The move to faster payments is happening. When you zoom out and look at things like the real-time payments initiatives that are going to have a real impact, you can see that instant payouts can have a lot of resonance in the insurance and the supply chain. But to do this in B2B, you really need to make it easy and marry identity together with payouts. That’s because a lot more is at stake when things move to real-time.
My guest today on the show is Stephany Kirkpatrick, founder, and CEO of Orum. Orum offers a single API integration for payouts that works over RTP, ACH, and other rails. Stephanie may be a financial planner by training but she’s all in on Orum and payouts.
We discuss what’s driving the move to real-time payments and how disbursements and early wage access are two of the most important first-use cases. Stephanie shares what looking abroad can reflect about the road and impact real-time payments.
She also shares her views on where the market is headed and her plans and goals for Orum in 2023.
Stephany Kirkpatrick is my guest today on the Tearsheet Podcast.
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The following excerpts were edited for clarity.
Stephany Kirkpatrick, Orum: Orum is the simplest API integration for instant payouts. Our solution delivers payouts through RTP, ACH, same-day ACH, and more.
Real-time payments
This year, we're really excited to be launch partners with FedNow with its new faster payments product coming in late spring or early summer. And we're excited about what we're doing in that space. Because it's a time-to-money problem, which is such a powerful human problem that everybody faces at some point, sometimes often, for a variety of reasons.
You can implement an instant payout stack with us via a single API where we can get this up and running in a sprint or less. It positions our customer partners to launch new-powered experiences that attract and monetize new customers. It's a total differentiator. We are literally in a real-time world, on every front, except with money, at least in the US. And it ultimately allows for diversification of revenue, because there's now a path to potentially charge and monetize the instant capabilities.
And then we work with our partners to grow beyond just a cloud solution to really thrive in a world of real-time expectations. You know, I laugh about this, but you can get a massage on demand in major cities right now on an app in an hour, and you want to get your bank transfer or your insurance payout, it's gonna take three or four, maybe even five, days if there's a holiday in there. And so, we really just think about continuously unlocking new features that continue to press on the necessity of instant and real-time. So whether it's a financial product that we're working with, or it's something in the creator economy, or rewards, incentives, insurance, and the full potential can ultimately be unlocked. So we're really excited about where we are, as we are getting into 2023.
More about real-time payments
I'm actually a financial planner, by training, and still a CFP. So I don't think I'm like your classic payments CEO for a variety of reasons. I think that's actually really powerful because I'm looking to solve a problem at the infrastructure level that doesn't reach just hundreds of thousands or millions – it reaches hundreds of millions of American households and businesses because we can fundamentally change the way money moves and using the new faster payment vehicles, like RTP and FedNow.
Think beyond that push to a wallet. There are so many different ways now that you could potentially move money from point A to point B – it's way more complicated than it used to be when it was just checks or wires. And so you need to be able to orchestrate and configure decision-making and allow all those technologies to live in a single place. From my perspective, that's the starting point and solving for time to money. It’s the reason I care so much about that problem, as a financial planner, and ultimately, as the daughter of an immigrant, where I spent my entire childhood watching my dad really build a life in America where he came with nothing. I'm really passionate about looking at the households that do have less who need to make the smartest, most precise decisions, who really absolutely, it's the difference between making it or not making it in a given week or month – if some payout doesn't get to them instantly.
Disbursements
You can think about earned wage access as an example right now. Those things go on to cards, and then there's interchange and cost. But if I can go directly into a bank account, how much faster, easier, and cheaper could that be for everybody? When it promotes banking, as opposed to the utilization of cards – now there are actually ways to deliver that value. Think about claims. Whether somebody goes out on disability, they've had an injury, a surgery. I just had my appendix out. So I guess surgery is top of mind. Though, luckily, that's not a long-term disability. You have a baby. And all of a sudden you're out of the workforce. How do we deliver instant access to money that helps cover and bridge those periods of time?
I just think the time-to-money problem literally lives everywhere – it's under every rock, and it's important to every household and every business for different reasons. I show up every day with a ton of conviction that someday we'll look back and laugh and say, Wow, I needed my account and routing number and it took five days to send money in or I had to get a check in the mail. And we'll laugh because someday probably not that far in the future, you'll use my email or my phone number. And it'll work just as seamlessly. So I think as the US catches up, and 2023 is a big catch-up year for us, we're just going to see an entire shift in the adoption of real-time, and instant payments everywhere.
Looking abroad at the power of instant payments
The inspiration from other countries is so incredible, When you look at a country like Brazil, which recently launched Pix, or you look at India with UPI, even within the UK and Europe, the US is really far behind. I think there are some understood reasons why. From a central bank perspective, that hasn't been a priority in the US. But if you look at Brazil, where the central bank essentially said this is a mandate and we're doing it, the adoption curve of instant went from zero to like nearly 90%.
And so I think that you can absolutely achieve broad adoption. There are reasons why we look at these other countries to glean insights from what they leapfrogged over, what they ultimately actually never did is a stepping stone, and potentially how it could be pushed further in the US with more of a policy mandate, which might or might not happen (likely won't happen) versus how it can be pushed further through consumer demand.
Financial institutions’ role in real-time payments
Well, the traditional financial institutions, certainly some of the largest ones, are out there. Maybe they’re not advocating aggressively, but they’re certainly participating in the new faster payment systems. And that's critical. If you think about Venmo or Apple Pay – things that today in 2023 feel basically ubiquitous – there was definitely a time when you couldn't really use those with full ubiquity.
So for the bigger financial institutions, I think the priority is your institution enabled to receive faster payment. Because the more places you can receive one, the bigger the sender network can ultimately be and the number of senders will grow faster. RTP just published some updates on the number of banks that are live: they have about 200 banks live. Now there are 5000 banks and 11,500 financial institutions, so that's like a drop in the bucket. But if you think about banking coverage, that's about 60% to 70%. The coverage is actually really good.
We hear that coverage isn't great, so therefore, we shouldn't use faster payment. Well, what if 70% of the time it can be instant? Why wouldn't you use it 70% of the time? It's not all or nothing. And so, to close the gap on the long tail, maybe it will only ever get to 80% for these current systems. But something else like Zelle, which I think is a fantastic example, because it uses phone numbers – it uses an alias like your email. It’s another way to bridge the gap to connect via token, the account you bank with, and the identity that you have elsewhere, and to create a seamless experience. So we might not get RTP and FedNow to 100% of banks. But we might be able to go to 95% or even higher coverage and reach faster payments, just by leveraging the different systems to do that, though.
Earned Wage Access as RTP use case
I think when you give consideration to the very unique model for wages that's been created in the advent of what was once called a side hustle or a second job – it's now like maybe five or six different things pieced together to create a full-time income. Driving for multiple service providers or providing gig services in three or four kinds of platforms, in the aggregate, may be enough income to replace a salary. So it's a wholly different model.
Now, besides the every two-week paycheck, the ability for folks to access those dollars that they have earned instantly is crucial, because they're not generally tied to payroll cadences, like traditional workers. And so they have differing needs – they have different kinds of insurance coverage that they might have to pay for. Being able to streamline early and earned wage access isn’t exclusive to the gig economy. We see it in other industries as well. Doctors, nurses, people who pick up shifts… There are just endless use cases.
And legally, in some states, there are absolutely things you have to contend with, especially in California, for example, where the last day of someone's work has to be paid out. Sometimes people are sending wires, or they're holding checks in a physical location and have to go get that – that’s just nonsensical for the digital world that we live in today.
Fraud
Fraud is such a hot topic for a variety of reasons. It certainly has had a bigger impact since COVID and the digitization of so much money movement. I think that fraudsters have been able to move quickly with the new technology. Americans are very vulnerable, especially in a post-COVID era, living through digital channels, social channels, and online dating – fraud has definitely increased.
And with ChatGPT and generative AI, the ability to sound like a friend, a human, it's getting better and better. And so the schemes are getting richer to socially engineer games where people would send money potentially on an instant platform. I don't think that is the same kind of fraud as we're used to seeing historically. Thus, I don't think it negates the power of instant. What I think it really does is it showcases why we need more education, and why there are probably more controls and checks and balances when you do certain transfers.
I'm ultimately obviously so bullish on instant that I don't want fraud to become the reason we don't do it. I think what needs to happen and is happening already, is that there's increasing consumer awareness of how to interact, and what not to interact with and that there increasingly are great technology companies who are at the forefront of identity and fraud, because they're different, although they can be related. And if identity and fraud are being thought of as wholly independent products and services that come before a payment transfer, we're in much better shape than we were historically, where systems like ACH, you could send it to Donald Duck and give Stephanie's account routing number and it would go through.
RTP requires things like a name match. So if the name doesn't match, it will return back saying the name doesn't match. There are different things that have been built into the newer systems that contemplate sending a message alongside a transfer, and that alone is a powerful change. There will always be fraud. I think it's just a changing dynamic and obviously, huge investment to find technology providers who are really working through those fraud issues at hand.
Data aggregation and faster payouts
You're trying to steal our secret sauce. You're really pointing towards a big piece of the strategy, which is that a payment network and a data network are very correlated. I think we would be crazy not to be keeping data that comes in as we do transfers about good actors and bad actors. I always landed in the camp that a whitelist is better than a blacklist. I used to love the blue check example. I think that's gone away for two reasons, now you could just buy the blue check. But there was a signal that if you had a blue check on a social platform, you were approved, and vetted.
From the Orum perspective, verified by Orum, there was a point of view that we have, and we're developing right now, more features and capabilities that will be coming out, essentially, to find the good actors and allow the good actors to bypass the bad actors, and maintain ease of access on instant capabilities.
You always have to inventory and find bad actors as well. But it's much more interesting, in my opinion, to really index on accounts that are in good standing, transfers that are good transfers and have a history and a bunch of data sets that can correlate to finding more of those in the populations as transactions continue to grow on the platform.
Plans for 2023
One of the biggest priorities is really just continuing to push boundaries into categories where instant payments is a necessity. The core company maybe isn't a fintech or financial services provider – it's been embedded finance examples. It's been really interesting to get out into places where there's some really new technology happening. I'm going to take logistics, for example. In the logistics world, trucking companies, you get to a platform, you're going to unload your truck, and you don't unload it until you get paid. How do we solve the next step in the journey? How do you unlock and gate pieces of the supply chain?
Factoring is also really interesting. There's a lot for us going on around gaming, and there's a ton happening in insurance, which is traditional financial services. But I think what's unique about it is that there's certainly more appetite to really find the use cases where a claim can be resolved through technology better, faster, smarter – call it down to like sub 24 hours. But the payments are still really slow. So actually resolving a claim quickly isn't that interesting, unless you can tie it to a faster payment.
There are definitely some products forthcoming. We're going to be launching an API shortly that is useful for finding eligibility and availability on these faster networks. So for folks who don't do transactions with us yet, but need to identify if it’s even viable to use this account in a faster payment schema? There are going to be a couple of things launching end of this quarter in service of that and then just juicy roadmap stuff. Ultimately 2023 is really shaping up in the first few weeks already to be such a big year for us.