Real-Time Payments A Reality By 2017’s End?

Real-time payments.

The buzz phrase of 2015. Now, the latest projections for the U.S. and Europe show that real-time payment infrastructures are set to be live by the end of 2017 through the ISO 20022 for real-time messaging standard.

In Europe specifically, the real-time payments services in the Single Euro Payments Area that was created by the European Payments Council has goals to be in place on that timeframe. In the U.S., the focus is more on the payments infrastructure once terms get finalized.

James Aramanda, CEO of The Clearing House (TCH), has indicated that the details of what’s next should emerge soon, citing the first quarter of 2016, according to a Banking Technology article. He noted that big banks in the U.S. have a “growing sense of urgency that they are behind and getting [more behind].” Testing for real-time payments should go live toward late 2017, he added.

Now, through a deal with VocaLink — a U.K.-based international payments system provider — and TCH, the push for implementing the faster payments goals are expected to build at a rapid pace.

“Finalizing this partnership with VocaLink represents a significant milestone in our effort to make ubiquitous real-time payments a reality in the U.S.,” Aramanda was quoted as saying. “Once completed, customers will pay or receive money in real time from any financial institution, and with its innovative extensible design, the system will be built to provide the basis for payment solutions currently unimagined.”

Another faster payments initiative that was put forth was from SWIFT, which announced a global initiative designed to use its existing global network of correspondent banks to enable same-day payments between businesses anywhere in the world.

As MDP CEO Karen Webster pointed out in her commentary this week, “Both are in response to the criticisms that the core banking rails everywhere — and in the U.S. in particular — are in serious need of an upgrade. The gauntlet that’s been thrown in front of the FinTech community and U.S. financial services sector is to get on board with delivering faster/real-time/immediate payments, well, fast.”

“No one, especially bankers and the operators of those core banking systems, argues against the need to modernize them. But where there’s plenty of debate is around defining who needs faster payments and when, how fast do payments need to be, who’s best suited to enable faster payments rails and what those faster rails replace, if anything at all,” Webster wrote.

Aramanda indicated that the U.S. real-time payments initiatives are ambitious and focused on ubiquitous payments, with the top 24 U.S. banks accounting for 60 percent of the industry. Of course, the real challenge is reaching the entire financial ecosystem, which encompasses 14,000 financial institutions in the U.S. The overall goal that’s been conveyed across the faster payments initiatives is to “empower U.S. consumers and businesses to send and receive real-time payments from their existing accounts at financial institutions [and] also provide a platform to launch innovative new services that will power a new economy built around real-time payments.”

Here’s a rundown of those who are in the race to push faster payments rails, as explained by Webster:

  • NACHA made a move earlier in the year to make payments faster by ratifying Same Day ACH for every single FI in the U.S. — all 13,000 of them. Starting in the fall of 2016, NACHA will have three settlement windows that make it possible for the funds that move along the ACH rails to move faster, if the relying parties want it to or need it to, and settle in the same day that it was sent. All banks in the U.S. will have the ability to enable Same Day ACH, and a business model to support it, should that be an option the banks want to make available to their customers.
  • The Clearing House, as mentioned earlier, would like to build and operate the faster payments rails for the U.S., too. The Clearing House settles $2 trillion every day on behalf of a subset of banks in the U.S., including some of the largest. Its announced partnership with VocaLink is designed to move money around the banks in the U.S. in real time. According to the press release that was issued last week, this system will allow U.S. consumers and businesses to send and receive payments in real time and create the enabling platform for the innovation of businesses and use cases around real-time payments. VocaLink is the technology that enabled the U.K. Faster Payments initiative and the system that is live today in Singapore. The press release says that this new system will launch sometime in 2016, which would make it live something like two and a half years faster than it took VocaLink to implement the U.K. Faster Payments initiative, with about 12,980 fewer banks. It’s ambitious to say the least.
  • FIS also announced a deal with The Clearing House back in October to launch a real-time payments capability. This partnership will leverage the FIS real-time technology backbone that can enable its 3,000 FIs to have real-time payments capability. FIS also bought enterprise banking player SunGard back in the fall for $9 billion. TCH said in its release last week that it will continue to work with FIS, presumably to extend its capability, beyond that which it has today, to include more banks. But to make things murkier, FIS has its own faster payments initiative, although it isn’t clear how much traction it has.
  • clearXchange, the bank-owned rails that enable P2P disbursements, is also throwing its hat into the ring here, too. Early Warning, another bank-owned authentication platform, is in the process of acquiring clearXchange in order to add additional authentication capabilities to rails and expand the disbursement use cases to include B2P and G2P. ClearXchange also suffers from a lack of ubiquity, although it says it can “fake it” by allowing consumers who bank with non-clearXchange member banks to enroll on its webpage and receive funds into their accounts.
  • ACI is putting its muscle behind making payments faster and smarter by leveraging its core banking infrastructure and software to innovate new use cases for real-time payments, including retail payments.


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