Another article, this one a blog in The Hill, claims that the launch of real-time and faster payments in the U.S. will help consumers who are critically dependent on the timing of electronic or paper payroll deposits, benefits or other funds. Somehow, the belief is that real-time payments will allow people to receive their money earlier. As I mentioned in commentary (dare I say a rant) last month, real-time payments will not make payday happen any earlier.
The Hill article, written by Representative Ted Budd (R-NC), argues that faster payments will, in fact, close the funds availability gap for those who can’t wait days for a check to clear or an ACH transaction to process:
Count yourself lucky if you’ve never had to worry about accessing the funds from your Friday paycheck until Monday morning. If you’re a single parent, working two jobs, it’s critical that you get instant access to your hard-earned money.
In 2015, the Federal Reserve realized this problem needed to be addressed, and to their credit, they encouraged the private sector to develop a solution to the deposit/access time gap. Four years later, through American innovation, a real time payments (RTP) system came to fruition and currently reaches over 51 percent of the demand deposit accounts in the country. This allows immediate payment and withdrawal for consumers. This helps everyone from a low-income worker who needs their paycheck right away to someone who simply wants to pay back a friend who picked up their bar tab on Venmo.
If an individual receives funds through payroll or as a benefit, and that payment is scheduled to arrive on the 15th of the month, funds will still be accessible on the 15th. The availability of real-time payments in the market does not mean that these scheduled payments will happen any sooner. Also, it is quite unlikely that an investment will be made to tie real-time payments to the check clearing processes.
The way that people get paid more quickly is to pay them sooner. It’s innovations like the ones created through fintechs like DailyPay and FlexWage that are actually putting money in consumers’ hands when they need it, not when it’s scheduled. These solutions may deliver funds in the final mile through a faster payment solution, but it is so much more than just the technology used in the background to move money.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group