Real-time payments are becoming increasingly popular, especially among merchants and smaller financial institutions. With real-time payments, merchants can receive payments instantly, without having to wait for batch processing or bank transfers. This helps them to manage their cash flow more effectively and avoid any delays in receiving payments. Smaller financial institutions also benefit from it, as it allows them to offer a more efficient service to their customers. In addition, real-time payments can help to reduce fraudulent activities, as they can be easily verified and monitored.
An article in the American Banker highlights that at this point in time in the evolution of real-time payments, there is a bit of a slowdown in the number of banks and credit unions joining the RTP network. The early adopters have completed their integrations, or at least their ability to receive transactions, and the smaller financial institutions are just trying to figure out how they prioritize the new payment method:
“Many banks, especially smaller ones, tell us, Oh, I can’t add another payment network — I can’t even handle what I’ve got today,” Cheryl Gurz, vice president and real-time payments manager at The Clearing House, said Wednesday at the Electronic Transactions Association’s annual meeting in Las Vegas.
Five years after The Clearing House launched its RTP network, 235 banks are now live with the service, covering about 70% of all checking accounts, according to Gurz. In January the network handled 40 million payments, she said.
Right now, there appears to be more activity from the merchant community to drive the applications and adoption of real-time payments. Bringing instant, non-card payments to the point-of-sale is a hot topic. I can certainly understand merchants wanting to improve cash flow by getting paid right away, but looking at using the irrevocable nature of real-time payments to avoid chargeback protections is asking for trouble:
The latest demand for RTP is coming from merchants, not banks, Gurz said. “We’re seeing a strong surge of interest from companies asking for RTP, and many of them are frustrated their banks don’t support it yet,” she said.
Merchants worry about chargeback risk, which instant settlement avoids. “Real-time payments mean you don’t have to worry about a dispute,” Gurz said.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group