The vision for a robust faster payments ecosystem in the United States is well-established. There are multiple contenders to bring it to life – from private offerings like The Clearing House (TCH) to the Federal Reserve’s continuing efforts into FedNow – but achieving true ubiquity can seem like an elusive target. How is that gap from vision to reality going to be bridged?
That was the topic for a full panel of professionals at the Chicago Payments Symposium last week, and the consensus was clear: that promised future may still be years away, but the industry is making real moves forward.
“It’s been a focus of ours since 2014,” said Tim Ruhe, Vice President of ePayments Strategy & Business Development at Fiserv. “We recognized that this was coming, and it would be the way we do business.”
Years of investment and development later, the financial services company is now doing over $3 billion of Real Time Payments volume every month, with services such as disbursements now implemented and more use cases still planned.
“We’re all still on the 50-yard line in terms of implementation, but we’re moving fast – some of that has been driven by Covid,” Ruhe said. “We’ve seen a 35-40% bump in the Covid months. We’re pretty far down the field, disbursements and such is in the red zone.
“Other things haven’t gotten very far – business-to-business in real time is still pretty far back. We’ve had a lot of integrations to banks (core systems) and businesses, and we’ve really tightened up and optimized fraud and risk tools. That puts us really midfield and on a roll.”
The Challenges of Ubiquity
Challenges remain, however. While the RTP network on the market that’s been active for the last three years can reach about 75% of all ACH activity, but some use cases still don’t have much broad support.
“We have to be able to support all use cases,” Ruhe said. “We’re pretty good at P2P, but haven’t broadly deployed money transfers or for-business payments.”
Another leading issue is that, despite ACH coverage, many banks realistically still have not connected into the network or integrated it into their toolkits.
“The challenge in the U.S. is there’s a lot of players, a lot of banks, and a lot of business that’ll need to adopt this,” said Carl Slabicki, Head of Strategic Payments Solutions at the Bank of New York Mellon. “I think we can do it, though, a lot quicker than people are expecting.”
Technical hurdles with banks and business are only half the battle, however; much more education not for those organizations is still needed to fully realize benefits.
“There is certainly potential for some confusion in this space,” said Reed Luhtanen, Executive Directory of the U.S. Faster Payments Council. “Anything new can result in confusion. But beyond that there’s a lot of different solutions in the marketplace for this.
“From our perspective, the thing to do here is really dig in and try to produce educational materials that ensure businesses understand how the different types of payments work, and on the consumer side figuring out the messaging for consumers to help them understand this is different from other electronic payments.”
The Digital Shift
It’s a message whose time has come: the increasing shift to digital during the pandemic is only driving that progression forward, revealing new demand that’s making everyone push forward their timetables.
“We’re at a moment in time that has changed how customers are interacting with all businesses and each other,” said Kathy Strasser, COO at IncredibleBank. “We’ve seen a significant shift to digital channels. 47% of our digital deposit account openings this year came through digital channels. Across the industry it’s 60% — and our goal as a bank this year was only 25%.
“I’m seeing a lot more conversation about instant payments across the industry. The banks that were sitting on the sidelines, maybe waiting on FedNow, are getting anxious and starting to push for earlier availability or looking at already-available options like RTP.”
Ultimately, successful U.S. implementation will take progress on multiple fronts. Advances in ubiquity, widespread access, and ultimately competitive pricing will all be key to making the shift.
“Ubiquity speaks for itself, but widespread access is really key,” said Eric Dunn, CEO at Quicken. “For example: the Fed wire service works really well, but you have to be on the inside circle to use it. We need flexible systems. Cost-based pricing is also really important, that’s what works great with ACH. It will be a defect in systems that don’t have it.”