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While the banking industry confronts external competitors and the expectations of the Digital Age, banks must embrace “Disruption” and adopt real-time payments in order to remain relevant. Avidia Bank, a community bank located in Hudson Massachusetts, redefined their strategic plan in 2013 by emphasizing payments as a means to grow deposits and fee income. Rather than perceiving payments as a commodity, Avidia Bank felt they could differentiate within their market place while gaining a national presence though fintechs.
Soon, they realized that fintechs were not the enemy, but rather strategic partners bringing new ideas to the table while providing technical expertise so the banks could scale. The bank quickly learned that, to be successful, Avidia could not strictly rely on legacy platforms or outdated processes implemented by larger treasury banks. Rather, Avidia became agile and built their payment strategy around open access with API integration and real-time payments. Thinking outside the box, they began processing real-time payments through MasterCard Send. By working with two of our fintech partners, Linked2Pay and PayFi, we identified a need for card acquiring merchants to receive their sales proceeds sooner than the traditional two–tofour-day delay. As such, we collaborated in 2017 to develop a solution leveraging MasterCard Send to disburse funds to a merchant as soon as they batch out their terminal.
"The rise in the popularity of real-time payments has created an opportunity for Avidia to partner with Fintechs as well as other financial institutions by taking on the role of funding agent"
With the help of MasterCard Send, Avidia Bank, along with their fintech partners, received the 2019 FIS Global Payments Innovation Award for “Instant Merchant Settlement.” Capitalizing on this achievement, Avidia became the first community bank to join the clearing house, and real-Time payments have become a cornerstone of their payments strategy. Today, the bank’s Fintech partners have either implemented or planned on implementing real-time payments for B2B and B2C payments, for example gig economy, payroll advance, rewards, expense management, merchant settlement, insurance claims, and reimbursements, just to name a few. While traditional banks may not provide these services, there is an increasing demand from corporate treasury and consumers. The rise in the popularity of real-time payments has created an opportunity for Avidia to partner with Fintechs as well as other financial institutions by taking on the role of funding agent. In addition to their Fintechs, Avidia has identified internal business cases as well. For example, Avidia has implemented realtime payments to disburse merchant proceeds and now, rather than waiting for 48 hours, corporate customers receive funds within minutes. Additionally, the bank is participating in a MasterCard pilot program, “Bill Pay Exchange” that revolutionizes the bill pay experience, and real-time payments plays a key role in this new innovation. Now, when a customer uses Bill Pay, the payee receives funds in seconds and a confirmation is provided instantaneously. Not only do faster payments and real-time payments meet customer expectations, but they also provide treasury benefits to the Bank. Avidia will be adding real-time payment functionality to its direct biller along with online and mobile platform(s), allowing the bank to improve liquidity by receiving funds within seconds. As a result of the innovation that Fintech’s bring in this digital age, the role of banks will be redefined. Avidia has embraced the change, and views this “tipping point” as an opportunity to derive new revenue streams while expanding its footprint.