Early Warning, operator of person-to-person app Zelle, and The Clearing House (TCH), operator of the real time processing platform RTP, have been planning on combining forces for faster settlement.
Today, Zelle transactions are messaged in real time and the recipient has access to funds immediately, but the settlement of funds between the sender’s and recipient’s banks is managed through ACH. This means that the recipient banks may incur some settlement risk as they wait for the next ACH batch.
Funds are guaranteed by the sender bank so the risk is managed, but as Zelle is used for larger and larger transactions–some in the millions of dollars–banks and credit unions can get a little uneasy. This is where TCH steps in to provide instant settlement between banks for Zelle transactions for those FIs who can receive RTP transactions.
An article in today’s PaymentsSource suggests that TCH will play not just a role in settlement but will also provide bill payment product through its Request for Pay solution which can be imbedded in the Zelle app:
We have been working with Early Warning to send money using an alias such as a phone number. We want to be the underlying plumbing for Zelle transactions,” said Steve Ledford, senior vice president of product and strategy at The Clearing House.
“We expect it to be in place for P2P next year. It will be up to the financial institution to decide if it wants to connect to RTP,” Ledford said in an interview during SourceMedia’s annual PayThink conference last week in Los Angeles
Ledford also noted that both companies were jointly working on bill presentment for early next year. The “Pay with Zelle” bill pay initiative is intended to help banks retain existing bill pay volume as well as encourage new bank bill pay usage.
There are several advantages for billers to use RTP for bill payments, according to Ledford. By using the secure RTP network a biller would know that any bill on the network was vetted going in by a financial institution and received by the customer’s financial institution. Essentially, this would counter common email bill pay scams.
The article also suggests that the RTP/Zelle partnership could extend to Point-of-Sale (POS) transactions. While technically true, I see zero interest in this:
- Early Warning does not have plans to integrate with POS devices or software.
- The owners of Early Warning and TCH are banks who have a business model around receiving interchange through the card networks. They aren’t going to bite the hand the feed them.
As the article mentions, consumers are very used to the protections offered to them through the card networks for purchases they make. These zero liability protections are not built into the non-card transactions.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
