Any time we see postings on real-time payments we tend to have something to say, since we’ve closely tracking developments in the U.S. (and globally) for the past several years. Unlike most of the broad commentary found in blog and other posts, we both provide research with estimated numbers, both overall and by use case, including specific B2B member research, as well as ongoing posts and podcasts through this channel.
This particular referenced article is found at CFO and the author provides a bit more depth of information than is usually found in such postings. The piece is about the growth of the RTP network in the U.S., which is owned and operated by The Clearing House (TCH).
‘What’s holding up real-time payments? In 2017, the veil was lifted off an interbank payment system providing near-instantaneous settlements instead of next-day automated clearinghouse (ACH) transactions. The real-time payments (RTP) network worked and was ready for adoption by banks, businesses, and consumers….Four years later, the RTP Network can point to several success stories, but nowhere near the adoption rates hoped for when it debuted. About 130 banks are on the network, up from a handful in 2018. Combined, they can reach 60% of demand deposit checking and savings accounts. That’s a far cry from the 4,430 commercial banks, 640 savings institutions, and 5,160 credit unions in the United States.’
Although it has actually only been 3.5 years since the initial RTP launch, the author’s points are valid since bank adoption, particularly in B2B use cases, has been a bit more tepid than expected. We have reported on the reasons for this in our latest overall member report on the status of faster payments, including factors such as complicated internal systems and process integration efforts to launch a real-time environment, relatively slow integration of RTP by TPSPs (Jack Henry was the first major adopter in 2019), as well as the comparatively low initial transaction limit of $25K (which was increased to $100K in Feb ’20).
We have reported on the generally accepted expectation for that limit to increase to at least $1 million sometime in the near future. The author adds another factor, which is the general skepticism around the need to adopt real-time payments for a net gain of a few hours (not counting weekends and holidays), which is manageable. We might add that the Fed announcement of plans to launch a separate real-time payments system (FedNow), likely also delayed some RTP adoption, particularly by smaller asset class banks.
In any event, the article is worth a quick read by those who have some interest in latest developments in this important payments sector, including intentions for various banks and TPSPs to utilize RTP for bill pay (request for pay) and greater use of APIs for B2B use cases. We see a much faster rate of usage during the next three years.
‘Even if all the banks in the world went real-time, Horowitz, the CFO at CareCentrix, remains dubious about the opportunities inherent in a system that limits payments to $100,000….“I can see the opportunity for smaller midsize companies and those in the [business-to-consumer] space where payments are much less, but for companies that do bigger transactions, they’d still have to go through a different mechanism,” Horowitz says….His point may become moot in the first quarter of 2022 when the RTP Network will review a proposal to raise the limit to $1 million. If it gets the green light and more banks join the network, another barrier will be gone….“We’ve seen three times the number of real-time payments in the last year than we saw in the preceding three years,” says Deloitte’s Aron. “I don’t know if Moore’s Law is at play, but I can see momentum building. In five years, this will be par for the course.” ‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
