For banks using the instant payments rails, the stage has been set for a summer surge in higher dollar-value transactions, especially for corporate clients navigating supply chain and tariff concerns with an eye on improving cash flow.
However, the challenge lies in addressing concerns over the safety of those quickened money flows, especially when it comes to sending payments.
Limits March Steadily Higher
The Federal Reserve announced June 24 an increase in the transaction limit for payments sent across the FedNow® Service from $500,000 previously in place to $1 million. At the same time the new limit took effect, the central bank announced that banks and credit unions can set some parameters around the transactions, as they can designate amounts and payment speeds for various customer segments.
The Fed’s move came after a February increase in the transaction limits over The Clearing House’s RTP® network, moving from $1 million to $10 million. The day after that increase became effective, BNY made a $10 million payment in an inter-company setting. TCH said 285,000 companies use the network to make payments each month.
The natural use cases would be the transactions that are routine in, say, real estate or construction, where six and even seven figures are common up and down supply chains. In a nod to increased volumes, Bank of America disclosed last month that 52% of the value of all real-time payments in the United States processed on the RTP network by the bank have been higher than $1 million.
Advertisement: Scroll to Continue
“Our clients have been using RTP to pay vendors, employees and customers, but the larger cap has opened up use cases for different kinds of transactions, such as real estate and deal closings and other corporate activity,” AJ McCray, head of global payment products, Global Payment Solutions (GPS) at Bank of America, said in a statement at the time.
What the Data Says
The PYMNTS Intelligence report “Doubling Down: The Growing Case for Multi-Rail Real-Time Payments” found that 58% of U.S. financial institutions that enable instant payments do so through both the FedNow Service and the RTP network.
Roughly a third of the 400 FIs surveyed for the PYMNTS Intelligence report “Real-Time Readiness: How Banks Are Innovating Instant Payment Access for Businesses and Consumers” said they offer instant payments for both consumer and business clients. This indicates the potential for some cross-pollination, as instant payment confirmations are indicated as a key benefit no matter the transaction parties or use cases.
However, there’s still ground to cover when it comes to send functionality. The PYMNTS Intelligence report “The Real-Time Leap: Closing the Gap Between Receiving and Sending” revealed that only 22% of small- to mid-sized FIs will enable both send and receive capabilities at launch, and 78% will launch with receive-only functions at first. The report found that 14% of FIs said they see the risk of data theft as the “most important” challenge in implementing real-time send capabilities.
