Three months ago, the FedNow® Service launched to much fanfare, heralding the second real-time payments network now live and fully operational in the United States.
Since then, about 100 banks have signed on — a start, to be sure — but only a sliver, given the more than 10,000 banks and credit unions operating domestically. The Clearing House’s (TCH) RTP® Network, for its part, has been up and running since 2017.
Rupa Krishnan, head of global real-time payments at J.P. Morgan Payments, told Karen Webster that “the Fed has started increasing participation and adoption of real-time payments,” and that a continued outreach to a broader range of financial institutions (FIs) is needed, along with education and collective work among all participants to understand the value of a faster payments network.
“Building trust and confidence in real-time payments is crucial for widespread adoption,” Krishnan emphasized.
Reliability, availability and resiliency in the network, as well as robust fraud protections, are important factors in cementing those building blocks of trust and confidence. Collaboration between FIs, network operators and aggregators will give rise to that crucial network effect.
But as it stands right now, “there are a few barriers to adoption that we all will have to overcome, and an important one is reach,” she said.
While FIs were in a wait-and-watch mode, the launch of FedNow has helped create momentum among technology and core banking providers, which is key to achieving ubiquity. TCH and FedNow have their sights set on expanding reach, and technology providers are investing in simplifying the tools necessary for a bank to implement connectivity to the real-time clearings.
Seamless onboarding and integration are also key for clients, like traditional corporates and enterprises, eyeing real-time payments and operating with constrained technology budgets. Alignment between the TCH and FedNow networks around operating rules and high-level feature roadmaps is important to widespread client adoption.
These dynamics will require banks to offer solutions that remove complexity for their clients and are another opportunity for FinTechs and processors to work with banks to solve this equation.
J.P. Morgan Payments has been an early adopter of both networks. It provides real-time payments reach through its connection to and orchestration between both networks via a single integration, making it easier for enterprises of all kinds looking to adopt real-time payments in the U.S. and globally, Krishnan said.
On the consumer side of the equation, there’s palpable interest in using real-time payments in everyday life. Research by PYMNTS Intelligence and Ingo Money showed that most individuals would pay a fee for real-time funds availability, but they would like faster payments even more if the option were free.
To broaden reach and set the stage for greater adoption, FIs like J.P. Morgan Payments are stepping in as network-agnostic connectors between FedNow and RTP, providing access to both real-time networks. Krishnan noted to Webster that her firm provides connectivity to around 450 unique FIs across both services, ensuring choice, reach and flexibility for users. A growing number of transactions are shifting to real-time, account-to-account (A2A) use cases across payroll, loan processing and insurance payouts.
“This is among the most reliable, fast and seamless ways to reach receivers that can accept real-time payments,” she said.
“It’s too early to tell how each network will evolve,” said Krishnan, adding that “either way, we want to be prepared.”
No matter how the networks evolve, she said, certain immutable processes and protocols must be in place, which will determine right off the bat whether consumers and enterprises find first experiences and interactions to be positive ones, and thus widen their comfort with, and desire for, real-time payments.
The networks and FIs are obligated to ensure that the right checks are in place to authenticate users and that appropriate fraud protection, risk mitigation and dispute resolutions are properly designed and articulated, she said.
In the months and years ahead, Krishnan projected, bill pay through A2A transfers will prove popular and provide an on-ramp to other B2C and even B2B use cases (transforming how working capital is accessed and used).
She said she thinks the stage is set for increased real-time payments adoption by banks in the U.S.
Operational alignment between the two rails, investment at a network level in fraud mitigation, dispute management measures, and consistent and high-quality fulfillment of real-time transactions are key factors in the U.S. that will help revolutionize the way payments are conducted for consumers, businesses and governments over time.
In the meantime, she said, J.P. Morgan Payments is focused on continuing to expand its global plug-and-play, rail-agnostic solution.