If you have ever sent a wire transfer, you know that the process is fraught with manual processes and a high risk of human error. Fintechs are solving this notoriously painful process with well-designed UI and API-led connections. This is driving the need for financial institutions (FIs) to improve the automation and user experience of their Fedwire Funds Service offerings to compete. In this blog, we’ll share how Payment Manager simplifies and automates the connectivity to the Fed, enabling innovation and efficiency.
What is Fedwire?
Fedwire dates back more than 100 years to when the Fed first began transferring funds between parties via telegraph using Morse code technology. Today, the Federal Reserve calls the Fedwire Funds Service a “real-time gross settlement system that enables participants to initiate funds transfers that are immediate, final, and irrevocable once processed.” Banks, businesses, and government agencies primarily use Fedwire to send large money wires for essential transactions such as a down payment on a house, buying a vehicle, or making a significant investment, among others. In 2020, Fedwire originated more than $840 trillion in wire transfers with an average of $4.57 million per transaction.1
Traditional wire transfers are a slow, costly experience
In the retail banking industry, the average value per transaction may not be as high as the numbers above. However, the process is time-consuming and costly for most FIs. Sending funds via Fedwire usually requires the bank or credit union customer to make a special trip to a physical branch to complete the transaction in person. The approval requires an employee to complete the application form, verify the information, gain approval from a manager or other authorized bank officer, and review with the customer before the wire is then transmitted to the recipient. The process is slow, invites human error, and results in poor customer experience and inefficient use of bank resources.
How fintech is changing the game
Today, however, as consumers turn to new, more convenient financial and payment technologies, traditional FIs like banks and credit unions must find new ways to participate in this marketplace. When ModusBox set out to build Payment Manager, our vision was to create a single pane of glass that standardizes the process for FIs to integrate with and manage any payment channel. Now that ModusBox is an official service provider of Fedwire, we are happy to provide that service under Payment Manager making it one of the most flexible options available for FIs to modernize their wire transfer process.
Payment Manager enables automation and customization without lock-in
Establishing a connection to the Fedwire Funds Service is complex, costly, and time-consuming. It involves dedicated MPLS connections, legacy message queuing software, and a mile of red tape. Payment Manager leverages our established cloud-hosted connection to the Fed and exposes a simple public API, making it easy for innovative FIs to build simpler, more automated Fedwire solutions.
We work with credit unions and banks that are looking to innovate and scale faster by reducing vendor dependencies, building networks across multiple banks, and more. Unfortunately, most of the Fedwire solutions available are canned for a certain use and create a labor-intensive process.
Payment Manager provides the flexibility to build out an automated process flow, allowing the FI to tailor the process to custom fit its business by applying the appropriate limits, conducting OFAC checks and other KYC responsibilities, and simplifying manual approvals only where they are required by the institution’s policy. Payment Manager eliminates the need for human intervention as much as possible, creating a level of efficiency and scalability that can’t be found elsewhere in the market. Payment Manager enables you to create unique customer experiences by building your own UI or exposing the API to fintech partners.
Some exciting things to come
We are excited to continue building new integrations into Payment Manager to create a consistent way for FIs to handle different payment types around the world. Fedwire and ACH have been around forever. However, the financial system continues to evolve with the introduction of technologies like Zelle and forthcoming real-time payment networks such as FedNow Service and the RTP® network from the Clearing House.
If you would like to learn more about Payment Manager and how it can create automated efficiencies in your FI that unlock innovation, read more about it and our banking core integration solution. Or, start a conversation with a member of our team today.