Rich Clow of Bank of America on driving payments innovation at scale

In this episode, I sit down with Rich Clow, Head of Innovation and Strategy, Global Payments Solutions at Bank of America, to explore how one of the world’s largest financial institutions is approaching payments innovation, such as instant payments and digital wallet technology. Rich shares insights into Bank of America’s unique perspective, given their scale of serving tens of millions of consumers and small businesses alongside 40,000 global corporates operating across 140+ currencies.

The conversation delves into the bank’s approach to the Paze digital wallet, why instant payments adoption is lagging behind other markets, and the critical importance of accessing real-time payment data to better serve clients. Rich also discusses the challenges and opportunities of driving innovation at scale as well as partnering with fintechs while ensuring the scalability and resiliency needed to support their massive transaction volumes.

In this podcast you will learn:

• Rich’s background and what his role entails at BofA.
• What consumers, small businesses, wealth management and global corporates have in common when it comes to payments.
• BofA’s global footprint outside this country.
• Why instant payments has not taken off here as it has in other countries.
• What use cases for instant payments have the most potential.
• The gap in the market that the Paze digital wallet is addressing.
• How they are measuring success with Paze.
• How their enterprise clients are using Cash Pro, their corporate digital solution.
• What BofA is looking for when partnering with fintechs.
• How they decide whether to build, buy, or partner.
• What Rich is hearing from their clients about use cases for stablecoins.
• What it is going to take for more payments to occur on the new payments rails.
• How their corporate clients are able to work with fintechs through BofA.
• What Rich is most excited about for the future of payments.

Read a transcription of our conversation below.

FINTECH ONE-ON-ONE PODCAST NO. 559: Rich Clow

Rich Clow (00:10)

The things that we look for are number one, how clear are the requirements of what they really want and need from a bank? Number two, how are they addressing the critical risks that the regulators and the other kind of operating rules of the various different payment schemes enforce? Because we’re not really a risk-taking business and we’re less inclined to support a business that wants to keep all the data, let’s say, about the sender and the receiver of a payment, we’d really like access to that data so that we can be a first party to what’s going on with that payment. And then third, we really look for partners, let’s say, that might help enable solutions for us. We look for scalability and resiliency because when you think about, like in North America, we have over 60 million consumers and small businesses using our digital channels. That’s a lot of volume, right? If you’re successful, you need to make sure that the uptime, that the scalability and performance and those other types of things can really make it at our scale.

Peter Renton:

This is the Fintech One-on-One podcast, the show for Fintech enthusiasts looking to better understand the leaders shaping Fintech and banking today. My name is Peter Renton and since 2013, I’ve been conducting in-depth interviews with Fintech founders and banking executives. It has been several years since I’ve had an executive of one of the major banks on the show. So I’m rectifying that with this episode. I’m delighted to welcome Rich Clow, the head of innovation and strategy of global payments solutions at Bank of America. With over 25 years of experience spanning call center technologies, mobile banking architecture, and more recently payments innovation at major banks, Rich brings a unique perspective on how payment systems are evolving. In our conversation, we dive into why instant payments adoption in the US lags behind other markets. We explore Bank of America’s approach to the Paze digital wallet and Rich also shares what he wishes more fintechs understood about partnering with major banks and it might surprise you. We also talk about the challenges of supporting payments needs across Bank of America’s diverse client segments. We’re talking 60 million consumers and small businesses as well as 40,000 global corporates operating in over 140 currencies. Rich offers candid insights into what it takes to drive innovation at scale in one of the world’s largest financial institutions and where he sees the most exciting opportunities ahead. Now let’s get on with the show.

Welcome to the podcast Rich.

RC: Thank you, Peter. Really great to be here today.

PR: Great to have you. let’s get started by giving the listeners a little bit of background about yourself. I’d love to kind of hear some of the high points of your career to date.

RC: Thanks Peter. So I’ve been in banking and enabling technologies for over 25 years, like we talked about. I started my career actually solving problems for local governments with computer telephony solutions or press one for this or two for that. And then really parlayed that into becoming a consultant for call center re-engineering. And I had the opportunity to work across major retailers like Bath and Body Works, as well as the Defense Mapping Agency for a really cool project as they realized they needed to digitize all the maps. And from there, I really found my way into banking, where every single interaction with a client matters. Call centers are looking both to become more efficient as well more effective in the way that they can serve clients. So I really started to specialize there. And in 1998, I was hired at Citibank to help build the architecture for our first branchless bank. So that was quite a while ago. I went to work with a couple other banks and ultimately went back to Citibank and did two things that were noteworthy.

I’d led the architecture program for a transformation from all of our visual basic call centers to Java, where it used to be that a call center agent could only answer one kind of call for American Airlines or some other card, and with Java they could mix the calls. And then secondly, and really the pivot into payments for me was that I was asked to co-lead a mobile development center of excellence.globally. So for all consumer at that point, we were in 40 markets is around 2011. So I got to really focus everything I was doing around mobile development. And at that time, everything was emerging, whether it be banking service capabilities or mobile payments. And really my start of the journey with payments was trying to figure out how to put the equivalent of a token into a SIM card with the telcos. So and from there, I really focused on what are the next kinds of payments coming? How do we look to make them secure? How do we make to look them convenient? And how do we partner with the ecosystem as we scale those things? And I’ve been with Bank of America for about seven and a half years, more emphasis in the United States and more emphasis on the consumer, small business in the first few years. And now we’re really focused globally across all the client segments that we serve.

PR: So okay, so just take us through that. Tell us exactly what your role entails at B of A today.

RC: Sure. So I work in an organization called Global Payments Solutions. And it’s a kind of unique structure for a bank because we have one function that serves everything from strategy to contract to product management across all eight lines of business. So think about the U.S. with consumer, small business and wealth. But then we also serve over 40,000 global corporates of all size. So my team, my role within that team is to focus on payment innovation and strategy.

So a lot of what we do is we focus on the why. Like why is this emerging technology or business model relevant to us? What role should we play? How can we validate the value for our client or multiple client segments? And then ultimately, how can we go through a stage gated process of introducing these new capabilities, validating each step along the way? So we’re a very client driven innovation function. I have a team of experts on process and innovation skills and really the goal is to be able to support anyone who has an idea that could make our payments solutions better to let them be the founder of a concept and then we work them through this stage gated process.

PR: Interesting, interesting. So you have consumers, small business, wealth, global corporates, I that’s some very different types of payments requirements, I would guess. Is there anything that these sectors have in common?

RC: I think so. mean, when you really zoom out, whether it’s a consumer household or a global corporate, you really care about working capital, right? You want to know what do you have in terms of deposits or for a corporate they call liquidity? What kind of payments am I making to other people? How am I receiving payments or income? And then last but not least, where is it appropriate to use credit? Right? And again, credit or lending for household would be different in terms of a mortgage or a credit card. And for a corporate, it might be supply chain finance or trade finance.

PR: So when we chatted recently, you talked about how B of A has a major global footprint and I did not realize that because you have your global corporates that you’re working with. Tell us about the operations that you have outside the country.

RC: Certainly. So we have offices in 37 countries right now where we have a bank charter. We are one of the top institutional banks globally. We offer payments in more than 140 currencies. And we’ve had a franchise that’s been around since, you know, in England in 1931. So although in the United States, you know, everyone sees us as a brand, like a local brand or a community brand, we also definitely have scale around the world. And in fact, we already count 78 % of the Fortune 500 as clients of ours. So we help a lot of corporates. It really started with US businesses as they expanded with their global needs. But now we’re also serving as a bank to some major global corporates who need access to other markets or the United States.

PR: So let’s talk about instant payments now. I’m curious because we’ve had instant payments in this country for a little while now. Other countries around the world have had it for a long time and have robust demand flowing through their instant payment rails. We’re yet to see that here, even though the infrastructure has been built out to enable it. What do you think is the reason for the gap between what we’ve built infrastructure wise and the adoption of instant payments here?

RC: Thanks, Peter. So I think it’s a couple things that contribute to this. One, some of the other markets outside the United States had a regulatory emphasis where it was a mandatory shift to the instant payment network. That market level power, if you think about a market like India or Brazil, was a tremendous asset to get the whole migration going. Secondly, if you look at the United States, we have many different ways to pay and we haven’t even announced an intention to stop one.

So for example, in Australia, they know that they’re gonna turn off the automatic clearing house, essentially the check clearing solution set. In the United States, we have multiple ways to pay, in fact, multiple ways to make instant payments. So things are coming a little more slowly. It does take a while for corporates to integrate all the data that’s required in these new interfaces, the ISO 20022 message into the payments, whether they’re making a payment to someone else or requesting a payment.

But we are starting to see traction. We are starting to see progress. And I do think that we’re going to continue to see an acceleration as it becomes a tool for just-in-time payments. We’re just-in-time, meaning you get the working capital benefit, you have the control, but you also have the ability to make sure that the payment is reconciled in a detailed way.

PR: So then what is a potential use case for instant payments that ⁓ you think has the best opportunity, most potential for growth, do you think?

RC: Sure. We see two really scaled solutions in market today and we think that there’ll be others to come. The first is around me to me payments. So if I have a checking account at Bank of America and I have a brokerage account somewhere else and I need to move money, we’re seeing people do that, whether it’s with Robinhood or another kind of emerging trading house or whether it be another online trading house. Those payments are important because you want the ability to make those investments as fast as possible versus having a two or three day lag, which maybe a risk in terms of the benefit that you just talked to your financial analysts or others about.

The second use case is around payout. So corporates to consumers. And if you think about things like an insurance claim in a hurricane situation, or if someone has auto or home issue, getting an immediate payment to the bank account that’s immediately available. so that that person can move on with what they need to do. We’re seeing more and more insurance companies offer those instant payouts.

PR: Okay, so then let’s talk about digital wallets. I think this is another area I find extremely interesting. Can you talk about the initial traction you’re seeing there and how B of A is kind of ⁓ viewing Paze right now?

RC: Certainly. So ⁓ I’d actually start all the way at the beginning about Paze. Why is there Paze? Right? So I’d say we’re off to a solid start, but really the key that we learned across the other owner banks with early warning is that there’s one segment of payments and clients that are really underserved by the existing solutions today. And those are people who choose to use guest checkout. So if I go to a website, if I’m not using a wallet, or I just choose to type in my name, address, and card number, there’s a really bad fall off in terms of conversion where the card payment might be unauthorized or there’s something wrong with the data. What we learned was that that’s a very frustrating experience both for the consumer as well as for the merchant. So the thought was if we had the right data, if we had a really great user experience and we had the security that was an extension of your bank, could we solve guest checkout?

So that’s where Paze started. And I think that right now we’re seeing really good promise. We’ve got over 125 million eligible cards amongst the seven owner banks and then several other smaller banks and larger banks are coming. We’re also starting to see we have approximately 30 merchants who are live today and we’ve seen a huge swell of new interest in the pipeline. But now we’re seeing everyday spend more and more coming up.

And there’ll be some announcements I don’t want to take away from Paze’s thunder. But when we look at a merchant like Fanatics, who’s partnered with us, and they’ve experimented with certain offers, we’ve really seen great traction. So we think that we have a good formula. It does need to scale. There are some user experience improvements. There’s some merchant integration improvements. So a couple examples of what we’ve done for the merchant improvements is the Paze team has gone and done partnerships with Fiserv and Worldpay. So those kinds of platform providers to scaled merchants really provide an unlock in terms of the speed and the ability to just experiment for merchants to come on board versus having to do like a one-off custom build with one more checkout solution. I think the second thing is around the brand. And it was just last week, Paze announced that they’re gonna be promoted as the jersey patch partner with the Atlanta Hawks. And that will also be for all of the Atlanta Hawks online checkout and their customer experiences. So we are starting to see some help in terms of the brand getting the right recognition with the right investments. And then each of the banks, candidly, we’re all marketing to our eligible clients and getting them to enroll through our digital experiences. So we’re seeing a steady kind of growth. But I think really, you know, late this year, early next year is where we’ll have a better balance of scalable merchants that make sense for consumers to be using, and then, you know, the right number of consumers.

PR: So how are you measuring success with Paze? Is it just transaction volume? it merchant adoption, brand awareness, all of the above?

RC: It’s all of the above and more because really, like I said, when we targeted guest checkout, we knew that we had to build a connection for the consumers that didn’t want to enter their card data, trusted their bank and had a really good and secure experience. So that’s something that we continue to validate and experiment with. then, really merchants, like we need merchants to say, this is working great or this is, getting close to priority with another wallet that we support or these other types of things. So we’re really trying to be focused on getting that feedback, making quick turns in the iterations on how that user experience works. And I’ll give you an example. Like in the beginning, every checkout required a one-time passcode, which is great and secure, but then passkeys emerged. And with passkeys, you can have a similar experience, but you can use a biometric.So we’ve been taking more of a fintech approach to the way that we’re trying to listen to this feedback and address competitive pressures with the Paze wallet. And it’s really turning out well.

PR: I want to talk about your cache pro platform and I’d love you to kind of describe how it’s transforming and I know it’s fueled by AI, but how is it transforming your real time data and your digital capabilities?

RC: Certainly. So Cash Pro is basically a corporate digital solution set, right? Where a consumer has their standard mobile banking, online banking. And what we’ve done is we’ve invested in that over time. Now we have over 550,000 users across our 40,000 clients. We have four channels. So there’s the online solution. There’s an API. There’s a host to host and there’s mobile. So there are four different ways that our clients can either embed our payment capabilities within their experience or leverage our capabilities directly through the channels that they prefer. I think the app is kind of the most visible in terms of the types of ways that it assists people where in the old days, like you had to go to a PC, you had to have a couple different tokens and you had to log on to make sure if you were a treasurer sending a $50 million wire that you were who you said you were. Now we’ve enabled the same level of security, but the convenience of the mobile app so that we’ve actually gone through. And last year we approved over $1 trillion in payments. So we’re really seeing this as another example of how did we bring the convenience and security of these digital channels to just a corporate treasurer, right? As opposed to a consumer and their household.

PR: Okay, so I want to talk about partnering with fintechs because I have a lot of fintech CEOs that listen to this show, many of whom I’m sure would love to be partnering with Bank of America. So what in your view makes a good fintech partner and what do you wish more fintechs understood about working with Bank of America?

RC: Yeah, yeah, that’s a great question. you know, Peter, we’re really fortunate in that we work with a lot of fintechs and we have a lot of fintechs who are clients of the bank. So we kind of get to see this around view of what these companies look like. And some might be in payments or banking. Some might be in a completely different area of business that need payments. But the things that we look for are number one, how clear are the requirements of what they really want and need from a bank? Number two, how are they addressing the critical risks that the regulators and the other kind of operating rules of the various different payment schemes enforce? Because we’re not really a risk-taking business and we’re less inclined to support a business that wants to keep all the data, let’s say, about the sender and the receiver of a payment. We’d really like access to that data so that we can be a first party to what’s going on with that payment. And then third, we really look for partners, let’s say that might help enable solutions for us. We look for scalability and resiliency because when you think about like in North America, we have over 60 million consumers and small businesses using our digital channels. That’s a lot of volume, right? If you’re successful, you need to make sure that the uptime, that the scalability and performance and those other types of things can really make it at our scale. Just a bonus one, if you have some other FinTech folks listening, you know, really there are so many FinTech folks that want to come and tell my team and I about a problem that we have and how they can fix the problem for us. Instead of just listening or asking like, what kind of problems are you trying to solve? How can we be a part of solving a problem that you have versus kind of making a VC pitch where you need to have a problem that’s big enough, an addressable market that’s big enough. And then thinking of the bank as kind of being a buyer because of that problem versus kind of asking or being curious about learning about what problems are important to us and our clients.

PR: Right. So on that then, when you see you have a problem or you have something that you would like to improve, how do you decide whether you can build internally, which obviously you can do for just about anything if you wanted to, what you should be partnering with a FinTech on and what you should be purchasing, acquiring?

RC: Yeah, we always start at just validating the problem that we’re trying to solve, right? Making sure that if we solve this, it’s worth it to our clients coming up with a business case. So we really put how to solve it last. We put all the how questions last. And when we do do that though, we have a terrific partner across our technology partners who have a lot of connections in industry as well as with some major players. And then really in many cases, we’re thinking about what’s the time to market? What’s the fit with our architecture and the user experiences? And then again, what’s the scalability and resiliency of the solution? And will it be able to, if we’re successful and we scale this, will the solution provider be able to keep up? And listen, we’ve been very fortunate. between, I guess over the last really three or four years, we’ve seen a range of build, right? Particularly around our AI solutions. We’ve also seen a number of acquisitions that we’ve made and we’ve partnered. So I really feel we’re pretty balanced in the way that we go about that evaluation and make those decisions.

PR: The hottest topic I think outside of AI, which infuses everything it feels like, but the hottest topic in fintech this year has been stablecoins. And what I’d like to do is get an understanding first about what you’re hearing from your clients. Is there demand for stablecoins or the things that stablecoins can do that fiat currency can’t? What are you hearing?

RC: We’re talking to all different segments across the continuum and we’re hearing really more questions than answers about what is it that stablecoin solves. And in most cases, people are really asking to learn and get advice about how to think about stablecoin relative to fiat than for a very specific use case. And furthermore, we really know that we have to understand what the regulatory environment is going to be, what are the rules going to be. And then lastly, think about what would a 24 by 7 infrastructure look like? How do we combine these new decentralized finance capabilities with our traditional finance capabilities like deposit systems and on ramps and off ramps? We haven’t heard like, here’s the one thing that I need as a treasurer here as an affluent client, this is the one thing I need. It’s really more about what’s the path, where is this going and what’s the bank doing to be prepared? So that’s really more of what we’re hearing now.

PR: I’d like to get your perspective on payments rails in general. There’s always been lots of different payments rails. It seems like there’s more now than there has been in the past and there’s so much innovation happening. But if you look at volumes, most payments are still occurring on traditional rails. What do you think it’s going to take to change that?

RC: Yeah, this is a terrific question, Peter. And it’s a question I get every year when I go to present to our head of payment operations. And he every year stands it up and asks, why are we only ever adding payment rails, which increase the costs and complexity for us to manage? Why can’t we turn one off? So I haven’t been able to answer that yet, but I think the reality is things like checks, ACH wires, and the card networks have been the foundation for payments for decades. Even though there are weaknesses, there have been a lot of compensating controls built around them. And some of them are fintechs, some of them are other banks. But to get all the way to instant payments and migrate to the ISO 20022 spec, I mentioned a little bit earlier, significantly more data is required to, let’s say, make a payment on the ISO or the instant payment network than on the ACH network or even on the wires network. That data takes time to figure out where do we get it, how do we place it, how do we build it in the user experience. So those are the kinds of things that we’re seeing a lot of, particularly our corporate clients work on. We have built out a whole set of user experience for our consumers in the United States. We’re one of the largest banks online with that. And we continue to learn more and more about how our clients thinking about this request for payment and how do they go about using it so that we can continue to branch out more use cases.

To the question about how are we in the United States doing relative to others, I think I mentioned earlier, when you look at India or Brazil, where there was a central force, right? The government, their treasury functions, all pushing to migrate away from their existing solutions onto something new that brought more security, more privacy, and instant settlement. In many cases, those things have come together where UPI and Pix are two of the broadest successes of instant payments today for everything from buying a cup of coffee to a corporate paying their taxes. So I do feel like we’re trying to get inspiration as we look through the utility lens with The Clearing House and Early Warning, we’re trying to see are there opportunities or learnings we could bring to the United States. But in many cases, these older payment networks aren’t broken or they aren’t broken enough to turn off. I think we’re going to have to find a way where these just-in-time payments and the data that comes with it and the insurance that comes with it is enough to compel people to actually reduce the amount of ACH or reduce the amount of wires in order to start using these new real-time payments.

PR: Yeah, and it makes sense because, I mean, even today, I think the expectation is still, I’ll get this tomorrow or the next day, you know, there’s not the expectation yet of instant. Whereas you go to other countries like my homeland of Australia, the expectation is that this is, you’re going to get this within 30 seconds. And if it’s not there, there’s something wrong. But, yeah, maybe it may take a while for those expectations to change. And the amount of volume that I think flowing through some of these older rails, I mean, checks are still being written in this country. We’re not abolishing checks yet. The amount of money running through traditional ACH is mind boggling to me still. So anyway, but before we close, I want to go back to the FinTech discussion because I’d like to kind of get your perspective on the corporates you work with. These 40,000 corporates, who many of whom will have payments ideas, payments innovations that they would like to see but they don’t really want to partner with a fintech directly or they want to at least get the B of A stamp of approval on that. How are you kind of managing that process?

RC: So that’s another really good question. We try to, again, take from our clients where their gaps are. In most cases, it’s accounts payable or accounts receivable for these types of solutions. And then as they identify those gaps, there are certain networks, there are certain applications of AI where, for example, we can analyze a payment file and we can categorize the different payment optimizations that they’re eligible for across different networks. Those insights that they can get are different than going to each of those networks or each of those enablers by themselves. So what we’re trying to do is how can we accelerate time to value for our corporate clients by us partnering with and making other fintechs a part of our solution set so that our clients get the safety security that’s the same as any other bank feature, but they get the convenience of not having to have a separate contract, separate onboarding, separate auditing process of a third party, that they just need for payment processing. So that’s where we actually see a lot of volume. And I think that, listen, a lot of these enabling partners can help also address other needs of our clients. So we do a lot, whether it’s through our APIs, right, or through our channels with Cash Pro, to figure out how are we building this to purpose so that either a corporate treasurer can use these directly themselves or through the APIs, they can participate with other partnerships or other networks to achieve their broader goal.

PR: Okay, so then in closing, I’d love to kind of get your perspective around what is most exciting, do you think? I mean, you’ve been around payments innovation for a long time. There’s a lot of different things happening. It’s like a golden age for payments innovation, it feels like right now. So what are you most excited about for the future?

RC:I’m really most excited about the prospects of how AI and generative AI come together for founders, come together for innovators. Because if you think back 20 years ago when I was starting this stuff, you had to write out a whole business plan, have a spreadsheet business case, then you had to find a developer that would work for beer and pizza on a weekend to build a prototype. So all the time in the coordination, now you can be a non-technical founder. You can build a great business case. can research, you can figure out price points, and then you can actually talk to a gen AI bot to build your code for you and have a functional prototype right out of the bag. So I think we’re going to see tremendous innovation coming across large and small businesses or corporates. And I think the cool thing is going to be, it may just solve one tiny problem in person to person payments or cross border payments or managing receivables, but can then bolt into these broader capability sets, either the bank offers or the fintechs offer directly. And I think that the takeoff, the launch time for these things is going to go from, let’s say 18 to 24 months of any scale to six to nine months for things that actually can prove themselves out in production. So I think it’s fascinating.

PR: Yeah, it’s exciting times indeed, I think. ⁓ Well, Rich, really appreciate your conversation here. Appreciate your time today. Thanks so much for coming on the show.

RC: Thank you very much, Peter. Great to speak with you.

PR: I love the point that Rich made about fintechs, that too many fintechs come to banks trying to sell a solution to a problem they’ve assumed the bank has, rather than asking what problems the bank is actually trying to solve. He would like fintechs to listen more and ask about the bank’s challenges rather than trying to sell a solution that may or may not fit. Fintechs need to move from VC mode, as Rich puts it, to partnership mode. Don’t focus so much on your own technology, but on building a relationship and being a curious partner. Good advice from one of banking’s top payments executives.

Anyway, that’s it for today’s show. If you enjoy these episodes, please go ahead and subscribe, tell a friend or leave a review. And thanks so much for listening.