payment networks. Where’s Zelle in all of this now? Because I think you’re talking about RTP, and how do we think about that?

Booshan Rengachari:

I don’t consider Zelle as a network. Zelle is an experience. Zelle is a payment experience. Behind the scene they are using other payment networks. To me, Zelle is just a directory and an experience. So over a period of time, as more and more banks adopt RTP, FedNow, I think Zelle will be that experience that behind the scene it is still going to be one of these networks that process that payment. Zelle, we just marked it, we just made it real-time, made it look like it’s all instant. But behind the scene it’s all, at the end of the day, it settles through ACH and wired. So it’s not instant settlement, but I think what I see is, over a period of time Zelle will become just more of an experience layer and have a massive directory that knows, who is-

Elizabeth McQuerry:

I like that characterization of the experience because that’s what the consumer’s looking for, certainly the perception, if not the reality of faster. How long till we have a directory for the other systems?

Booshan Rengachari:

I think that’s a great question, and everybody, we keep asking that point, and I think there is going to be multiple directories. So we have Zelle directory and there is PayPal directory, Venmo, all the directories. And I think the Fed has been talking about the directory. I don’t know when it is going to be available, but I think there could be a directory of directories like that. But I think we want to have one place where I can say, “Hey, Elizabeth account.” And I can say, “Hey, what are the methods available?” I can send with whatever options, you can pick, “Hey, I prefer to be delivered through this way,” and then you get delivered that way.

So I think options are good, too many, I think we are in a country where options are mandated, you need to have always more than one option. Sometimes it’s also not a good thing, and options gives you a way to compete, get a better price, better solutions, better technology, but it always creates more complexity also. And that’s the kind of complex life that we are in. If there is only one payment network, it would have been a totally different story. Now we have two payment networks and then, “Hey, how are they going to interoperate? How are we going to have one common directory that can speak?” I think there have been a lot of things happening in that space.

I think it’ll be too early to talk about what is going to be that one, but I really see a common directory available at some time. I don’t know, maybe 2026 we can see more of that being utilized and real available. Because one thing is, Pay by Bank is going to be an important option that will be available because of the power of RTP, FedNow. One thing that if you look at the volume of payments, primarily on the consumer side, a lot of payments are happening only through the card networks. Again, card is again fraudulent. Now, if you lose your card, if you lose your number, the pin is gone. People can take money, and that’s always not good. In my view, payments should be linked to an identity.

If the payment is coming from me, you should be only after if it identifies it is me, I’m sending that payment, like Apple Pay. Apple Pay, I cannot make a payment without your face ID. That reduces the friction, that reduces the fraud. We should have similar payments across the board, “Hey, you’re initiating the payment. Are you the person who say who you are?” If I’m sending a payment, that person is the payment, the person who he is, if you’re requesting payment. So I think ID will play an important role, and we really don’t have a digital ID in the U.S., and that’s one problem that we have to solve first before we make payments more friction-free, less fraudulent and more adaptable. Address directory is one of the thing that will play a role as well.

Simon Skinner:

So maybe just continuing that thread of the conversation around fraud, and you mentioned and fraud in the context of faster payments and real-time payments. You mentioned earlier that intrinsically there are some advantages over maybe card payments from a fraud perspective in that they are authorized in the instant by the owner of the account, but are there some other fraud vectors that we need to consider when it comes to faster payments?

Booshan Rengachari:

So the only thing I am afraid of fraud is the account takeover. Someone calls my grandma or my mother and then says that, “Hey, I’m pulling from the bank, can you enter this pin?” I think that’s the only fraud I’m worried about. I think even there there are, once you identify through the, even someone takes my account, let’s say my account is taken out by someone else, okay, you can log in, you can do this one, but when it is time to make a payment, I want to see your face and authorize. That person is not going to get authorized because my face is registered to my account. So that account takeover fraud is the only fraud I’m most worried about when we say everything is more instant. But I think even that can be solved with more connecting an ID, the payer’s ID with that account so that we authenticate and make sure it is Booshan who is initiating the payment, not the fraud guy who took over my account.

Simon Skinner:

Yep, yep. We’ve seen in other markets with potentially slightly more mature, faster payment systems, an increase in authorized push payment fraud or authorized push payment scams. Is that something that the U.S. needs to be keeping a careful eye on? We’re seeing some of those markets put in place, rules, regulations to greater protect the consumer. Is that a route that, again, the U.S. should be kind of watching closely?

Booshan Rengachari:

Yeah, I think, see, it is still happening already, even the U.S. we have the authorized push payment, the fraud happening in Zelle. That is very common I think, and I’m an engineer, I will try solving problems. I think these problems are there, but how do you address that problem? If we can ensure, we are two parties, and my bank makes sure I’m the guy who I say I am, and your bank verifies you are the guy who say who you are, and then we are going to operate. Now, if you are fraudulently taking my money, I can go to my bank, “Hey, it’s a fraudulent money.”

Now, your bank should take responsibility because they did not do the KYC properly or whatever. So the way I see this is things have to change. We cannot stop fraud without changing the processes, without changing our approach, without changing the technology around what we are doing. If we keep doing the same thing and then if we keep on patching, “Hey, let’s find a better way.” All we are trying to do here is creating patches, patches, patches, of a way to fix it and adding regulations, putting pressure. Banks are becoming policemen, banks should be doing banking. The identity is the government’s job.

Government is not doing its job, and pushing all these things to the banks and banks are becoming more and more taking over that role. So I think as a country, as an industry, we have to look beyond what we are doing and start thinking about what the future should be. Again, apply first principles. If we have nothing available today, how the future should be like, and if we can start imagining that, and I think we can eliminate all of those frauds, there will not be any fraud. And I think it is possible, certainly possible, but I think it is important that maybe the doggie or the new government, which is going to come up, start thinking about, “Hey, what is the best for the future of the country?” So I think that’s my view of how we can prevent fraud, but I think the current systems continue to encourage more and more fraudulent activities.

Simon Skinner:

So potentially a broader digital ecosystem challenge, and not purely on the bank’s shoulders potentially. Well, speaking of digital ecosystems, another topic that’s prominent this year is open banking. So obviously the CFPB recently finalized its personal financial data rights, or open banking rules, albeit the U.S. has had market-led open banking for some time. But do you see those rules as a stimulus to account to account based payments, perhaps in broader context? You mentioned pay by bank earlier.

Booshan Rengachari:

Yeah, I think I see this as a really important one for the economy. The banking is not going to happen in the branches. The banking is not going to happen in the online platforms. Even in mobile, and some may be mobile. The banking will become more and more integrated in our lifestyle. I go through a drive-through, when I pass through the drive-through and make a purchase of a coffee or a burger, and the payment is going to be part of the journey. I don’t have to take my wallet, I don’t have to take my card to make that payment. Today, you have that kind of experience in Uber and a few other platforms.

You place an order to buy that, and then payment is part of the journey, you really don’t think about, “Hey, I have to make a payment,” you’re just buying, and then it’s over. So likewise, and if you take an insurance process, my insurance process is I’m filing an insurance claim, and then the client gets processed. I don’t have to give my account number, routing number, and receive a check or scan the check, it should be, all will be gone, all will be eliminated. That’s basically a lifestyle banking. I call it a real-time connected, embedded banking.

The banking is real-time and people and businesses are connected, and banking is embedded in those transactions, in those business. So that is the future that we are going to live in. I cannot tell how fast it’s going to happen, but it will happen, and I’m very confident it is going to happen. In order for that to happen, we need our financial services, financial data available through APIs. I think that’s the very important step, and those things are very important, how banks are going to monetize, and I think that will come for a period of time, because all these things are additional cost, additional way to deliver these services.

But I think bank will monetize into offering, “Hey, now you don’t have to go to online platform to make their payment, but you can call the API to make that payment. I’m going to enable Pay by Bank to my merchants. I’m going to make money in enabling that Pay by Bank options to them.” Or the banking will change and say, “Hey, I know I’m real-time, I’m connected. I know my merchant’s in a cash flow. He needs money. He needs to make payments to someone else. I’m going to make an instant loan payment offer. Or he has more cash. I’m going create a quick overnight or 10 days faster deposit, give him a higher interest rate.” So all these things will become more of your real-time services. So in that aspect, I think CFPB move to open it up is really important and very excited about that.

Simon Skinner:

Yeah, you paint a very compelling picture there, your real-time embedded banking. I will look forward to the day when that is a reality. One of the things that we noted in the rules is that it only makes reference to ACH payments and not faster payments, and we’ve seen faster payments as part of open banking and other markets in the EU and in the UK. Do we think that’s a missed opportunity for the U.S. or do we think it’s too early in the journey of faster payments to contemplate having open banking and fast payments together?

Booshan Rengachari:

Yeah, interesting. Yeah, I think we talked about ACH is the highest volume. I think instant payments, it will eventually become part of that rules, but ACH is the largest volume. I think if you do ACH, you’re pretty good with that one. So my guess is I think this is still too early for these regulations to get adopted. Just that getting that adoption itself is going to take a couple of years, and I don’t know with the government changing whether it is going to be passed for some time and then going to reopen, I really don’t know.

But I think given the volume that we are seeing in the instant payments, it’s not a big deal, but I think eventually as the volume increases, it’ll be part of that same open banking framework as well. I think even though CFP may not say instant payments, but when the banks start implementing, they’re going to do for all rates. So they’re not going to just do ACH only, because they know that it’s going to come eventually. So most of the vendors, like we do one API all payments, so it really doesn’t matter for them.

Simon Skinner:

So it might be a consideration for that industry standard setting board in the future as it defines its roadmap.

Booshan Rengachari:

Yes, very true.

Elizabeth McQuerry:

I think we’ve covered quite a bit of territory starting with dusty pipes in the bank modernization journey. I want to just sort of end on this notion of embedded banking, connected banking is connected payments were often referred to, and that’s a pretty powerful concept, that in quite a transformed picture that you’re painting for us, Booshan. I want to give you one last chance to say something more about that and what you’d like to leave the listeners with on that concept.

Booshan Rengachari:

I think we are connected, all of us. Earlier, if you look at it, we all lived in a smaller community, and we exchanged through these notes cash. That’s how we did all of those things, the businesses were all connected, and businesses were local. Now we are more and more digital, we don’t even see where this business is. We don’t even know who we are speaking with, and we are living in a digital world. And in that world, what is more important is, does that business really exist? And the people who I speak with, they are the real people, are the people who I speak with are the people they say who they are.

So I think all these things are coming into this mix with this digital world, and we are having these conversations because it’s all digital. The payments, the banking is the same way. The commerce is digital. The way I see this is our employees, our vendors, our partners, and we are all connected. And when it comes to the payments, when it comes to the banking, if I am sending you an invoice, you can see my invoice in real time. If you are ready to, if you see that approval, I can see that approval in real time, “Hey, the approval is coming.” My bank, I can go to my bank and then say, “Hey, that payment is approved. It’s just going to be paid 30 days later. Can I get a discounted payment?” So that is all real-time data that is shared between all these parties.

So the way I see this is, it’s real-time data, it’s shared in real time, and we are all connected. Without connected, we cannot do this data. And embedded, that’s because banking is not going to happen in the branches, and very much less and less online, and it’s going to happen as part of the systems that we operate. Again, I give an example of you have, let’s say you have a medical billing. They are sending a bill, their system sends you a bill electronically to your account, and then it could be your bank or it could be your other third-party system. They source that bill in real-time. You can dispute that bill in real-time through your bank, and you can approve that bill. Everything is going to be more and more of real-time connected experiences.

So when think about this in a global scale, not only in the U.S. scale, think about, you have the vendors and suppliers in other countries, how can we all bring all these things together? ISO 20022 is a huge move in sharing that data in a better standardized way. Now I can send this data to my vendors and suppliers in other countries. Now I can see what’s being happened, and I can request payment, I can send the bill, I can look at all this data. So it is amazing. But is it going to happen within the next one or two years? No, it is going to take time. These are all possibilities, and it’s all going to be very important for our economy to flourish. But I am saying that this will happen in the next five to 10 years.

Elizabeth McQuerry:

It’s an exciting concept, and I really like that notion of embedded banking. That’s a powerful notion to continue to ponder here, and maybe we’ll have you back in exactly five years to see where we are in the journey. I look forward to that conversation. But thank you so much for sharing views on so many different topics, Booshan. It was great to have you on Payments on Fire. And Simon, thank you for joining us as well, and I think this is unfortunately the time where we have to say until next time, as we say here, keep up the good work and bye for now.

Booshan Rengachari:

Thank you so much. It’s great speaking with both of you. Great conversations. Thank you for having me on the show.