Open Banking for The Enterprise: Building for Scale and Reliability

Hear from Open Banking payment provider Trustly's new collaborative agreement with Fifth Third Bank to provide real-time payment rails to its embedded finance platform Newline. Get insights into growing real-time processing, account-to-account transfers and address emerging compliance challenges.


Transcription:

John Adams (00:09):

Great. Thank you everybody for attending. Thank you for doing the panel. One of the things we're looking at here is the growth of real-time payments and how that impacts open banking and the project that they worked on. Guess we'll start with some statistics that I found before we came in that according to a recent data from the clearinghouse shows in 2024, the payment value on its RTP network total 246 billion, over 343 million transactions with 847 financial institutions. The other major realtime network, the Fed Now service has more than 1200 financial institutions registered more than $38.2 billion in payments in 2024. There are several potential use cases that are emerging to make faster payments, more compelling for consumers and businesses that will boost adoption. But there are still hurdles, there are still difficulties for when there's no mandate in the US and there countries like Brazil and India. So faster payments, instant payment processing has to grow more organically through business cases. So that's why Dan and Jim are here. So I thought we would start first welcome and then thanks. Could you describe your roles at your company and what you're working on?

Dan Dall'Asta (01:44):

Sure. So my name is Dan Dall'Asta. I lead the revenue organization for a Newline by Fifth Third. New line for all intents and purposes is the dedicated partner and sponsor banking group of Fifth Third Bank. It is the combination of a legacy embedded payments business for Fifth Third, as well as the acquisition of a company named Rize in 2023. Rize was a banking as a service provider where I was A COO. That acquisition was almost two years ago. So new line, we take care of all bin sponsorship on the issuing and acquiring side, third party payment processing. And then since that acquisition we have an API platform that enables other embedded payment transaction and banking use cases. And last year turned on ACH wire, RTP accessible via the API. And yeah, we look forward to continue making strong partnerships in the space with leading providers, obviously such as Trustly, which maybe is a nice segue,

Craig McDonald (02:42):

But Well, thank you very much. So my name is Craig McDonald and I run the Go-to-market organization for trust here in North America. So Trust is an open banking provider that utilizes, we have roughly 10,000 bank connections across North America and Europe as well as Brazil and in Australia. And trust utilizes those connections to be able to obtain consumer permission data, so that's personal identifiable information, bank account information, transactional information, and then we utilize that to either provide data endpoints for external third parties, merchants for account linking or underwriting or as well as KYC. So we augment that as well. But the main thing that we're doing here in North America is really around payments. So we utilize ACH and we use EFT in Canada, but we use the combination of open banking where we have strong consumer authentication along with that data that I mentioned, to be able to provide a new and better form of a debit product for merchants across various industries so we can provide that to them in terms of higher approval rates and lower costs. We also are one of the largest initiators of real-time payment transactions from a disbursement perspective here in North America. And we're wired into both RTP and Fed Now transactions. So we've been doing this for the past seven years and we're at scale, and so we're very excited to partner with Fifth Third and New Line to be able to bring broader distribution and added value to new line's customers.

John Adams (04:22):

The partnership, how did it come together and what was some of the thinking behind it and how has it worked?

Dan Dall'Asta (04:28):

Yeah, happy to start. I think some of our team members have been closed for quite some time with the trust lead crew. Once the new line API platform was stood up, it started to meet some of the asks of larger client types and trust lead was already in discussions with some of our sales folks and our technical sales folks. And so I think as we approach larger enterprise partnerships for us to vet prospects, it's important that we believe in the sophistication of the team as well as their adherence to the right types of regulatory and financial crimes elements to make sure we have longstanding partnerships, we have great respect for the trust lead team, and then based on the use cases they wanted to support and based on their licensure, we were able to support what right now is starting off with an ODFI relationship, ACH and wire RTP will be coming live soon to support some of their gaming use cases, online gaming use cases as well as some e-commerce. And then we also have, because a lot of our clients ultimately may be able to use some of Trustly's capabilities, also a bit of a partner relationship in the other direction where we can support Trustly as they go out to their clients to address those payment needs via API. And then as our clients are looking for different open banking solutions, Trustly has a great suite that we're able to turn onto our commercial base.

John Adams (05:58):

You mentioned gaming is one of the use cases that's come up a couple of times in sessions. What makes that a good fit for open banking, faster payment processing, and what are some of the opportunities there and also what are some of the risks that need to be managed?

Craig McDonald (06:15):

Well, Trustly has been active from the very beginning in sports betting and iGaming we're now moving into casinos as well, brick and mortar casinos I should say. So we were active ever since New Jersey went live. And all of the major operators, DraftKings, FanDuel, MGM, Caesars Interactive, et cetera, they all standardize in terms of open banking and account to account payments on Trustfully. So I think one of the things was that at the beginning, of course you couldn't use a card and so we were there at the right time at the right place to be able to provide value to that particular vertical. But then our solution set has grown and been augmented over time again, leveraging online banking. So we're also now providing not only guaranteed payments and those guaranteed payments, the nice thing about what we do is they have a concentration.

(07:06):

So they have large players that want to deposit a large dollar value. In those cases, we provide a much better experience for the player as well as for the operator than a bank wire. And of course, debit cards, credit cards are capped in terms of the transaction value they can support. We also provide augmented KYC, which is very important from a regulatory perspective for these operators. So we can really provide a gold standard in terms of both combining secure consumer authentication as they log into their bank. And we combine that with name matching what we get from the merchant, and we have bank C-I-P-P-I-I, and then we can utilize all of that to be able to correlate SSN and DOB and really lock that down at the same time that what we provide is a method of payment, which is more economical than card payments. And again, it can range from average transaction value of $150 in that particular vertical all the way up to $500,000. So we can span the range. And then of course once we have that account and routing number, that's also the pointer for us to be able to do real time disbursements, which is also something very important for the operators. It provides confidence and it creates a virtuous cycle. So it's been a very successful vertical for trust and we provide a great deal of value in that space.

Dan Dall'Asta (08:29):

And from our perspective, I mean as our risk appetite and aperture evolves as we're staying up to date with different regulatory approvals across the country, we look to partner with best in class providers that are going that we can trust. We'll have the right type of onboarding procedures in place because the last thing of course we want is any bad actor, the reduction of as many bad actors as possible. It's hard to, you can't eliminate fraud or eliminate ill actors a hundred percent of the time, but working with folks like Trustly and this burgeoning space, they are meeting the customer where they are with payment methods that effectively weren't there to begin with. And again, this is, we want to work with the clients that will be there and support those. So it was definitely a space as we saw, open up from a regulatory perspective rather than head rush in with any provider. We wanted to work with the right folks who knew how to operate in this space.

John Adams (09:26):

And what is the, if you're dealing with much faster processing, what are some of the challenges in terms of managing fraud and preventing fraud and how can they be met and how is this partnership with making that happen?

Dan Dall'Asta (09:39):

Yeah, I think the first thing is setting up or making sure, one, we have the right oversight and Trustly has the right procedures to, the first way to try and keep fraud out of the system is stop it before they get onboarded. So as Craig mentioned, the right KYB and KYC procedures, just to make sure that you're bringing folks in that are known actors in the financial system. And then just the right levels of transaction monitoring. There's a two line of defense, whereas Trustly maintains first line and we're overseeing that as well. So it takes a lot of right smart people in the right seats and the right tools and technology to effectuate it. But yeah, it's something that both of our firms have already demonstrating a strong expertise in.

Craig McDonald (10:23):

And when we're doing payouts, the merchant themselves, the operators, they're doing their own screening before they actually push it out. And then we have other mechanisms. In many cases what we do is we only allow an RTP to be paid out to the same account that was utilized for the paying. So we're trying to tighten that whole loop, if you will.

John Adams (10:48):

This project was a bit different in that it was an enterprise scale. What are some of the differences there and what have you learned that might be useful for other banks or fintechs that are looking at the same thing?

Dan Dall'Asta (11:03):

Yeah, happy to start. I mean, I think the evolution really since the crisis. You've seen, I talked giving the talk the other day and people like which crisis? I forget that there've been many, many ones, but really since oh 8, 0 9, I think as FinTech has started to emerge and being a more trusted source or a trusted brand for many consumers and small businesses than some of the legacy banks, I think as those partnerships have emerged, what most of those fintechs had started we're smaller. And so I think banks would able to come in and say, well, if you want to operate, this is the exact set of criteria to operate under. And then just trusting that those smaller fintechs are able to do it. I think at the enterprise scale, that model won't be the most effective because actually with firms like Trustly and other large enterprises that we've worked with, they may know their businesses and their end consumers better than the bank will.

(11:59):

And so we have in many cases a delegation model where obviously we have ultimate oversight. There are certain things that we have to make sure are in place, but now working with sophisticated teams like Trustly and others, they are able to put in place potentially even more safeguards and more measures all under the right oversight model. But ultimately at that enterprise scale, things maybe take longer. You have more people in the room, but a lot of smart people in the room to make sure these programs are stood up versus I think, and again, it's a firm like trustfully and other large enterprises are less, everyone wants growth, but they obviously want growth met with long-term viability. Whereas I think a lot of the earlier stage startups have to grow quarter to quarter and so are willing or will prioritize growth over safety all the time versus larger enterprises. We're able to trust that we can meet the right balance of safety and growth to make sure that there's integrity in the system.

Craig McDonald (12:59):

There's so many learnings that we've had along the way over the last seven years. I think there's so many things have to come into place. You have to have enterprise grade connectivity with all the financial institutions. That means that those connections have to be secure. You need to have a high data retrieval rate, a high data quality rate in terms of account routing, number that you're pulling, et cetera, to be able to effectuate the transactions. It has been, I'd say a huge experience curve that we've had to climb because really the trick that we're providing is we're providing a debit product that has to have an approval rate, which is at or above cards with a cost, which is much lower than what you have in the marketplace. So to be able to pull that off at scale and still drive a margin has been a huge learning curve for us.

(13:50):

But we're now there and we're providing that at enterprise scale. So that's been a big learning curve I think that we've had to climb. The other thing is that when we're doing paying through ACH, we're doing RTP on the way out, there's also been everything related to being able to move the funds from various accounts, our RTP bank versus the bank that our operators are working with. So we've had to make sure that we can move the funds and have them in the right place at the right time, and then manage all of the store and forward capabilities when the receiving bank is doing maintenance with RTP. So I mean, the list goes on and on and on and on. But yeah, I think at this point it's been a seven year journey and now we feel very confident to be able to provide this at scale. And Trustly has a number of enterprise merchants today that we're servicing such as at t and Verizon and T-Mobile and Charter and Cox and eBay and Facebook Meta. So we know what it's like to be able to adhere to those kind of exacting standards of those merchants, and it's been a journey I would say.

John Adams (15:02):

We've touched on this a little bit. You mentioned your customer and such. What are some of the compliance issues with a project like this and how you'd be able to manage them?

Dan Dall'Asta (15:15):

Yeah, I mean, I'd say I'd move away from issues. I mean, I think so far the partnership has been working quite well. I mean, I think we take the appropriate amount of time upfront to stand up the program, make sure the risks and the roles and responsibilities are very clear from the outset over what are Trustly's merchants responsibilities, what's trust responsible for and what's Fifth Third responsible for? So setting up that program in the right way, setting up the right cadence in terms of periodic check-ins and periodic audits, those are the things that are most important is setting those up upfront, making sure we have the right agreement rather than ad hoc trying to go in and out and see if the program's working well. Setting up those standards upfront enables us to make sure there's the right level of visibility and transparency into both the transactions happening as well as the overall program management.

(16:11):

So there's a lot of folks on the Fifth Third side both on the financial crimes and compliance side that have eyeballs on the program, make sure that as we're setting up those initial contracts that everyone is very clear about what's delegated and what's the responsibility of the bank. So yeah, knock on wood, so far it's been terrific. All the teams have been working very well together. But again, back to the enterprise, to enterprise, you're operating with a different level of sophistication than small bank to enterprise or large bank to small FinTech. I think when you have two larger sophisticated institutions, everyone is aligned to again have longstanding. We tell folks, if you're just trying to get to market fastest, don't work with us. Work with us because you want a 10, 20 year partnership because that's the type of rigor that we're going to bring to the table, and that's who the types of clients we're looking to work with.

John Adams (17:07):

Now, account to account payments, pay by bank, that's a product that's existed for a long time, but it seems to be picking up steam over the past year or so. What are some of the reasons you think are driving that and what makes it a good opportunity to be enabling that type of transaction now?

Craig McDonald (17:26):

Yeah, I can take that. We believe that it is just a more secure method of payment because again, at the beginning you have secure consumer authentication, they have to log into online banking, and then once you have that along with permission access to the underlying data, then you have similar visibility on that consumer in terms of their ability to pay and their fraud characteristics. So you're able to provide the market with a guaranteed form of debit through account to account, which hasn't been the case to date. Of course you have huge volumes of ACH, but in certain use cases you need to have a guarantee. So trust provides that guarantee various forms, whether we stand in front of all ACH returns or just simply NSF and admin returns, and we can provide that to merchants with an approval rate that's at or above their existing rates of authorization that they have with cards at a price point which is much lower. So that is really kind of the unlock and what you have in this guaranteed A in the model that trust provides is that you collapse kind of the multi-party network into just two or three parties. So it's more secure, it's more efficient, it's higher approval rate, and it's lower cost. So we think that that has over time the ability to provide value to multiple merchant use cases and payment use cases.

John Adams (19:00):

And what if there are two or three big takeaways from this project that you've learned that you think of interest to other banks and payment companies, what would they be from?

Dan Dall'Asta (19:14):

Yeah, I mean I think this partnership further opened our eyes to what is an ongoing trend, which is again, there's going to be more verticals we'll be opening up. I think finding the right partners that can be where the customer is, but run the program effectively is something that, again, I anticipate more 10 years ago a lot of verticals or industries that were at risk or now a bit more open. So I think again, rather than from our side, we won't be rushing into any vertical that may used to have been any restricted or prohibited list, but as risk appetite and aperture changes, it's important to make sure you're partnered with the right folks. Again, we are doing it from a behind the scenes. We are powering our partners from new lines partners to be able to enable the right payment use cases for these verticals. And I think the account to account is certainly a channel that is opening up more and more, and so it's important for FIS that want to remain relevant to make sure you're there for all these different payment channels that'll continue to permeate and not just be beholden to payment channels that you hope won't change based on economics use. Have to make sure that as new highways are open, that you're a participant and not just hanging in the past.

Craig McDonald (20:43):

A couple things I would say that account to account has the benefits, which I described earlier, but it's just one product. And so I think that the benefit and what we realize the value in the relationship with Fifth, third and New Line is that they have comprehensive relationships and they're adding value to their treasury customers, and we can just play a part of that. But from a trustee perspective, that's really incredible value to be able to have an opportunity to partner with Fifth Third and just be able to augment those existing relationships in addition to kind of the backend relationships where we're working together in an ODFI and RTP capacity. So we're super excited about this relationship and we think that's really the biggest takeaway and learning from our perspective.

John Adams (21:27):

We have some time left if there's questions, if anybody the audience has questions? Yes.

Audience Member Joey Bisato (21:53):

Hi, there you go. I'm Joey Bisato with American Banker. One thing we talk about with account to account, it's cheaper. Like you mentioned, it can't be more secure because it's push, but getting consumers to adopt it in terms of not using a credit card is a challenge. So any thoughts there on how banks or financial institutions can get more customers to use the payment rail?

Craig McDonald (22:21):

Yeah, please start. It's the million dollar question, right? Because the people have this thing in their pocket called a debit card. It works pretty well. So really the path to be able to getting consumer adoption is going to be in certain use cases that we've talked about with gaming. We provide inherent value up and above a card. So in some use cases, a card can't be utilized, but where a card can be utilized, then what we realize is that the method of payment has to be at a price point such that the economics are opened up for the entities that are involved, the merchant specifically, that they have such savings vis-a-vis what they would normally pay with a card so they can divert those economics into increased loyalty. So it is kind of very similar to what you would see with the Target Circle card.

(23:08):

And what we're providing is really a target circle card. In a box, it's easy button, you can turnkey it, approval rates are where they need to be, the conversion rates are going to be where they need to be, but the price point is going to be such that the economics are opened up so they can enhance existing loyalty programs to get people to adopt. And that's really the trick. In addition to that, we also have, again, permission data and the transactional information that we have, which is cleansed and categorized and can be provided in a responsible way to merchants for them to understand their consumers better, and then they can again utilize that to enhance loyalty programs and be more targeted. So it's all about incentives. Thank you.

Audience Member 2 (23:55):

Was there someone else that wanted to ask a question? I don't want to, Dan. Let's just assume hypothetically that your bank was on Visa flexible credential or what these guys reported last week for MasterCard, one flexible credential. The idea there is that all account types for the bank could be routed through Visa or MasterCards network with the customer being able to flexibly choose which one was the default card, but maybe with a digital wallet change it dynamically on the fly. In the case of flexible credential from Visa, it was described as debit, credit, buy now, pay later, maybe pay by bank, A to A, whatever it might be. If that was the case, do you see a scenario where you would support trust lease credentials, even if they were delivered or a part of the suite of options to a consumer through your digital banking app?

Dan Dall'Asta (25:05):

Yeah, great question, and I'm probably not the best person to answer on behalf of Fifth Thirds direct clients.

Audience Member 2 (25:12):

It's hypothetical.

Dan Dall'Asta (25:13):

Hypothetical

Audience Member 2 (25:14):

To deal.

Dan Dall'Asta (25:15):

Well. I think new line mean we look to just be infrastructure to power. We want to be powering the rails or powering the mechanisms for consumers and businesses. Who do they trust to help? Whether it's the routing, whether it's choosing the payment type, we want to be there to support our partners who gained the trust over certain customer segments. So I think we, again, from new line's perspective, we won't look to shift things over one way or another. We get, obviously we are incentivized by volume of transactions. We pick great partners for certain use cases and certain verticals to help drive transaction volume to us. I mean, obviously we're not just giving away tech for nothing. And so as Trustfully and other partners of ours builds more curated solutions, we're certain customer types, we won't want to be in a position to look to dissuade that consumer from doing what is for them the right trusted way to initiate that payment. Does that answer the question?

Audience Member 2 (26:28):

It does.

(26:29):

Craig, do you see yourself Trustly being a Switzerland here? If MasterCard or MasterCard one or Visa flexible credentials wants to deliver, you'll connect.

Craig McDonald (26:44):

Of course, but it goes back to the previous question, which is what are the network fees and overlays and what are the merchant economics? So if it waters down that economic arbitrage, then you don't have the ability to provide value to the consumer and then you won't get adoption. So it becomes circular if though they can convey it in a way that actually provides those economic benefits flow downstream to the merchant. Oh, yeah. Right, of course, because it means volume, it means distribution at a flip of the switch. So yes,

Audience Member 2 (27:19):

For all right,

Craig McDonald (27:21):

For all,

Audience Member 2 (27:22):

It can carry a whole new transaction type, even if it's not branded and it's really not clearing and settlement as we know it. It's their tokenization service, and they're claiming that if you take their current tokenization fees, it would come in and look like a very expensive ACH, but certainly not interchange.

Craig McDonald (27:41):

Yes. So it depends.

Audience Member 2 (27:45):

Thank you.

John Adams (27:47):

Well, great. Well, we are at time. Thank you. Thank you both for joining us today. It was a great discussion and we appreciate your time and thank you everybody for attending our session.