Friday, November 17, 2017
The Federal Reserve's vision of real-time payment systems accessible to U.S. consumers and businesses alike is inching closer to reality. On Nov. 13, 2017, the first real-time payment was processed through RTP, a new payment system developed by The Clearing House. The exchange was between BNY Mellon and U.S. Bank. At least four other large U.S. banks – Citibank, JPMorgan Chase, PNC Bank and SunTrust Bank – are expected to start moving payments through RTP any day now, TCH said.
RTP – which TCH describes as "the first new core payments infrastructure in the U.S. in more than 40 years" – was a collaborative effort involving TCH's 25 owner banks and Vocalink. Vocalink, which is majority-owned by Mastercard, developed the technology that undergirds several existing real-time payments networks, including the U.K.'s Faster Payments Scheme.
In addition to moving payments, RTP is designed to support exchanges of payment-related data (for example, invoice and remittance documents) to support back-office reconciliations, as well as immediate confirmation notices that payments have been sent, received and settled.
TCH is hoping for near universal adoption of RTP, akin to the automated clearing house system and wire transfer networks like CHIPS and FedWire, by 2020. This is in keeping with a goal established by the Fed back in 2014 to have something approximating real-time payments universally available in the United States by 2020. A Faster Payments Task Force, set up by the Fed in 2015 that includes all manner of payment system stakeholders, has been evaluating various real-time payment system prototypes, including RTP.
"Real-time payments are now a reality in the U.S., and the RTP system is open to all U.S. depository institutions, no matter their size, and will be used by corporations and consumers looking to benefit from their efficiencies," said Steve Ledford, Senior Vice President for Products and Strategy at TCH.
"As an industry, RTP positions us like never before," said William S. Demchak, Chairman, Chief Executive Officer and President of PNC. "RTP will make everyday financial tasks such as paying bills, issuing invoices, making payroll or settling insurance claims faster, safer and more satisfying for businesses and consumers across the country."
Most, if not all of the leading providers of core banking solutions have been working on products and service that compliment RTP and similar initiatives. ACI Worldwide, for example, just introduced a service to help banks and credit unions quickly ramp up access to RTP so they can quickly begin offering real-time payments to business and consumer customers. "ACI's RTP Start Up program offers a host of options to support a quick on-ramp to RTP while managing investment with predictable costs for increased ROI options," said W.A. Proctor, Vice President at ACI.
There is significant market demand for faster payments capabilities in the United States, particularly among businesses. A 2016 survey conducted by the Association for Financial professionals found 62 percent believe faster payments will have a somewhat or extremely positive impact on their businesses.
Business Insider, in a recent analysis of RTP, said it's likely to prove popular. This should be the case particularly for businesses, the firm said, noting that "53 percent of merchants [represented in the AFP survey] believed faster payments would have a positive impact."
But the biggest impact may be that it places the United States on a more equal footing with competitors in other countries with real-time payment platforms. "Other leading global payments players, particularly Singapore and the United Kingdom, have long offered real-time payments platforms, putting the U.S. squarely behind and setting the scene for disruptive technology, like blockchain, to overtake legacy payment systems," Business Insider wrote. "Building an easily implementable system that will help the U.S. catch up – RTP is globally interoperable – could help fend off that disruption."
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