Writing the Recipe for Instant Payments

Cheryl Brown

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Mary Gilmeister, the CEO of PaymentsFirst (formerly MACHA), joins the podcast to talk about the organization’s Instant Payments Cookbook, who needs to read it, and how it came together.

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Transcript

Cheryl Brown

Hello and welcome to The Purposeful Banker, the leading commercial banking podcast brought to you by Q2, where we discuss the big topics on the minds of today's best bankers. I'm Cheryl Brown. Welcome to the show.

Today, I have Mary Gilmeister with me on the podcast, and she's here to talk about instant payments and a resource that helps financial institutions navigate the ins and outs of offering instant payments to their customers.

Mary's the president of PaymentsFirst, which is formerly known as MACHA, and that's a not-for-profit trade association that helps its members maintain compliance, improve operational processes, and mitigate fraud and risk. Welcome to the show, Mary.

Mary Gilmeister

Thank you, Cheryl, and thank you for having me.

Cheryl Brown

So you've been in this payments game for a long time, and I know you've been with MACHA/PaymentsFirst for over 30 years, but you also serve on a variety of other boards and committees devoted to payments, right?

Mary Gilmeister

Correct. I've served on direct deposit campaigns for Nacha. I also serve as the chair of the Consumer Financial Exploitation Group. And in addition to that, I am on the advisory board for the Faster Payment Council, and I've also helped the State of Wisconsin and the State of Hawaii implement direct deposit programs.

Cheryl Brown

You've seen some new things come along in your career, and so instant payments, this is just the latest of the new things, right?

Mary Gilmeister

Correct. It is, and it's a big undertaking. I was involved in the Faster Payments Group when it was run by the Federal Reserve Bank and participated on that for a couple of years before we actually got instant payments up and running.

Cheryl Brown

So awesome. Well, so tell me a little bit about PaymentsFirst. I know that there was a merger. I think was it late last year? So you were called MACHA.

Mary Gilmeister

Right. So we actually merged January ... effective January 1, 2025. We combined MACHA and PaymentsFirst together, and we kept the PaymentsFirst name because payments is what we are all about. We're a membership organization, and we provide support and rules interpretation and education for our members.

And we also have a for-profit subsidiary called PAR, Payments Advisory Resource, which we do over 650 risk assessments and audits in a year.

Cheryl Brown

Great. Well, how many financial institutions do you have as part of the PaymentsFirst membership?

Mary Gilmeister

Over a thousand financial institutions as members. We also have third-party senders. We have fintechs. We have processors, correspondent banking, so we have a variety of membership that we work with.

Cheryl Brown

And I assume that's all across the United States.

Mary Gilmeister

We are in many states. We service Wisconsin, Maryland, and we also service Hawaii. We also have South Carolina, Atlanta, Georgia. We have Tennessee, and we also have Alabama.

Cheryl Brown

So, like I said before, suffice it to say you've seen a lot of transformation in the payments industry over the years. And now we have instant payments through RTP and FedNow, which is the first new rail, I guess, in your career maybe. How have you all at PaymentsFirst approached instant payments and how do you support your members in understanding this rail?

Mary Gilmeister

One of the very first things is when instant payments came about, our board of directors said, "We ..." who are made out of financial institutions and industry experts, said, "We have to figure out how to help our members." So we created a faster payments committee that is now actually over 150 institutions can participate.

We meet quarterly, and then we divide into groups that ... subgroups that are working on different things and try to put together information, best practices and share a lot of what they're experiencing. In addition to that, we do offer the accreditation for instant payments, faster payments through Nacha. So we provide training, and in addition to that, we also hold webinars on how to implement FedNow.

One of the other things that we also do is we have conferences throughout our territory in which we use Debbie Smart from Q2 as one of our excellent speakers and knowledgeable. We love Debbie, our members love Debbie to keep them informed as to what's happening in the industry.

Cheryl Brown

Yeah, Debbie, she's one of those people that if I have a payments question, I'm asking Debbie. She's going to be the one who knows. So you guys have put together, you call it the Instant Payments Cookbook, and this is a resource that you guys have put together to ... And it's not just PaymentsFirst, right? There was a collaboration. We'll talk about that more in a minute, but tell me, what is the Instant Payments Cookbook? What is that?

Mary Gilmeister

So, we know that financial institutions have challenges, and there were so many moving parts. What do you need to do to start? Where do you need to start? What are all these ... It's a new terminology. We're dealing with ISO 20022, which is a new concept with a lot of new information.

So we did actually ... with our Faster Payments Committee, we actually did one-on-one interviews, a small group of us did and said, "What do you need to know?" And we developed use cases that actually were very beneficial to our members that they could use that use case and then implement it. So we have legal, you have compliance, all the regulations.

There's not just one place to go, like with the ACH Network, where you have the natural rules. You have other, you have RTP, you have FedNow, and they're not interoperable. So you have a lot of work to do on explaining when they're similar, when they're different. We also have a lot of technology questions. What to ask your vendor? And one of the neat things that we did put in there was FI Insights.

So was with a financial institution who said, "This really isn't anywhere, but here's what you need to ask, and here's what we learn." When you receive, you can't ask ... you can't do a Request for Payment, when you're in the receive-only mode. So those were little tidbits throughout the book that we actually have created that add the insights.

Cheryl Brown

Thanks to Debbie, I've actually had a primer on instant payments for a couple of years now. It's like even just understanding the ecosystem of all of the players that have to take part. It's not, "Hey, hook your financial institution up to this rail and go." There are steps in the process, right? There's an ecosystem that has to be understood. I mean, does the cookbook go to that? I mean, does it start at that level? It's like, "Here's what's what the ecosystem is, and then we go down from there?"

Mary Gilmeister

Yes, it definitely does. We define all the players, who they are, what role do they play in the ecosystem of instant payments. And when we created the cookbook, we included every party so that everybody had an input as to, "Here's what you need to know, here's what you need to ask your vendor, here's what you need to ask your correspondent bank."

I mean, liquidity and settlement is 24/7/365. You’ve got to be prepared and know what reports to look at or what reports are available to you. So we cover all of that. We have resources. We have links to the RTP rules. We have links to the Regulatory Operating Circular Aid so that if you wanted all of that detail, it is available to you.

Cheryl Brown

Awesome.

Mary Gilmeister

And then the cookbook wouldn't be a cookbook without recipes.

Cheryl Brown

Yeah. That was my next question. It's like, so what do we have recipes for in there? Is that how you guys are referencing maybe like the use cases?

Mary Gilmeister

Correct. We actually ... The actual recipes start you out like you have a morning breakfast or a morning drink, and it goes throughout the day. As you grow your instant payment system, here are some recipes from all of our different areas, and it just adds some excitement or light reading and fun to a manual.

Cheryl Brown

Well, one thing that we have really focused on, or a value prop that we've identified here at Q2 for instant payments, is really the ability for that invoice information or that payment information to travel on the rail with the payment so that you don't have to have this separate email invoice or this separate postal mail invoice. Do you guys go into some of the value props in your cookbook like that?

Mary Gilmeister

Oh yeah, definitely. We definitely do. And for example, my institution at first didn't offer instant payments, so I went and opened up an account at one of our members that did, so we could get that information, and we explain that in the cookbook as to, "Here's what you need to get, here's what could be included."

We get into also fraud tools and accept without posting and what does that mean, and communicating back that, "We're not going to give this ... your account holder immediate credit because we're going to do some more research for it." So all of that's included.

We have ... Actually, since this publication, we've also developed quick reference cards for instant payments so you don't have to page through all that information. It's shortened. And we provide a sample authorization form to say, "I didn't authorize this to come out of my account, or I want to refuse this credit." We've created forms that our members have used in instant payments, so it's readily available to them.

Cheryl Brown

So that's awesome. It's not just a manual, but you have these actual on-the-job tools that someone can just keep at their desk and quick reference. That's wonderful. Well, we talked a little bit earlier about the collaboration, and there's a long list of collaborators that went into creating the cookbook. What was that like? And can you just talk a little bit about the collaboration process that you guys use?

Mary Gilmeister

So we asked for volunteers, and we developed the outline of the book and having, for example, a smaller credit union, a very large financial institution that said, "Here's all the rich data you have and what you can get." And just the exchange of information. We had OPN. They were instrumental in saying, "Here's what you need to do." Even getting ... before you get started, right, you need to ask the vendor all these questions.

Settlement was another issue. How are you settling? And if you're on both rails, which we recommend, that you have to know how that works, what type of reports. And you need to involve everybody in your financial institutions. So, even the smaller institutions, we created questions that your account holders might have. When they walk up to the teller window and say, "What is ..." They're not going to say instant payments, but they're going to say, "How can I get this money quicker?" Or we really worked through.

It was really, really a good group to put all this information in it. And our staff, they actually worked on gathering all the information from everybody and putting it into a format that was a very easy read, but a lot of great information because I think in the beginning everybody thought instant payments was a product versus the FedNow and RTP, they're not a product, it's a rail that you're moving money on.

Cheryl Brown

Right. And we think that instant payments, the use of the rail is going to pick up more once more businesses understand what it can mean for their organization. How it can ... There's that value prop that we talked about earlier about the information moving, but also just true real-time payments, you really getting the money into the bank faster.

I think that that starts with education. There's going to need to be education on the part of the financial institution to educate their customers. And I assume that the cookbook kind of gives some tips and tricks about how best to do that?

Mary Gilmeister

It does, and we give you examples of what are the benefits of instant payments. And we even went to as far as developing a use case for a financial institution to do their loan collections, their delinquent loan collections that you can automatically debit their account and don't have to worry about ... You're having that money credited and it works. So they look at that use case. We've looked at expense reports for employees and paying off their expenses immediately if they have credit cards or whatever the case may be. So, we have a full range of use cases as a reference.

And then how to implement that. How to actually ... What do you need to do? We have pictures of a phone and what your phone app might look like. So if I want to offer instant payments through a mobile app, we have pictures of what that mobile app will look like. So we get into that far detail with that.

Cheryl Brown

What kind of response have you gotten from the members who have used the ... Are you getting some feedback from them?

Mary Gilmeister

Yes. Matter of fact, the committee actually said, "I wish I would have had this implemented." And we've gotten a lot of great feedback. Our members have said, "This is just a great wealth of information."

And quite a few of our members, as we know, are in receive-only mode. And so they're like, "This is really helpful for me to go to the next step." And we talk about strategic planning, informing your board, how to inform your board. And we do a lot with the board reports, too, that you have to have policies and procedures, and we have sample policies that your board or a committee of your board should actually approve.

Cheryl Brown

So it sounds like it's really a soup to nuts resource.

Mary Gilmeister

We have a couple of pages where you can just download the resources, and the forms are in a Word document that you can actually adjust to your financial institution and how you want to word it.

Cheryl Brown

Yeah, I know when Debbie found out about the cookbook, she said, "We've ... Cheryl, we've got to get this out. We've got to help get it out to everybody we can. Let's get them on the podcast." Because we've written a couple of white papers, a couple of resources on how to get started with instant payments, but we were never going to get to this depth. And so Debbie was adamant. She's like, "We've got to spread it far and wide and just get it to as many people as we can." So, who needs to read this?

Mary Gilmeister

I think you need to have a committee that you develop within your institution. And the whole committee … you have marketing, because we have marketing chips in there, you need your legal and your compliance. You need the frontline people who are going to ... or your call center people and definitely operations.

And there's a difference because there is no day two of operations, right. There isn't. It's not like ACH, where you get in a transaction, and then you have to deal with it and return it the next day if it's not postable.

So there's a lot of opportunity, and you really need to have put together a committee and have them each pass that around for each one to read or read their certain area, because they're going to have to understand it from the very beginning, as well. They're going to have to explain it to the board. You're going to have to explain it to your executive team and bring in operations and frontline. This is a big ... It took us a while to get even direct deposit going. And so I think we need to really get everybody involved.

And I think now, with the executive summary from President Trump about treasury checks and all the fraud that is in treasury checks and all checks actually including businesses, you're going to want to know that that payment is there and that you have availability to use those funds immediately. And I think that's going to be a turning stone for instant payments. And we look at disasters of the Maui fires, or North Carolina had the hurricanes and people need those funds immediately. And I think the federal government said, "We're going to go to instant payments. We're going to go to quicker payments and do away with checks and all the check fraud that is currently happening today."

So this allows you to start to get on board, and we will continue to work with our members on developing more fraud tools, what's available, policies and procedures, and education of materials. So it's going to evolve, but you need to start from somewhere, but it's going to happen.

Cheryl Brown

And you mentioned fraud and check fraud, and it's something that we just talked about on our very last podcast is how check fraud is still so high. And who's using checks? Well, it's businesses, right? Consumers aren't using checks unless they have to pay a business using checks. But I think one of the things that we've heard from many financial institutions is this concern about fraud because it is an instant payment. And what do we do? And so, do you guys have a section in the cookbook about fraud?

Mary Gilmeister

We do. And what tools are available. And with RTP and FedNow, there are different things that you have to do to report that fraud. It's very, very minimal. And we talk about you have to set exposure limits and you have to not give it to every customer that comes around. You're going to want to make sure that you have your controls in place. You're monitoring your file limits. You don't want to give everybody a million dollars to have access.

So we do address all of those areas within the actual toolkit. And then we also have a little bit of a risk assessment. What do you do to address the risk? Here are some questions, broad questions of you need to figure this out. So ask this question, rate this, do cross-channel risk. So we do include a little bit of a risk assessment in there as well.

Cheryl Brown

Once again, those good, tangible tools that people can take back to their financial institution. And you mentioned small institutions, and you mentioned big institutions. Is this cookbook applicable for the smallest credit union all the way up to a top 10 bank?

Mary Gilmeister

It is. I mean, we had Wintrust, which was their larger financial institution, and we had a smaller credit union, and they even brought up the fact of, "You need to ask when you're processing these transactions because sometimes credit unions use the same number. So how are you going to work around that?" So, we addressed it on all scales as to what you need to be doing.

Cheryl Brown

Well, this sounds like a great resource, Mary, and you know, I appreciate you coming on to talk a little bit about it. I also appreciate that PaymentsFirst is offering the Instant Payments Cookbook to our podcast listeners at a discount. So if you click the link in the show notes and you use promo code Q22025, that's Q22025, you can get the cookbook for $200, which is $50 off the already discounted member price.

So listeners, if you or someone in your financial institution has been tasked with digging in and understanding instant payments and what it means for your organization and your customers, this is where you're going to find answers. So Mary, thank you so much. I appreciate your time today.

Mary Gilmeister

Thank you very much. And get instant payments.

Cheryl Brown

Yeah, get on board and start sending, right?

Mary Gilmeister

Exactly.

Cheryl Brown

Well, that's it for another episode of The Purposeful Banker. Just a reminder to our listeners to go to q2.com/podsurvey and give us your thoughts on our podcast content. Your input is so valuable to help us know that we're giving you the conversations and the content that you will find valuable. The link is in the show notes, as well. And as always, you can subscribe to the show wherever you listen to podcasts, including YouTube, Apple, and Spotify. And you can see our archive of podcasts at hub.q2.com/podcasts. Until next time, this is Cheryl Brown and you've been listening to The Purposeful Banker.