You wouldn’t think that the act of moving money from point A to point B would be so controversial, but since there is money to be made and winners and losers to be declared, politics is playing a role in the deployment of real-time payments in the U.S. The American Banker ran an article today with details regarding the most recent declarations from The Clearing House that has community banks and credit unions up in arms. A link to that article is here.
There has always been a concern from smaller financial institutions (FIs) that The Clearing House (TCH), owned and managed by the very largest banks in the U.S. is not the right organization to run and operate the country’s only real-time clearing and settlement system. It makes community banks and credit unions uncomfortable that they are relying on a payments network that benefits their biggest competitors. It puts them in a scenario they have seen before when the largest banks developed the global card networks decades ago when the smaller financial institutions felt forced to join or face a fatal competitive disadvantage. These concerns were the very reason that the Federal Reserve last October announced that they were considering becoming a real-time payments operator themselves and introducing an alternative to TCH in the real-time payments market.
TCH has taken measures to assure smaller FIs that they have no monopolist plans. They have stated that their RTP® platform is open to all FIs and the flat rate per transaction fee for a real time payment will be the same for all FIs, regardless of an institutions volume. TCH’s 7 principles around fair play were re-articulated in a public declaration last month. But there was one bullet point that is creating the controversy:
These principles apply so long as the RTP network is the only provider of faster real-time clearing and interbank settlement.
The American Banker article states that TCH does not intend for this to be a threat directed at the Federal Reserve as it contemplates its role in real time payments. I believe that. This caveat could be used if any organization decided to get into the real time game such as another network or a competitor representing smaller FIs.
Supporters will say that TCH is free in an open market to do what is needed to protect its business model.
Detractors will say, “I told you so” and contend that The Clearing House has monopolist intentions.
As these controversies continue to play out, the deployment of a reliable, ubiquitous real time payment network get pushed further and further into the future. This will give faster payments (but not real time) solutions like network push payments and same day ACH more time to gather early-to-market wins.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group