Payments Unplugged: Insights from Nacha’s Smarter Payments Conference with Plaid

Recently, Cross River’s Head of Product, Luca Cosentino spoke at the Nacha Smarter Payments Conference in Miami alongside Rahul Hampole, Head of Payments at Plaid. The discussion focused on the rapidly evolving landscape of payments in the U.S. and the imminent shift towards a multi-rail ecosystem. In this new era, diverse payment methods such as ACH transfers, instant payment methods (RTP® and FedNow®), and emerging innovations will coexist, each chosen based on situational appropriateness. This paradigm shift moves away from a one-size-fits-all approach, empowering customers with unprecedented flexibility and control. Here are some key takeaways from the conference:

1. Payment composability is powering new use cases

This wave of payments is all about composability, which supports more and more complex new use cases by orchestrating various pay-in and pay-out options to design optimal workflows. Consider a scenario where RTP® is used to instantly verify an account, an ACH pull funds a digital wallet, and Visa Direct transfers money to another wallet. This intricate orchestration meets users where they are, but creating a multi-rail use case is full of invisible traps. Each operation—account verification, fund availability checks, transaction origination, ledger updates, settlement, and reconciliation—requires meticulous attention to detail. Each rail comes with its own technological, compliance, and operational nuances, not to mention distinct mechanisms for handling failed payments, reversals, and edge cases.  

The silver lining is that payment platforms are becoming more comprehensive, simplifying this complexity. If you are building a payment product, you should care about reducing the number of intermediaries to enhance the reliability of the payment flow. Hence, picking a one-stop-shop that supports your use case becomes a differentiated factor.  

2. Payment interoperability is imminent, just unevenly distributed

As the payment landscape diversifies, the industry consensus is clear: payments should be interoperable. However, the design and implementation of interoperability will not be uniform and will be only available to those who work with a payment platform that makes interoperability a priority.

What does interoperability mean in practical terms?  

It starts with a simple user need: Alice wants to send money to Bob, while retaining controls over transaction cost and speed. Currently, payment systems often require users to choose the payment rail upfront, a far cry from how users intuitively think about making payments. Intuitively, the process should resemble sending a letter: express your speed/cost/insurance/etc. preferences, and the system handles the rest for you.

Plaid has made strides in this direction by developing a unified API that integrates RTP®, FedNow®, and ACH. And they did so by leveraging Cross River’s single Instant Payment API, which allows full interoperability between RTP® and FedNow®. That means you can access any endpoint on both networks, without any additional integration lift. For more technical details, you can explore resources from Cross River and Plaid.

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3. Cards benefit customers, fintechs, and issuers

The notion that "every company will be a card company" might seem far-fetched, but the value proposition is compelling. The prevailing strategy—address the most pressing customer needs, then monetize or foster loyalty through a card—is widely adopted yet seldom discussed openly. At Nacha, it was evident that almost every participant either had a card program or was planning to launch one.

The ease and flexibility of launching a card program have attracted diverse players, including those who previously would not have considered it. This trend underscores the growing importance of cards in enhancing customer engagement and driving business growth, especially now that the card is not only a ‘send payment’ tool, but also a ‘receive payment’ address.

4. Fintech-banking partnerships will evolve

The collaboration between banks and fintech companies is entering a new phase, characterized by a clear division of roles and reduced intermediation. Banks are focusing on ledgering, compliance, and simplified money movement, while fintechs concentrate on multi-rail strategies, user experience, and market outreach.  

At Cross River, we pride ourselves on our strong partnerships with fintechs. Our collaboration with Plaid exemplifies this synergy, combining their unique insights with our proprietary and flexible technological capabilities to create innovative payment solutions. Through tight collaboration, we can design solutions that satisfy the new payment experiences that our customers want to bring to the market.  

Predictions for the future

Rahul and Luca made two key predictions during the Nacha session:

1. From Rahul: within a year, at least one major retailer will test pay-by-bank for online purchases. This could be a pivotal moment for broader e-commerce adoption.

2. From Luca: micropayments will emerge as an alternative to subscriptions, offering a more flexible payment model for digital content.

The multi-rail payment system is here to stay, and with customer choice at the forefront, the possibilities are limitless. We can expect to see more innovative payment methods emerge, blurring the lines between current practices and future innovations. This evolution represents a win-win scenario for all stakeholders in the payments ecosystem.