You probably saw the headlines yesterday announcing how The Clearinghouse (TCH) executed its first real time payment (RTP) transaction for $3.50 in between BNY Mellon and U.S. Bancorp’s U.S. Bank. The transaction settled in less than four seconds, as Digital Transactions reported:
More big U.S. banks—Citigroup Inc., JPMorgan Chase & Co., The PNC Financial Services Group Inc., and SunTrust Banks Inc.—will be going live with RTP soon, according to New York City-based TCH. The spokesperson says the banks primarily will be using RTP in the early stages for business-to-business, business-to-consumer, and consumer-to-business payments, “though the system has the potential to be used for transactions between any entity: business, consumer, or government.”
So what happens next? Additional banks, fearing a loss of corporate clients due to this faster transaction capability will also join in. Others will wait it out and see how the market evolves. There are still a lot of unclear and unanswered questions. Setting aside for the moment whether or not there is a business case for RTP, there are other rather fundamental issues yet to be determined. The Federal Reserve through its Faster Payments Task Force is building a settlement function for RTP. How will that impact what TCH and its partners have built? The Fed is also working out guidelines and a regulatory framework. How will that impact the future for these transactions? Much work is still needed to integrate good fraud detection tools too.
When rolling out brand new technology, it is not necessary to have all “T’s” crossed or “I’s” dotted. Those who were brave enough to be first should be applauded. But it is understandable if some will wait this one out for a while until first-to-market risks are better understood.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
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