How the Payments Industry Is Changing: A Conversation with BHMI

This episode was recorded at the Money 20/20 event in 2019. On this episode, PaymentsJournal’s editor-in-chief, Ryan McEndarfer, sat down with Marc Vaughn, Concourse Sales Director at BHMI.

PaymentsJournal:

Welcome to the PaymentsJournal podcast. I’m your host, Ryan Mac, and today’s episode was recorded at the Money 2020 event 2019. Now during this episode, I’m going to be speaking with Marc Vaughn who is the Concourse Sales Director at BHMI. Now, Marc has been in the payments industry for over 40 years. So we’re going to be taking a look at the evolutions and changes that he’s seen within the payments industry. And we’re also going to be getting into how BHMI is working with the payments industry on a global scale. So without any further delay, let’s start the show.

So Marc, it’s fantastic to talk with you today. Now, I know that you’ve been active in the payments industry for more than 40 years. So I’m guessing that you’ve seen a lot of change in the industry.  And so, I’m curious and if you could help enlighten our audience, what are some of the biggest and most monumental changes that you’re seeing in the payments industry today?

Marc Vaughn:

Thank you, Ryan and I appreciate the time today. You are right about seeing a lot of change and I began putting ATM systems back in the 70s. And in fact, I replaced offline ATM system to use track three, to account for the balances of the accounts. So it tells you how we’ve moved and been able to go to an online system and beyond with some of the things I’ve seen in the ATMs of today. But the innovations that I’ve seen are probably similar innovations that most people in America have seen is in the area of mobile phones and in first personal computers and then in mobile phones.  The idea and ability to go to the internet and connect to a phone that has that much power and that much application capability is incredible. And so it’s been a catalyst for the industry to be able to take advantage of that digital technology digital phone and put it into the business environment where it can be used and stretched and we’ve seen the younger generation take advantage of it but I also think folks that are the 40s and even in the 60s are taking advantage of that technology. So with that, you also see micro payments is being a very important part of that growth of transactions and even tap and pay you could have been paid by a card now I’ve used it myself. So those transactions will eventually show the momentum of real time payments. And in that payment structure, the fact is that you’ll see many more payments that have to be addressed and the adoption of that.  We’ve seen faster payments as part of this overall evolution of payments. And the initial part of faster payments that we saw in action was in the UK initially.  In 2008, we saw the faster payments program in the UK begin and also internationally, the New Payments Platform in Australia, short name of NPP, in earnest in 2018.  And in the United States, we saw faster payments and same day payments in 2016 and then RTP in 2017 along with P2P networks like Zelle that were later this year. So shortly after that, we all saw the card networks get out involved, including Visa Direct and Mastercard Send, to be able to push money to accounts in a real time fashion. We then saw the recent announcement of the Federal Reserve; they’re going to be participating in a program called FedNow, that will go live within a few years. So we’re going to see more and more faster payments.  It’s going to be C2C or consumer to consumer, P2P payments, as well as B2C as well as consumer to business payments, which will be a form of bill pay. So that kind of gives you a feel for what I see is changed over the last 40 years. Ryan I hope that answered your question.

PaymentsJournal:

No, it certainly does. And thank you very much for that Marc. You know, I think you’re completely right there. You know, it really is amazing to see how the payments industry is changing and the rapid pace of changing that it’s going through but as we know, you know, with change that is obviously going to bring up some challenges here. So I’m really curious from your perspective and from BHMI’s experience, what are some of the biggest challenges that you see companies facing today?

Vaughn:

Yes, there is. I mentioned it earlier I talked about transaction volume but one of the biggest challenges will be the sheer volume of transactions. We talked about micro payments. We talked about other types of adoption of digital technology with the mobile phone that will always drive to payments. And if you don’t have a software environment and a hardware environment that is able to handle these transaction loads, you’re going to be behind the trend so to speak or be able to handle these alternate payment mechanisms. Another key challenge is able to support new payment methods. For instance, card based /account based payments as well as card based payments will need to be supported. In some cases, they will have to be supported in different environments. You have alternate reference numbers such as telephone and email addresses that also have to be taken into consideration and have directory services for.  Based on what has happened during these last years, I think there you say many types of new digital transactions. And this means companies will need to have a flexible system that will support these new upcoming payment methods and the transactions that are tied to them. Also, as we discussed earlier, faster payments is gaining momentum, and companies need to ensure they can handle a flexible system to perform a real time processing. Currently, most legacy systems are based on batch processing by moving to a continuous passing environment standard application standard, excuse me, companies will not be able to create a system that is faster but they also be able to be more efficient and the overall capacity.

PaymentsJournal:

Excellent. So now let’s talk about faster payments here. Obviously a big topic within the payments industry. Now you mentioned at the tail end of your last answer there that most legacy applications are based on batch processing. I could imagine that this is going to be a significant barrier for companies that want to be successful in this modern world of payments that we’re living in. So, can you tell me more about what you’re seeing in this particular area?

Vaughn:

Sure, absolutely. To address the changes occurred in the payments industry, many companies have focused on frontend systems, which makes sense because they connect directly to the mobile phone that we talked about earlier, or those endpoints that are were transactions are being originated. All these transactions ultimately, though, need to be processed for a back end by a back end, and have back end processes tied to them to ensure that they’re audited and reconciled properly. This will be very difficult for a batch system to be able to move and address these new environmental changes in the marketplace. And you can consist of multiple levels, legacy systems to be able to try to work together to be able to meet these needs. Therefore, they don’t have an “always on” environment that will allow them to simply consume increased volume of transactions and leveraging new value the digital world.

PaymentsJournal:

That’s certainly very interesting there, Marc. So I know that BHMI is best known as the creator of Concourse Financial Software Suite. And there’s been a lot of press lately about how it enables companies to support faster payments. So perhaps you could enlighten me and our audience to a little bit more about Concourse?

Vaughn:

Yes, I will be glad to and you mentioned faster payments—when you say that I think about the architecture of Concourse first, and then I’ll talk about that and then talk a little bit about the application modules. So let me talk about the architecture. Unlike traditional back office systems that we talked about earlier, Concourse continuously loads data and from all transaction sources and process that data as it arrives and places the data into a centralized repository. It then instantly performs back office processing, as soon as the data arrives. As a result of that, companies have real-time access to the data and processing activity. They can view the complete transactions, they can look at the current life cycles of every transaction. A real important example of that would be, as we talked about earlier, the NPP system in Australia; you only get three business days to do a dispute process, meaning that you have to have the data available in an immediate timeframe.

Also, when we talked about Concourse, we talk about how you need flexibility. With that flexibility, we provide a modern, dynamic rules engine. That rules engine supports requirements that customers will have to address, and it has to meet their client’s needs and requirements. So I think the architectural feature of the rules engine, along with the continuous processing and continuous loading, is very important. In the Concourse Financial Software Suite, the application modules and integrated software include transactional research, as I mentioned earlier, settlement processing, dispute management, reconciliation, and fee calculations. So those four modules in a package provide the overall suite and you can use the modules as needed as you go forward with your application installation.

PaymentsJournal:

Excellent. Thank you for that overview there, Marc. Now, I wanted to ask you about some recent news I’ve been seeing about clients in the United States and internationally that have selected Concourse for faster payments. Can you enlighten us to about some of those recent announcements?

Vaughn:

Sure, so you may have seen the announcement about Early Warning selecting Concourse for the Zelle network. All Zelle transactions will be accepted by Concourse in a near real time fashion and stored in a Concourse repository. In fact, Early Warning licensed the whole suite of Concourse products, but their initial implementation will be to address dispute processing and then they will be able to look at reconciliation, as well as settlement processing as an audit function for the overall Zelle network. The next one you may have noticed is in Australia.  Concourse is being used by Cuscal.  Concourse’s role within Cuscal is similar to the role that is played by Zelle. A new payment platform, as I mentioned earlier, is a real time payment network in Australia. Concourse is being used by Cuscal for providing NPP gateway services for their clients. Concourse is a repository for research facilities and the database of record for all NPP transactions by the Cuscal clients.  With Concourse, Cuscal able to provide real time updates for all money movement activities. Concourse is also being used by the NPP payment disputes involving Concourse clients. In addition, Concourse is being used as the dispute and settlement system for the non NPP transactions within Cuscal, including Visa and moving forward next year with Mastercard settlement. Another example is Portugal-based Payshop, which is a subsidiary of Banco CTT and provides Europe a wide range of payment services. Payshop is using Concourse to provide a unified back office environment for all their payment services. This includes cashless transactions and cross border payments, which, Concourse supports via the ISO 20022 payments standard for SEPA, which is the Single European Payment Area.

PaymentsJournal:

Wonderful know that certainly very exciting news. You know, obviously, based upon the clients that you mentioned there, it would obviously appear that Concourse is a very well suited offer the modern world of payments, and I certainly mean the world of payments because you had mentioned Portugal, you had mentioned Australia and obviously the United States here. So now I’m curious in terms of just additional resources here, you know, obviously as an experienced payment software provider, you know what industry councils and payments advocacy groups, would you recommend to our audience?

Vaughn:

That’s a great question. BHMI is involved in a variety of councils and events. As, as of late with the last year that we were focused on the evolution of modern payments first comes to mind is BHMI is a member of the Faster Payments Council.  In fact, I just got back from an autumn council meeting and in Boston. BHMI is also a member of the ATPC, which is the American Transaction Processing Coalition which is the influential group of payment processors and solution providers, that is helping the lead away from the payment industry from a regulatory perspective. BHMI also intends to participate in many other payment events much like Money 2020. I also want to mention that BHMI has published a variety of white papers. We recently did a research brief with the Mercator Advisory Group called “Is Your Back Office Keeping Up With the World of Payments”. I would like to invite everyone listening to the podcast download is complimentary copy, which is within the white papers section of the PaymentsJournal website. It gives great information about the current payments landscape.

PaymentsJournal:

I think that that that’s fantastic there. And yes, just as the last kind of reminder to our audience that they do have the availability to be able to download that white paper from PaymentsJournal.com. I certainly read through it is a fantastic, fantastic read from not only a resource perspective. So, Marc, thank you so much for taking the time today for speaking to me about BHMI and kind of your insight to this changing and quickly changing payments industry that we have.

Vaughn:

Oh, thank you very much, Ryan. I really appreciate your time today.

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