The Clearing House (TCH) launch a real-time payments platform in November 2017. Since then, the largest financial banks, also owners of TCH, have been incorporating TCH services into their product offerings primarily (but not exclusively) for transactions between corporate clients and corporate to consumer disbursements. Smaller banks and credit unions with smaller tech staff and greater dependency on their core provider for new products and capabilities, cried foul and petitioned the Fed to consider becoming an operator themselves. Smaller financial institutions believe a Fed option will provide a more competitive marketplace. The Fed is contemplating their decision.
And now we wait.
In the meantime, some pioneering smaller banks are convincing their boards of directors that they can’t wait and are joining TCH. TCH is welcoming them with open arms as they are keen to impress the Fed that they are truly a platform open to all institutions and there is no need for the Fed to create an alternative competing capability. As PaymentsSource reported:
We are still pushing as hard as we can to get as many credit unions and community banks on the network as quickly as possible,” TCH’s Ledford said. “There is no mistaking that the uncertainty created by the Federal Reserve clearly slowed down the decision making for financial institutions.”
Regardless of what the Fed is planning to do, TCH is “here and doing everything we can to bring on smaller institutions, as they are going to be an important part of this faster payments network moving forward,” Ledford added.
The “welcome them with open arms” approach appears to be paying off. This week, FirstBank announced their commitment to join, and Avidia Bank has also announced their integration with the help of technology partner, PayFi:
Avidia Bank and PayFi have collaborated with linked2pay to lure small banks with technology that increases payments and merchant onboarding, a bundle that recently added RTP as an option.
“When we made our initial move into faster payments in 2016 with our partners Avidia Bank and PayFi, our roles were around the provisioning of risk management, merchant onboarding and the delivery of value-added payment solutions,” said Jay McShirley, founder and CEO of linked2pay. “It is amazing and rewarding to see how far we have all come, and how we are positioned to help others get on board.”
The migration to the RTP rails can be challenging, and includes an extensive IT project, contends Travis Dulaney, founder and CEO of PayFi. “The key to building a two-sided network is to enable first and then initiate second,” Dulaney said, adding that’s driving the payment companies that are vital to RTP to partner to reduce friction, time to market and delivery of the new payment rail.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
