Real-time payments show the way forward for US banking

In many ways, the financial sector in the US is very different from the rest of the world, historically favouring smaller local banks to large national institutions, the country has over 13,000 FIs.  Bank regulation in the US is also highly fragmented as compared to most other countries that have only one bank regulator.  US banking is regulated at both the federal and state level with the US maintaining separate regulatory agencies for securities, commodities and insurance. This presents a different set of dynamics to other G10 countries when adopting new technologies such as chip-and-PIN as well as new exciting opportunities around faster payments.

US banks are now taking steps to provide a faster, more efficient payments services to citizens in the world’s largest economy. For instance, two of the nation’s biggest institutions have recently unveiled a new person-to-person (P2P) payment solution that will greatly expand the reach of real-time payments wherever users are.

Bank of America and U.S. Bank get involved

Between them, Bank of America and U.S. Bank have around 22 million mobile banking customers in the US, and consumers at both institutions are now able to send P2P payments instantly to other users, thanks to a collaboration with bank-owned real-time payments specialist Early Warning.

This is said to be a unique solution to the US market, due to its ability to provide consumers with immediate access to their funds, while payments are made in just a couple of simple steps. In an environment where many customers place a high value on convenience and fast service, such solutions are set to be in high demand in the coming years.

After enrolling in their bank’s money transfer program, users of the service will be able to send money to another individual through the online or mobile channels, using just the recipient’s email address or mobile number. The recipient will then be able to withdraw the funds through any channel, including in the branch, at an ATM, with a debit card, or at a point of sale.

Banking institutions also embracing real-time

It’s not just direct person-to-person payments in the US that are beginning to benefit from real-time technology (and the influence of Early Warning). Last year, Early Warning partnered with NCR to create a bank-to-bank good funds network that supports faster availability of funds.

The technology guarantees participating depositing institutions real-time processing for both check and ACH transactions, and supports both credit push and debit models. This means customers can now receive faster availability of funds on deposited items, as well as instant notification of items presented for deposit.

Lou Anne Alexander, chief market development officer of payment solutions at Early Warning, said: “Financial institutions are responding to customer demands for faster availability of funds, as well as better real-time information on their available balances.”

Mobile also comes to checks

When it comes to mobile innovation, we are seeing many different types of initiatives. For example, U.S. Bank has recently unveiled a new tool aimed at small and medium-sized businesses that will allow them to process checks when on the move.

The Deposit Express app allows workers to capture an image of a check using their smartphone’s camera and have it processed. This will aim to make life easier for small firms by removing the need to go into a branch in order to deposit funds into their business account. According to U.S. Bank, it is geared towards companies that deposit fewer than 200 checks a month.

These innovations highlight how important the mobile channel has become to banks in the US, particularly when it comes to offering new options to customers in order to make managing finances as easy as possible – both at the personal and business level. As consumers become more familiar with running all aspects of their lives through these devices, banking will be no different.

Written by Andrew Short

Andrew Short

Andrew is NCR's Mobile and Payments Solutions Manager. He has 20+ yrs experience in the software industry covering banking, healthcare and the telecommunications verticals. With past positions in finance, accounting, sales, and production management, he brings significant mobile and payment expertise to his current role.

Read more articles from Andrew Short