Real-time payments have become a strategic priority for financial institutions seeking to deliver faster fund availability, improved customer experiences, and new payment capabilities. Since The Clearing House launched its RTP network, adoption has steadily expanded beyond the nation’s largest banks to include community banks and credit unions looking to remain competitive in an evolving payments landscape. At the same time, the rollout has sparked an industry-wide debate over whether a single private-sector network is sufficient or whether the Federal Reserve should operate its own real-time payments service to ensure broad access and competition.
While policymakers continue to evaluate the future of the U.S. faster payments ecosystem, many smaller financial institutions are moving ahead with RTP implementations. Technology partnerships are helping reduce the complexity of integration, enabling institutions with limited internal resources to offer real-time payments without undertaking massive technology overhauls.
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.
The continued expansion of real-time payments demonstrates that financial institutions increasingly view instant payments as a competitive necessity rather than a future capability. As more community banks and credit unions join RTP networks through partnerships with fintech providers, access to faster payments is becoming more attainable across institutions of all sizes.
Whether the long-term market is served by one network or multiple operators, the industry’s focus remains the same: delivering secure, scalable, and interoperable real-time payments. Success will depend not only on payment rails themselves, but also on the technology partners that simplify implementation and help financial institutions bring new payment services to market more quickly.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
