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Crafting a corporate payment strategy: A blueprint for growth

Featured speakers:

Matt Ribbens
Head of Treasury Product Management
First Citizens Bank

Jason Mills
Head of Merchant Services
First Citizens Bank

Amit Gandhi
Associate Partner
McKinsey & Company

Matt Ribbens: Welcome everybody to our webinar today called "Crafting a corporate payment strategy: A blueprint for growth." We're excited to have you here and joining us today. It's a very exciting time. December's a great time of year to be thinking about what's coming next in 2026, and this is a great topic to launch us. We're going to be talking about strategies for optimizing cash flow, managing working capital and building a payment approach that supports flexibility, efficiency and, ultimately, long term business growth. So let's get started by introducing our panel today.

I am pleased to be joined by my fellow panelists here on the call. Jason Mills, who leads up our merchant services, heads up our our business line there at First Citizens, Amit Gandhi, who is an associate partner in the US payments practice for McKinsey and Company and the owner of the US payments map. And I am Matt Ribbens, head of treasury management for product management at First Citizens.

If we go ahead to the next slide, we'll talk a little bit about what we're hoping to cover with you today. So in the next 45 minutes, we've got a pretty packed agenda, but we are trying to cover several topics, particularly what to think about when developing a payment strategy, or when to think about that more correctly. Steps to achieve strategic goals that you have as a business and how payments fits into that. We'll talk a little bit about the benefits of card acceptance.

So Jason will talk a little bit more in-depth as well as Amit. And then we'll talk a little bit about how the payments landscape is evolving and changing not only in the consumer space but also in the business space. So if most of your businesses revolve around B2B, we'll be covering that as well as if you have a lot of consumer-related or retail exposure in your business. What are the experience things that are evolving in the markets you need to be aware of, and how does that play into your strategy? And finally, we'll wrap up with the key takeaways and next steps.

So, now that we've got, I think, most of our audience logged in, I do want to kind of turn it over to Jason to walk us through a quick poll, kind of get your feedback on what you're hoping to learn today and kind of what are some of the big pain points you're faced with. So, Jason, let me turn it to you.

Jason Mills: Well, thanks, Matt, and thanks, everyone who's joined the call for our discussion today. Like Matt said, let's start, with a quick poll to understand your biggest payment strategy challenges. So you'll see a question appear on your screen. What is the biggest challenge you face when it comes to payments? If you can select from one of the options, we'll give it a couple of seconds for responses to come in.

A couple of seconds.

Matt: It's tough if you only get to pick one. Right, Jason?

Jason: Right. Right. Must be some tough decisions out there too.

Matt: I agree.

Jason: All right. Hopefully, the results will be coming in here shortly.

All right. There we go. So, yeah, pretty good disbursement of responses there. But, moving away from checks looks like it's coming in at number one, and tied for second is adopting new payment options and all of the above. So that's great. It's perfect. Those are all that we hope to cover today in our session. So let's go ahead and let's begin. So let's start with how businesses can take a more strategic approach to corporate payments. So with that, I'll turn it back over to you, Matt.

Matt: Thanks, Jason. So, yeah, let's dive into payments. It's just in general for your business. And, couple things we'd want to just highlight here is, you know, one of the big questions about creating a payment strategy is when is the right time to do that? So as a business, you've probably been, oftentimes as you're growing, just trying to grow as quickly as possible and accepting all forms of payment, making payments however is easy, convenient, you know, maybe not a lot of thought put into it. It's very normal. It's not unusual to start that way.

And as you grow, you know, as you add some more, you know, controls and AP departments, AR departments, then you start looking a little bit more selectively at, you know, where where are your payments coming in from, where are you seeing delays, where are you seeing opportunities.

And that's kind of what we're hoping to talk about. So this is really the shift that you want to make from being more reactive to being more proactive in managing your payments inflows and outflows and really understanding how that relates or interrelates to your overall business growth.

Again, payments directly influence the efficiency of your finance operations and cash flows, obviously. But one thing I don't want to lose in that too is also customer experience. So as you know, many times as your business is growing, maybe, you know, not having an option to pay becomes sort of like a nice to have, but then quickly becomes a need to have or an encumbrance and folks from doing business with you. So it's important to understand how the landscape is evolving and when you need to, for your business, really invest in maybe a different capability.

And, again, as I mentioned, just moving from active to passive. So one of the steps we can talk about is just, you know, starting with what what are you receiving today. Is it mostly checks? Is it mostly, if it's consumer payments, are you seeing the the volume shift a little bit from, you know, check to card? Are you seeing electronic payments being inquired about? Are you doing direct debits of accounts?

You know, what are your customers willing to accept? And then, you know, I think in the passive state, you know, early on, maybe before you have a formulated strategy, it's oftentimes you're reacting to what a customer is requesting and maybe not looking at what that means from a long-term cost perspective or even if that's the right approach for your business.

And, again, understanding also what your competition may be doing. We also see cases of where businesses have transformed, you know, the capabilities maybe in digital payments and really seeing a nice lift in their business being responsive to what clients are looking for.

So key indicators that it's time to ask—to act. Excuse me. So if you have a process internally where you, you know, you're having to have a discussion about adding staff. We see this a lot with check processing. If there's a lot of manual invoice handling, there's a lot of checks as we talked about.

That was the number one issue in the poll, getting rid of paper checks. So we know we both create a lot in the business world and receive a lot. So when we're starting to see our costs go up because of checks, is it the right time to start pushing back and looking at digital payments?

Customer dissatisfaction. If you see abandoned carts, if you see folks that are, you know, not happy with the options to pay because maybe it's challenging, are you really listening to that voice of the client and looking at what the payment component has to do with that overall equation?

And then, finally, the rising cost. So, again, or delays in payments received. So as we look at some of the challenges there, you may be accepting a lot of different forms of payment. Maybe you want to be more strategic about that, maybe aligning it to one partner or looking at consolidating multiple payment options down to one, or maybe it's expanding payment options out to more capabilities in the digital space or even accepting things that are more on the emerging side, like Real-Time Payments or starting to look at some of those.

So it's a good time. If you're feeling any of those pain points today, you're at the right session. This is the right time to talk about it. We've got some great detail to share with you.

So I'd like to turn it over now to Amit just to share a little bit of what are some of the challenges. If it was so easy, Amit, everybody would do it. Right? So what are what are the challenges here?

Amit Gandhi: Yeah. Thanks a lot, Matt. I think I'm going hit on the poll results quite a few times in the call today because that's exactly what, you know, we see on our side as well in McKinsey, and that's exactly what we have, what we have today for you all.

So if you look at the, you know, the challenges to the adoption on the digital side, I want to lay out, like, two comparisons. I think if you look at the consumer side, we have seen, like, you know, consumers adopting digital channels in a very quick manner. And, of course, you know, there was this COVID period where everyone was forced to use digital, you know, channels for a lot of reasons. But, you know, the transition there has been, I would say, smooth and quick.

And then you compare that with what has happened on the commercial side or the business side. And I think we've seen some transition over to digital, you know, channels, but the transition has been slow. So what are the reasons for that?

I think the first and the foremost reason is that there is supplier's reluctance to move off from checks. And I think that's what you guys also, you know, talked about in the poll. But that to us is the fundamental reason on why we don't see a lot more digital transactions on the B2B side.

And if I think about the reasons for that, I think it's probably driven by the comfort, you know, that's there with checks, the control that you have when you're dealing with a small or a mid-tier client and the legacy workflows that are attached. Like, you know, you're not using the the best-in-class ERP systems and therefore there's some fragmentation, and it's, you know, easy to route those transactions to checks.

And the sad part, or the reality, is that because the suppliers dictate the payments acceptance rules, biased generally, you know, even if they are motivated to use some other payment methods, that does not translate into into any form of digital payment adoption.

And of course, you know, the industry is trying to move away from the, you know, the model which kind of incentivizes suppliers more than buyers, but we have not seen that traction there on that front.

The second reason that I would mention is the processing fee or the pricing, which is again a big component of what why we don't see digital adoption on the B2B side. That ranks number second. It's on 48% of the folks saying that that's a big barrier.

And I think that's true for most, you know, suppliers where the margins are super thin. You don't have the ability to, you know, pay 2% to 3% or whatever the cost of a transaction on a card is in order to get that transaction or money quicker.

The last one that I want to touch on is the fragmentation that, you know, really exist on the ERP side, which kind of creates the onboarding challenges for a lot of firms.

And we've seen that playing out in the middle market for the most part. And I think that's also one of the contributing factors to what where things are today and, you know, why they haven't moved quickly.

Matt: One of the things I've neglected to mention at the beginning was if you do have questions for those of you participating in the call today, feel free to include them in the Q&A. We will be answering those as we can during the session, but we're also happy to follow up.

One of the questions I had, Amit, just on this slide is, you know, with the rise in check fraud, I see security and fraud concerns still seem to be pretty high up from moving away from checks, I guess, to digital.

But I don't know if this audience—I mean, you know, we continue to see study after study that talks about how check fraud continues to be on the rise and sort of the weakest point in the chain. So I'm surprised to see digital payments having some of that concern, but do you see that a lot as well in your research?

Amit: That's a good question, Matt. So I would say—I would try to answer that in two parts. The first one is that if you look at the, you know, nuanced view of what is the fraud rate on checks and what is the fraud rate on other transactions, the data suggests that the fraud attempts at least on the checks, are far greater than, you know, what you see on ACH, RTP and virtual cards combined. That's the reality, you can't move away from that, of course. You know, we're dealing with something else, which I want to talk about next.

I think there is a perception gap and there's an awareness gap with digital transactions and check transactions. If you think about the perception gap, a lot of business owners still believe that, you know, digital transactions come with a risk, and therefore they don't try to onboard new payment channels. That's number one.

And the second thing is that there's awareness gap, which I mentioned. You know, there are facts on what is a fraud attempt, you know, rate for different kind of payment transactions, different payment instruments. And if people are not aware, they again, you know, they don't try to get closer to those more efficient payment instruments.

I would say that if you try to look at the digital, you know, channels and things like tokenization, multi-factor authentication and all of that, you are in a much more secure environment than using manual processes for, you know, for check transactions.

Matt: Very good point. Let's keep the dialogue going on the next slide. We'll talk a little bit here just about what do you do to achieve these strategic goals. And if we go to the next slide, I'll just highlight four areas for you that I think are practical steps that you can start taking.

So as I mentioned a little earlier in the call, let's start by looking at your volume. Look at your activity. This is not only on the inbound receiving side but also on the payable side. So as you're sending payments out, as Amit mentioned earlier, the suppliers typically have a lot of control in terms of, you know, the way that they make payments happen.

So let's review, you know, your own internal operations, look at your buyers and your suppliers, how you're paying them, how you're being paid. Identify opportunities if you haven't already. I know we've talked to a few clients. I was on a call the other day with one that recently transitioned to lockbox, and they continue to need to accept checks. And they've accepted that as part of their strategy, but they've actively, in this transition, really worked to get more activity moved to ACH and use the transition as an opportunity to re-engage those folks that send payments to them to encourage them to use electronic payments—in this case, ACH.

Strengthening and fraud prevention and controls. Again, while checks continue to be out there, we also just heard Amit talk about the attempts are actually more than most of all the digital payments combined. So that's a scary thought, and it's something that we do need as an industry to continue to address.

And a couple of tools that we offer, things like Positive Pay—particularly, I would recommend Payee Positive Pay in many cases because there's a real big need to ensure that as check washing may occur that there's a way to capture that or to to notify you if there's an exception if somebody's tried to modify an item that you've mailed.

In addition to that, ACH is also another area where we have fraud controls that can be layered on top. And then, we'll talk a little bit more about merchant and card, but those also have some inherent fraud protection capabilities as well.

And that kind of leads into the third point here of cards. We'll talk a little bit more about, I know we've got some data to show about consumer preference for card, but we continue to see growth in the commercial card space too.

So as you look at making payments out to other suppliers, is a card on an invoice an option—something that you'd like to pay out via card? It does give you the opportunity to extend payment terms beyond the 30 days with the the float provided from the card. Are you looking at those opportunities to, again, optimize your working capital?

And then last, this doesn't happen overnight. And I think, you know, it's evidenced by the fact that checks are still out there. What can you do to kind of influence and take the next steps in shifting your payment strategy?

And that could incorporate the move toward identifying, if you have multiple payment providers that you're working with, can you do some consolidation?

Can you look at digital payments? Have you really evaluated through voice of the client what your clients would like to do in terms of making payments? And if you could offer these payment types, would it give you a lift in terms of overall revenue to the business? Even if processing costs are a little more expensive, is there a net benefit to the company to considering doing that or moving to one of these emerging payments?

So those are the four practical tips for building a payment strategy. I will go into the next slide to talk a little bit more about card acceptance, and I'll turn it over back to Jason here and Amit.

Jason: All right. Thanks, Matt. Yeah. So yeah, why does it matter? Why is it important to make sure that cards are a part of your payment strategy?

You know, all of us as consumers, and our consumer experience, has changed over the last several years, certainly since the pandemic. And consumer experiences with like online retailers and born digital companies have really raised the bar for how we as consumers and cardholders and even as businesses expect to interact and transact business. Card acceptance is expected in many areas, but it's not always offered as a payment method. It's important that, for card payments or really any payments, is that there is a frictionless payment experience and that you're really elevating customer expectations in their experience.

So if you think of even like digital wallets or instant payment experiences or embedded payments within apps at the checkout experience, customers are wanting a seamless payment experience that's secure, that's convenient, but it's also instantaneous. And so businesses, we've seen this in our business here at First Citizens, but businesses that are able to adapt and change their payment strategies to really react to customer demand have been the big winners. From a considerations perspective—we kind of hit on this earlier, Amit and Matt—but in some of the previous slide, calls are always an important consideration. You know, I think it was it was number two in the list of of top concerns of the digital or a payment strategy.

But there's been a lot of changes recently in the card space for the last couple of years really coming out—of the or during the pandemic, coming out of the pandemic—where we're seeing shifts of who bears the cost of the transaction, of the card transaction.

Historically, it was the the business or the merchant that was absorbing those costs, and we're seeing in certain markets and verticals where that cost is now being shifted to the cardholder or to the consumer.

We're also seeing, you know, businesses implement whether it's surcharging programs or convenience-fee programs, cash-discounting approaches, or even dual-pricing programs where a cash price and a card price is displayed separately. That's relatively new, from a mainstream perspective, that we've seen over the last couple of years. And then further, you've got states starting to weigh in too from a legislative perspective around ultimately who is responsible for the cost of card acceptance.

It's really important to choose the right partner for your merchant services program or even your overall payments approach.

And banks have an important role to play in that—reliable partner, not only for traditional banking services but also for payments, and we offer a simplified approach to relationship management and support.

And so we also wanted to look in the next couple of slides, trends about what to look out for. So Amit's gonna share some data from McKinsey that shows the the growth of card use over the last couple of years. We've also got some information around card acceptance in traditional and nontraditional spaces or verticals, like mortgage payments or utilities or rent payments.

And then also we're going to go into the payments map showing some regional or industry-specific trends. So with that, maybe let's start with looking at card spend at the POS. And with that, Amit, I guess, what's the data telling us here in this slide?

Amit: Yep. The data is telling us a lot of things, Jason. But I'll try to like, you know, keep it short and maybe, you know, meaningful for the audience.

I think if I look at this macro picture, first of all, this page is all about the consumer spend across different payment instruments. This is what, you know, we're trying to show. And the macro picture, if you look at the bird's-eye view, this is that card dominance is continuing to strengthen. If you look at the 2019 number and 2029, we've seen a massive 10% jump, or we will see a massive 10% jump across the 10 years in just the card share of the total consumer spend. And the contrary part of that is that cash is continuing to go to down, and that will continue going forward as well. And we can argue, like, you know, the the rate of decline of cash.

But the big story there is that consumers are going to choose other payment methods over cash driven by the convenience that, you know, the other payment methods offer—specifically cards—the rewards that they're you know, that they have, and the experiences that are far better than, you know, pulling out, you know, cash and then, you know, trying to get the right amount of change from the other person.

And the and the third thing is that if you look at the total pie, which is the total spend that consumers are making at the POS, that is also expected to grow meaningfully. And you know, if you look at the number from 2019 to 2029, we've seen a massive 4 trillion jump. So the card share is not just like, you know, driven by the fact that you're getting some kind of shared attrition from cash. It's also that the pie is getting bigger, and therefore cash is growing on that side as well.

And then last comment on the other payment method because we keep hearing about the threat from, you know, other instruments such as BNPL, POS lending.

If you compare that, you know, time series, that share is between 5 to 7%. It's not changing by a huge margin. So to say that cards are being threatened by BNPL is some kind of an overstatement here. We do see some kind of use cases of BNPL playing out really well in favor of, you know, those instruments over cards. But it's by far going to remain a very limited kind of payment instrument for most part.

And I will maybe, you know, pause here by making one small comment that the longer-term trend reinforces digital migration. That's the overall theme that, you know, we think is going to play out.

It has largely played out because of COVID in the last 5 years. It will continue moreso in the next 5, and that will more or less benefit the card payments and the players who are operating around that. So I think that's the big theme from the data page that you have on the screen.

Matt: And Amit, this is good. I think, you know, you mentioned digital payments growing, but you can see that digital's listed here, I think, probably as card. And so do you see more adoption of debit or credit driving some of this growth, or is it a combination of both?

Amit: That's a good question, Matt. So I would say that it's a combination of both, again, depending on, you know, which vertical you're looking for.

But if you try to split out that trend of carded option into two parts, the one where you had COVID in the initial period from 2020 to 2022, you had a lot of digital adoption coming from debit cards because consumers like to like, you know, keep it safe. They don't spend money when you're in a crisis situation.

And, you know, debit card spend grew by more than 10%. And then as things normalized and went back to how it was in pre-COVID era, consumers started using credit like, you know, they were used to, and therefore, we saw that jump in credit over debit. Going forward, we expect a mix of both, but more in favor of credit and less in favor of debit for the next 5 years.

Matt: Thank you.

Jason: So Amit, this is a great snapshot of trends at the point of sale. But what about in the digital space? What trends are you seeing for digital payments?

Amit: Yeah. Jason, I would say that's a very good segueway to the next page, where we kind of split out the overall spend, the consumer spend into digital and in person. And, you know, it's fascinating to see what we expect going forward in terms of these numbers as well. As I mentioned, digital will continue to outpace the in-person growth. That has happened in the last 5 years, and there's nothing different that we will see in the next 5.

Digital is expected to grow two to three times faster than in person, and it will shift from 25% of the spend portion in 2019 to roughly 45% in 2029. So that's the amount of change that we will see.

And then, as you think about the digital payments getting traction, you think about the beneficiary of that, and I think cards will dominate digital payments. And we also have that as, like, you know, as a number there, but the card share of digital C2B POS has been around 90%. It will remain so. And therefore, that is, in a way, reinforcing that digital growth directly benefits card networks and issuers and all the parties who are involved in that kind of payments value chain.

The other thing I want to mention, which is very important as well, is that the growth at an overall level and even within digital will be robust, but it will slow down. We saw a double-digit growth in the last 5 years on the digital side. We do expect that growth to moderate to a 7 to 8% range for the next 5 years.

And that's not very different because, you know, we would expect some kind of normalization to play out, given that the COVID years had a lot of noise in terms of adoption toward the digital side. So yeah, digital is expected to be the engine of growth, and we expect cards to be the beneficiary, and all of that will play out as we see in the numbers as well.

Jason: And so on this slide, Amit, it's—I think it's also interesting kind of shifting away from digital for a second—but if you look at total, you know, penetration of card acceptance by from a vertical perspective, you really think most of us kind of take for granted if we walk in anywhere or for most online retailers' cards. It's just there. It's ubiquitous.

But there are certain verticals, or industries, where card is still underpenetrated.

If you think about certainly the B2B space and the challenges there, we've kind of already talked about from a card perspective or from a pricing perspective and then a platform perspective. But if you also think about construction and trade businesses, nonprofits, religious organizations, professional services like attorneys, accountants, architects and engineering firms, I mean, there's still tremendous opportunity to further grow the card business where it needs to be part of an overall payment strategy.

And we're also seeing from the standpoint of the card networks, like the Visas and the Mastercards of the world, they're being more aggressive in some of these industries where the card acceptance isn't quite there.

And so whether they're offering interchange incentives or other operational incentives for businesses to upgrade or to modernize their payment acceptance processes, It's been a really interesting dynamic to see the card brands really put a lot of focus and energy and also dollars behind some of the incentives to really drive further penetration into some of these underpenetrated verticals. I didn't know if you had any other comments here related to this slide and what we're seeing from an industry-specific perspective.

Amit: I think you put it very well, Jason. I don't have anything to add specifically on this page.

Jason: Okay. So maybe on the next page, I think we've got one more slide.

Maybe if I can turn this one over to you, Amit, from how we're seeing, net-new spend is really being driven from a card perspective. So again, I kind of mentioned we kind of think cards is ubiquitous and card acceptance is kind of commonplace. But by not having cards, it ultimately can decrease overall spend. So if you wanna share some additional context and color related to this data.

Amit: Sure. I think, if you try to bifurcate the card, you know, spend profiles into two segments, there is a transact review and then there's a revolvers view. I'm just trying to, like, you know, lay out why cards are important and why, you know, we think that spend would decrease by 60% as we see from, you know, the survey that we ran. The transactors really love the rewards.

So if you don't have credit card as an option at the checkout, there is no reason for them to at times to even go and, you know, do that purchase. Maybe, you know, there are other ways that they can do that through some other card. The revolvers are there because they don't have access to credit line through any other payment instrument. Cards are the only—credit cards are the only way they can access, you know, they can buy, you know, do that purchase.

So if you think about that, the industry ratio between that is, like, 60, 70% of the card, you know, spend comes from the revolvers, and then, you know, there's a 40% share coming from transactors. If you think of cards being, you know, the driver of growth and with all the features that they have, if you remove that portion from the equation, you're obviously going to see some kind of drop on the spend side as well, and that is what is reflected in this page. So it's very dramatic, but it kind of makes sense if you join the dots that are there around card spending daily.

Jason: Yep. So it's clear that credit cards help drive new sales for merchants, but want to bring Matt back into the conversation. And, Matt, you know, beyond cards, what are you seeing as some of the other payment preferences that consumers have to pay merchants or bill payment for?

Matt: Yeah, Jason. Again, point of sale, I think a lot of us, as we've experienced in our own lives, we like to pull out the card. But in the business world, you know, if we go to the next slide, I think we'll talk a little bit about the landscape. We'll actually kind of tee this up to talk about consumers first.

So we did mention again their preference for card, but we've continued to see—and this is a great study, I would recommend it to anybody, it's The Diary of Consumer Payment Choice that the Fed does annually—it's got a lot of great detail on how customers self report that they pay bills or pay for services that they're using.

And so again, it's also through the lens of a consumer where they may decide they're, you know, they're using ACH, but they're doing that through bill pay through their bank, for example.

But you can see in this slide that there's a continued growth in the volume of payments not only moving to card, but there's still continued volume of paying with cash. Some people, again, for smaller-dollar transactions, still just don't want to use that debit card or credit card, so there's still cash out there. And there's still some other, again, payments that we see that are kind of evolving. Amit, let me bring you in because you mentioned sort of mobile payments and sort of what we're seeing there too. And you can see that the purple bar, it's sort of steady, but it's kind of grown a bit since the pandemic as well. So would love to kind of get your take on where you see the market going.

Amit: Yeah. Thanks, Matt. So I think, this is again you know, we've seen the the the real data behind digital in person, and that's probably driving most of the growth here. But I would make two small comments here.

The first is that I think you touched on the cash share being small but still going to, you know, persist. That's absolutely right. We are not predicting the end of cash, even in our forecast. Cash is going to be there. It will be important for a lot of transactions, but those transactions will be small of the total pie. And I think that will still be the case.

The second is on the mobile wallets. If you think about Apple Pay, you know, Venmo, Zelle, all of them are now becoming mainstream. There is a lot of familiarity across generations, by the way, in using these kind of newer tech payment types, which is not the case, let's say, you know, 5, 7 years back.

And the underscore there would be that this is all benefiting card rails. It's not just that, you know, you're using Apple Pay and that's a different payment method than using something else. But the underlying infrastructure, the underlying payment, is all card transaction. So I think the pie is obviously, you know, a lot bigger on the digital side, but the shift is still, like, undergoing. It is not completely done.

And I would say that gives out the ability to open up strategic opportunities for banks, merchants, any player who is operating to deliver a seamless omnichannel experience for the consumers that they aspire.

Matt: Yeah. There's so much, we've seen a lot in the Q and A actually today just about generational differences and preferences. But, you know, it's interesting. I think if you even want to do this exercise around the table in your own offices, you know, just ask around the room who has cash in their wallet.

And, you know, people still carry cash, and there's still those moments that they prefer to use that. And so it's interesting. As a business, you can't quite eliminate that, and we've actually seen a lot of growth and interest in the cash-vault services, smart safes, things that we offer as well today, just particularly for those clients that that still have cash-paying customers. So consumers really are gonna continue to evolve their preferences.

The one thing I think that's obvious from this chart other than checks declining is that none of these have gone away since 2016 either. So we just continue to add some new different nuances and experiences. And you bring up a great point of what you can do with digital and integrating that into an overall experience, is really fascinating. And I think Jason may have touched on it too just in embedded payments, where you get clients that are sort of nonfinancial companies that are building an experience, and they want to embed the payment experience like the Ubers of the world.

So you just close the car door, you walk out and the payment is initiated where there's no handing over of a card physically anymore. It's all moved to digital.

Well, let's go to the next slide to talk a little bit about some of you are more in the business-to-business payment space. And, Amit, you guys, as well know, and I think throughout the industry, the payments map has been sort of the gold standard for where the market is evolving to. So you've got some great data here to share, and I'll turn it over to you.

Amit: I'm going to go back to what, you know, we saw on the prior pages, Matt. And I think a lot of people said that they are having issues with the movement away from checks.

That's very true. It's reflective of the industry data that we manage as well. So just as the consumer expectations have evolved, we are seeing some kind of paddles on the business side as well. Although I would say, it's much more gradual than what we had anticipated.

The the bottom line there is that there are companies that are trying to reassess the inefficiencies of checks, and they want to increasingly turn over to the digital payment methods. Of course, you know, there are barriers to that.

But if you look at the industry standpoint and where we are, check usage will continue to decline, although it will taper off gradually because of the amount of checks that are left in the industry and also, like, the kind of reluctance that we see.

But on the other hand, the good news is that ACH will be the major beneficiary for this transition. Most of the checks that are moving away from the industry are actually getting digitized in the form of ACH transactions.

And I would say there are two or three different reasons for that. A, you know, ACH is much easier to scale. You already have all your connections with the bank. It's lower cost. You know, you pay a few cents, maybe less than a penny for each transaction, and it's much easier to reconcile. It's all electronic. And there are ERP systems, which are easy to tag along with the ACH transactions and much less so with the check transactions.

And then, you know, you look at the real-time payments and faster payments, and they're also, like, you know, emerging options, in the US today. Although, you know, we haven't seen the kind of adoption that are there in, you know, some of the other markets, and we can talk about a lot of reasons for that. But if I have to pin down the three, the first one obviously is the acceptance issues. There are send and receive options on RTP, and not all the players have that enabled.

And that leads to the network effect as well if, you know, there are a hundred players in the industry and only two are operating at the level that, you know, we expect all hundred to operate, you won't see the network effect of this payment instrument.

And I would say the third one, with a little bit of a pinch of salt is the pricing issue with RTP. RTP transactions are priced at around 10 times the rate of ACH transactions, and that becomes a barrier for some of the industry folks where you don't really need the money to be moved over quickly or urgently.

So, yeah, I think those are the three main. And then you have card and wire volumes, which are growing modestly, I would say. Card specifically is very important in some of the specific B2B use cases where you have the you have the ability to get the advantages in the form of rebates. There is no acceptance challenge, and you don't need the money to be moved at that very moment.

So I would close this page, Matt, with one headline, which is that we have seen some modernization efforts on the B2B side as well, and that's playing out very well if you see the ACH growth and compare that with the legacy instruments. But there's much more that could happen, if I have to draw paddles with, like, you know, what we have seen on the consumer side.

Jason: Amit, that's that's great context here. And what I'm hearing from clients as well is, you know, beyond the traditional more traditional forms of acceptance, whether it's cash, check, ACH, card, we're getting a lot of interest from our clients in nontraditional or newly emerging payment channels, whether that be Zelle® or P2P payments. But what are you seeing as other, emerging payment trends that might be of interest for some of the folks on the call today?

Amit: Yeah. I would say I would, to be honest, Jason, I would not call Zelle® as a very, you know, nontraditional payment type. It's all, like, you know, similar to what we have seen on the ACHs of the world. But if you truly want to call one payment type, which is nontraditional, I would say stablecoins is that one. And we've seen a lot of interest from our clients to understand how they can play in that space both from the merchant perspective and from the bank side as well.

And I would say that if you look at the total transaction volume for stablecoins today, we are looking at all the use cases which are not payments related, for the most part.

I think the stablecoin payments-related use cases are only 4% of the total transaction value, and this is 2024 data. Maybe it's 5, 6% as of today's number.

And so the point that I want to make here is that we are still far away from enabling use cases for payments on stablecoins, specifically on the domestic side. And I say that because if you compare the transactions that we do on the C2B or the C2C side, you have the best ways to transact. You have the card channels for for C2B transactions. I as a consumer get a lot of benefits when I'm using card. I get fraud protection or charge-back protection. I get, you know, the ability to get rewards and evolve if I have to.

And it's accepted everywhere, so there's no acceptance challenge. That is all not there with stablecoins today. So to reach to a level where you can compete with guardrails, you need all of these things first, and we are far away from that. And then you go to the B2B side of things as well.

If you look at domestic transactions, ACH by far has all the things that you need in order to do the transaction right. From a security perspective, from an acceptance perspective, all of that is there with ACH. Why would you go to a stablecoin to do that transaction on a domestic basis if you are not moving money from a US dollar to a Chinese yuan? You would not do any sort of movement to stablecoins. Things change, and this is the last comment I want to make on stablecoins.

Things change when you think about cross-border transactions. I you have to do as a company, you're moving money from one country to another, and most of the flows are needed in US dollars, there is a definite use case for stablecoins. And I think that will continue to see a lot more traction and visibility from industry stakeholders.

And I think the same is true for remittances as well. If I have to move money in two different markets and I prefer to keep my money in US dollars, there's no off ramp that I need to do, and therefore there's no cost for me to do any off-ramping. I would still like to do that transaction. So there are different use cases and, you know, again, we'll we'll have to see how all of that plays out in the future, but it's definitely fascinating.

Matt: So we did talk a little bit about, you know, Venmo and Zelle® and some of those, but the latest buzz in the industry is crypto-related, I guess I should call it, with the sort of this new, genius bill that was passed, and there's some interest in the market around stablecoins. And I think you touched on this a bit already from a cros-border standpoint, but anything else you would add around stablecoins that the audience here might benefit from hearing?

Amit: Yeah. I think I mentioned about that 4% number, which, you know, I was trying to get to a ballpark range. I think it was exactly 4%.

As I said, you know, out of the total $26 trillion of the value of transactions with stablecoins, if only 4% of the total is getting used for these two use cases for payments, and and that too globally, I think we're still seeing early days on of stablecoins adoption. And I am in the conservative camp on the adoption on the domestic side, and I think I would love to see more use cases on ground to say that this could threaten any of the traditional payment rails in the US.

Matt: OK. Thank you. We get a lot of great questions too. I think, you know, we call them emerging payments, but I know some of these things like Venmo, PayPal, a lot of these, kind of become more mainstream as you mentioned.

So I do think there's been some good chats happening. You know, Jason, maybe to bring you in a little bit folks that want to receive Venmo or Cash App payments or anything like that. I mean, can we do some of that through merchant, or I think is that sort of something we're continuing to explore or looking at? I know we have Zelle® for business today.

Jason: Yeah. We're continuing to explore options for alternative payment acceptance. As you mentioned, we can accept Zelle® for small business transactions and a few others. But definitely it's a lot of interest from merchants on some of these alternative payments, again, Venmo, Cash App and others. But continuing to explore that, certainly with our payment partners and from a software and from a platform perspective, making sure that there's support there to be able to authorize securely those transactions and ultimately fund.

Matt: Super. Well, let's go on to the next slides. I know we're getting close to time, but I don't want to take the full time today. So let's try to wrap it up.

One of the things, you know, we hit on that I think everybody hopefully has seen, and I think we've had some really great dialogue in the Q and A, so thank you guys for sending in your questions. Clearly, we've hit on something that is important to all of you, and you have a lot of different business lines that you may offer. You may have different customers, segments you serve, really aligning your payment strategy to what those client needs are, what the needs of the business are, to grow. And also, we talked about cost and sort of efficiency as also being big factors to consider in developing your payment strategy.

So it matters for all those reasons. Those are real bottom-line impacts to your business or top-line growth opportunities, and you don't want miss out on those. That's where payments plays a role. So the the second part here of steps to take, a lot of you had highlighted in the Q and A.

One company I want to give some kudos to have moved fully to ACH. There's probably a good story in there to talk about later. But the more you can move to electronic payments, the better you'll be from an efficiency standpoint. Oftentimes too, a lot of the payments that have evolved, real-time payments and instant payments, you're starting to be able to send the payment remittance detail along with the payment itself. So it helps even in reconciling back-office functions when you can match up the invoice to the payment received.

Electronic payments give you those capabilities, where paper may, but you have to scan that in. You maybe need to do some sort of OCR or ICR. There's some opportunity to do that, but electronic just gives you that much more efficient operation.

Embracing card acceptance. So if if you saw your industry in the slide where we looked at adoption of merchant, you saw most industries are 90% plus accepting some form of card payment.

Do you have opportunities to expand that through digital payments? Do you have opportunities to make sure that you're not falling behind competition in terms of offerings? And then exploring emerging payments. I know, again, stablecoins are new. There's probably going to be some evolution there.

Amit highlighted the limited use cases today, but there continues to be innovation in the space. And instant payments like real-time payments and same-day ACH, we're seeing greater adoption every day. There's a lot of opportunity to streamline your payments process.

And I think the misnomer I tried to put in the chat with instant is that you have to pay your money out quickly, which you do. It's within seconds, but oftentimes you can time that to be a just-in-time payment. So some of those of you in manufacturing, just-in-time inventory and just-in-time processing, this is just-in-time payments. So a lot of great things.

The other piece there too is partnering. Like I said at the beginning, you're not going to do this overnight. You're not going to do this on your own. It's a bit of a journey, and it's a team sport.

So there's an opportunity to pair up with specialists here at First Citizens, with any other folks across your business lines to talk about payment strategy and to figure out what you're really trying to accomplish overall. Is it growing revenue? Is it becoming more efficient?

And what are the things that the bank can help offer in terms of insights? What are your peers in the industry offering in terms of insights? Always great to stay engaged on those topics.

So in closing, I would like to just remind you all, I think in the chat there was a opportunity to, if you're looking for credits for CTP or CCM, there will be an opportunity to fulfill a survey. The link is in the chat, and we will also send out in an email. You can fill that out to get credits for a CTP if you're looking for that. We also have our contact details here. So if you had a question that didn't get answered today or you would like some follow up, feel free to reach out to us, and we'll make sure we connect you with the right folks here at the bank.

And other than that, I just want to thank my fellow panelists for a great session. It was great to get your insights. Appreciate you all sharing some really great, relevant knowledge and also really kind of leading-edge direction on where payments are going. So I just want to thank you all for joining, and thank you all to the the participants today for staying engaged and really having some great questions. So thank you for your time, and we'll do this again soon. And appreciate all of your engagement.

Jason: Thanks, everyone.

Amit: Thank you, everyone.

Thank You

You'll receive an email with the slides after the webinar. Please share with anyone you feel would benefit.

To explore payment solutions or to optimize your current strategies, reach out to your banker today.

Thanks to our panelists!

Matt Ribbens
matt.ribbens@firstcitizens.com

Jason Mills
jason.mills@firstcitizens.com

Amit Gandhi
amit_gandhi@mckinsey.com

Approved for up to 1.2 CTP/CCM recertification credits by the Association for Financial Professionals. Youc an access the link to the quiz in the chat and in the follow up email.

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