The first thing to remember is that ‘real-time’ payments is a subset of the overall faster payments category discussion of the past several years. Real-time means 24x7x365 availability, with clearing and settlement within seconds. This is to be distinguished from Same Day ACH (SDA), which allows for just that, meaning same day clearing and settlement as long as the payment is initiated by 2:45 PM (not including weekends and holidays, although that is under consideration). Now that we have that straight, this piece, appearing in PaymentsSource, is about corporate perceptions and take up of the November 2017 implementations of RTP by The Clearing House (TCH) in the U.S. and SCT Inst across the European Union as part of ongoing SEPA initiatives.
‘New architecture for real-time payments went live in recent months in key global markets, expanding B2B payment options for financial institutions and their corporate customers. In the U.S., The Clearing House launched its own instant payments brand last fall at the same moment when instant cross-border payments became available in Europe.’
So the piece goes on to discuss a couple of excerpts from surveys covering U.S. financial executives’ familiarity with the new payments rail capabilities. Of the surveyed group, about 30% understand what RTP does and the remaining responders are somewhere south of that. This may account for the roughly 15% that are actually in process of implementing some form of RTP utilization at present, with another 30% expecting to get an initiative moving along within a year. This is generally in line with what we at Mercator have stated, which is that 2018 is a year of assessment and knowledge building for launch effort as well as establishing bank and PSP price points for services provided (payments and data). Part of that problem is that relatively few FIs have actually established an RTP connection (the latest number we saw was eight), although that is supposed to accelerate by year end. That lack of access would certainly would limit end-user enthusiasm and knowledge. TCH does not yet provide any usage data for RTP.
‘Lack of capital and expertise are the top factors holding back real-time payments adoption in the U.S., PNC’s survey indicates. The majority, 64 percent of respondents, said the cost and/or complexity of real-time payments integration is preventing them from integrating it, while 28 percent said they need more knowledge about the technology’s value and applicability to their organization. Nine percent said the cost of a new type of transaction is a roadblock.’
It might be interesting to note here that SDA, although not real-time, had about 120 million total transactions in 2017 (credits and debits, although debits only became available in Sept 2017), of which about 17% were related to B2B payment use cases. Now just to keep things in perspective, 120 million transactions represents less than 1% of total ACH payments in 2017, so it is not yet in ubiquitous demand in the U.S. However, we expect fairly robust growth for faster payments (and real-time) during the next five years.
The article goes on to contrast the SCT Inst launch in Europe, where the EPC has indicated that 1 million transactions have been completed through July 2018. While this is a drop in the bucket versus full daily payment transactions across the EU, it does show progress. One may recall that the initiatives across the EU are more driven by EC directives, whereas in the U.S. faster payments (and the RTP launch) are market-driven, with enthusiastic (but non-regulated) support from the Federal Reserve to modernize U.S. payment systems.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group