Real-time payments (RTP) are financial transactions that are settled almost instantaneously. This year marks five years of real-time payments in the U.S. That is since the Clearing House deployed the first real-time payments network in 2017.
While all the big banks are on the Clearing House network, most small- and medium-sized banks are not. The reluctance to jump on board with The Clearing House RTP network is due to an alternative payments network the Federal Reserve is developing. The network is called FedNow, and is set to be released in July.
A recent article in Forbes interviewed Ted Forman, President of Payments Solutions at Jack Henry. He gave his take on real-time payments. He said that because RTP is a new field, and the Federal Reserve’s RTP network isn’t out yet, the RTP space hasn’t matured yet. Third-party solutions that can take advantage of RTP are just not out there yet, but they will be, and largely because of demand from youth.
“Financial institutions are starting to understand that they need a payment strategy. I believe that interchange revenue is slowly going to be cannibalized,” he told Forbes.
PaymentsJournal has written about the potential for real-time payments to change the payments landscape. It will be interesting to watch how the introduction of FedNow next year will lead to advances in payments. This will be especially interesting for those that are through third-party solutions that are built on the network infrastructure.