Real-time payments arrive in the US – will it bring the promised transformation?

'Frictionless' is a key buzzword for many banks at the moment, but what does this mean in practice, and what will banks need to do to improve their performance?

While the US market has been at the forefront of many innovations in banking and payments technology over the years, one area in which it has been conspicuously behind the curve in recent times has been the adoption of effective real-time payments solutions.

More than 20 nations already have access to this technology, and some of these have enjoyed it for some time – the UK’s Faster Payments system was launched back in 2008, for example. However, the US has fallen behind, in part due to the lack of a centralized regulatory environment to lead efforts.

But this is now changing, and real-time payments infrastructure has now officially arrived in the US. In November 2017, The Clearing House (TCH) announced the launch of its RTP system, with the first payment taking place on November 13th between BNY Mellon and U.S. Bank.

So what will this development mean for the US payments market, and will it bring the revolution that has been promised to how the US makes payments?

‘The most important payments transformation’

TCH, which is owned by some of the world’s largest banks, has worked with Mastercard Vocalink payment infrastructure company to manage the change. Vocalink has already driven real-time payments systems in several countries, including the UK, Singapore and Thailand, to reduce the time taken to process payments from days to seconds.

The introduction of a similar service to the US may be long overdue. Indeed, TCH notes that the launch of RTP marks the first new core payment system in the US for more than 40 years, and during that time, the expectations of consumers and businesses when it comes to payments have changed dramatically.

Ian Stewart, CEO of BNY Mellon Treasury Services, described RTP as “one of the most important payment transformation efforts in our industry”, and one that will go far beyond addressing the traditional challenges payments processors face in the US.

“Bringing online a truly real time, two way, 24/7 payment and messaging system will create new scenarios and entire new markets in ways we have not even anticipated,” Mr. Stewart stated.

Businesses and consumers stand to benefit

One feature offered by RTP that differentiates it from other real-time payment solutions elsewhere in the world is the ability for more information to be sent along with payments, such as confirmation messages. TCH stated that this will help provide additional transparency and certainty by notifying both parties that payments have been settled.

“Confirmations provide businesses [with] the ability to free up working capital by more precisely managing cash flow and make life less stressful for consumers on tight budgets,” the company said.

Expected use cases for RTP include e-invoicing, bill pay, insurance claim payments, cash on delivery payments and more, with the system set to be used by all the US’ biggest banks by the end of next year, with a goal of it becoming ubiquitous by 2020.

Business Insider also noted that the technology is likely to be highly popular among both consumers and business users, while RTP will help overcome many of the barriers to adoption that has held back banks’ implementation of faster payment solutions.

The fact it is simple to integrate, globally interoperable, offers education functionality, and provides a quick return on investment will make it highly accessible and therefore an attractive option in an environment where consumers and business users expect faster payments resolution.

 

For more information on this subject click here to view a recent webinar, ‘Making Real-time Payments a Reality’, where NCR’s experts explore the global drivers, implementations and technical demands of Real-time payments.

 

Written by Steve Nogalo

Steve Nogalo

Steve Nogalo is VP and General Manager of NCR Payment Solutions. His work involves driving growth of image and electronic based payment solutions including RDC, payment transaction processing and risk solutions. During his 30 years with NCR, Steve has held management positions in Sales, Production Management and Software Engineering.

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