Why It Might Be Time to Jump to Real-Time Transaction Processing
Posted by Andrew Kobialka on September 6, 2022
Credit unions everywhere are considering whether the move to real-time processing of payments makes sense or is even worth the hassle, especially when their processes, systems, and architecture are often entirely batch-based. So, how can the move to real-time processing benefit not only credit union members but credit unions themselves?
We leaned on the insights of 30-year subject matter expert, Matthew K. Lessig, VP of next-generation banking at GoWest Solutions partner FIS to help lay out what’s really at stake when it comes to real-time processing.
Memo posting vs. real-time posting
For credit unions operating on a traditional batch model, transactions are soft-posted as they’re accepted, but they don’t impact account balances until batch processing takes the transactions from theoretical to posted.
This can cause problems for everything from customer satisfaction (due to delays) to fraud management. Not only can real-time processing solve these problems, but it can also lay the foundation for long-term growth.
For credit unions looking to compete with nontraditional financial institutions, here are five key benefits to making the move to real-time processing:
- Funds access via real-time processing
Immediate access means members are more likely to trust credit unions that will give them immediate access to their paychecks and other funds, and credit unions will lose fewer customers to fintech upstarts that offer everything in real time. The ability to view and access transactions in real-time also means that everyone – from the member using their mobile app to the teller and customer service department – sees the same information simultaneously.
- Fraud management improves with real-time processing
Real-time payment processing also offers tremendous benefits when it comes to fraud detection. When transactions are posted in real-time, alerts and notifications also happen in real-time. This means an account with fraudulent activity is spotted right away instead of being discovered during overnight batch processing – a delay that could allow harmful transactions through. Consumers will feel protected, and credit unions will spend less time and resources on fighting fraud. Those resources can be redeployed into the next key benefit — product innovation.
- Product innovation due to real-time processing
When credit unions can reroute resources to focus less on manual processing, they’re free to focus more on innovations. One FIS client saw a decrease in product time-to-market by 90% because real-time processing allowed immediate product configuration and migration – something that wouldn’t have been possible with batch processes. Real-time processing provides immediate, accurate data that can be used by real-time analytics to cross and upsell effectively based on the customer’s personal transaction history and financial behavior.
- It isn’t all or nothing with real-time processing
If the move to real-time processing seems like a huge lift, there’s good news. Credit unions operating on traditional batch processing methodology don’t have to make the move to real-time all at once. The shift can be gradual, starting with processes that make the most sense for each credit union and expanding as benefits become obvious. The good news is that even with this approach, credit unions will see real benefits as real-time access also delivers improvements to other systems, with everything from analytics to application program interfaces (APIs) improving the day-to-day experience of every bank employee and customer. This, in essence, is the real-time ecosystem: a place where you’re taking advantage of the aspects of real-time that make the most sense for you right now, then evolving and adapting as they begin to benefit from other aspects of your credit union’s systems and technology.
- Increased performance, decreased cost with real-time processing
Thanks to real-time processing, not only will credit unions see happier customers, shorter time-to-market, and better fraud management, but they’ll also see lower operational costs across the board as real-time posting of transactions means immediate decisioning of any exceptions encountered with those transactions. Manual intervention gives way to more automation, resulting in a significant reduction and elimination of next day or “day two” processing. The newer technology required for real-time will also free credit unions from managing and synchronizing multiple databases, overseeing aspects of recovery and business continuity, and decreasing overall cost per account.
Especially in the U.S., credit unions have been very successful running on memo posting (or batch processing) for a long time, but the advantages of moving to real-time are tangible, and the time is now. Real-time will make an essential difference as your bank moves forward.
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