Real-time payments have been the subject of extensive research over the past several years. New real-time payment options have emerged as consumer expectations and demand are driving real-time payment growth across multiple channels.
To learn more about the paradigm shift towards real-time payments and unpack how the NOW® Gateway from Fiserv can provide connections to a range of real-time payment capabilities, PaymentsJournal sat down with Tim Ruhe, Vice President of Real-Time Payments at Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
Top priorities for financial institutions
Financial institutions have been investing time, energy, and money into real-time payments for one all-encompassing reason: to meet customer expectations. Fiserv recently commissioned Javelin Strategy & Research to look at today’s real-time payments landscape. The research shows 75% of polled consumers feel it is important to receive payments and have access to funds instantly. This expectation is particularly strong among the youngest generations, with 90% of Gen Z respondents and 93% of Gen Y (Millennial) respondents highlighting real-time activity as essential.
There are plenty of reasons why consumers want faster payments, according to Ruhe. “It’s a social obligation, or it’s an urgent payment, or they don’t want to be late,” he said. “There are many, many ways that consumers want to be able to take advantage of this.” Moreover, according to Grotta, Mercator research forecasts that the rate of real-time payments growth is only going to speed up.
Beyond that, real-time payments have the potential to impact every type of payment interaction that financial institutions support today. “It’s going to touch how we transfer money between accounts, how we get paid, how we pay bills, how businesses pay each other, and might even affect how you buy goods and services from a merchant,” Ruhe explained. “Financial institutions are starting to think about that journey.”
What is driving real-time transformation
As previously mentioned, customer expectations play a significant role in determining where FIs choose to make investments in their business offerings. Currently, consumers don’t want to put their lives on hold when payments aren’t processed over the weekend – they expect 24/7 service. For FIs, this is an opportunity to stand out from the pack. “You want to be able to differentiate yourself now, because over time, this will become table stakes,” said Ruhe, meaning real-time will soon be viewed as a baseline offering. “Then you will need to be at competitive parity.”
Additionally, real-time payments lead to deeper digital engagement. For example, early data has demonstrated that users of the Zelle® person-to-person payment service are more heavily engaged with their financial institution and exhibit greater loyalty than non-users. “Customers who use Zelle have higher balances, they have more product holdings, they are more profitable, and they don’t leave the financial institution as frequently,” Ruhe explained. And that is just in the P2P payments space. “What’s going to be that next application that really drives the adoption and use of faster and real-time payments?” Grotta wondered.
The network perspective and what comes next
Both the RTP® Network from The Clearing House and the Zelle Network® are being adopted at a rapid clip. $34B was processed through RTP in Q3, which represents an 18% growth from Q2. Meanwhile, the Zelle Network processed 828M transactions totaling $226B over the first six months of 2021. “We’re seeing a lot of uses of Zelle, and RTP works on all bank accounts for any financial institution that support RTP, so that opens up a whole other set of capabilities and use cases,” Ruhe noted. “And we are starting to see them interoperate, so that’s creating a lot of innovation as well.”
One of the next big steps in the real-time payments industry will be the addition of the Federal Reserve’s FedNow network, which should launch late next year. However, there is still an open question of whether or not FedNow and RTP will have interoperability issues. “It’s not a new thing for us to have more than one payment network,” Ruhe clarified. “There’s a couple different ACH networks and multiple card networks. This is kind of how we roll here in the U.S.” The intention behind this diversity is not to cause complications, but rather to drive ubiquity. Competition spurs continuous innovation, and with cross-border payments enablement as one of the next big hurdles to cross, who knows if that will be on an existing or future network?
Bringing everything together with the NOW Gateway
The NOW Network from Fiserv, which was introduced in 2014, enables financial institutions to deploy multiple payments use cases across multiple networks with one single connection. NOW is an acronym for “Network for Our World,” and Fiserv recently introduced the NOW Gateway: RTP Network, which can receive credit transfers from RTP. “NOW Gateway simplifies the task of implementing real-time payments,” explained Ruhe.
Support of RTP is applicable to plenty of use cases, including paying gig economy and temp workers, plus any emergency payroll situations. If one of the nearly 1,300 financial institutions that have implemented Zelle decides they want to support RTP, Fiserv can add that capability simply through the NOW Gateway. Furthermore, Fiserv can bring real-time capability to electronic transactions that currently take two or three days. “In summary, NOW future proofs the implementation of real-time payments at financial institutions,” Ruhe concluded.