Banks Rush to Promote Instant Payments as RTP Crosses Billion-Transaction Mark

Roughly seven and a half years after The Clearing House (TCH) launched its RTP® network — the first new U.S. payments infrastructure in four decades — 24/7 instant transactions are finding wide embrace.

Joint research from PYMNTS Intelligence and TCH found that nearly all banks plan to adopt real-time payments capabilities within two years, and 62% of financial institutions (FIs) are already connected. In February, the RTP network crossed its 1 billion payment milestone.

James Colassano, senior vice president of RTP Business Product Management at The Clearing House, said banks are gearing up to meet the demands of their enterprise clients and a variety of emerging and yet-to-be-envisioned use cases. Getting to must-have status will take time, but 93% of the banks that have moved into the real-time realm have said such offerings improve customer loyalty and engagement.

The Difference 7 Years Makes

“We’re starting to see a very, very steep rise in interest across every sector, and every business sector is interested in real-time payments,” Colassano said.

That’s a marked change from, say, seven years ago, when the network was new and banks were unsure about end-customer demand and what business use cases might develop.

Now, “banks are being asked by their customers [about real-time payments], ‘Why don’t you have it, and when will you have it?’” he said. “The banks are expected to be able to deliver on what these customers are asking for.”

Although small banks, including credit unions, may be hesitant about integrating into the new payments service — as it requires some technological investments, and in some cases, partnering with solutions providers to get that connectivity in place — Colassano cautioned that “when you see the volume building up, when you see the competitor down the street offering these capabilities, and you can’t, then you have to bite the bullet and make the investment decision. And that’s what we’re seeing banks doing today.”

Where Demand Lies Today and Where It’s Headed

Demand is growing for instant payroll, speedy gig economy payouts and direct transfers — not just between bank accounts but also between wallets and bank accounts.

The initial “sign-on” by banks for RTP was to enable the receipt of instant payments, but now they are allowing customers to originate real-time transactions, he said. Some businesses are developing their own use cases tied to loan funding, merchant funding and other improvements in money movement.

Someone can sell their car on their phone, for example, and when the dealer picks up the car, the seller has money deposited into their bank account, settled in seconds.

“This is the innovation that we’re starting to see,” Colassano said, adding that TCH’s increase in transaction limits from $1 million to $10 million will boost innovation.

As for the widespread concerns over fraud, Colassano said fraud across the platform has been minuscule, due to the measured approach TCH took over the years.

“We started with simple credit transfers several years ago,” he said. “Now we’ve adopted requests for payment, we’re adding new functionality every day. But we did that in a very risk-managed way to learn how [RTP] was going to be used, and then to expand and grow. And we’ve seen a lot of success in doing that.”

Educational efforts by banks, various governments and other entities to warn consumers about scams have borne fruit, and more people than ever are aware of the immutable nature of instant payments, he said.

“There’s more activity on the network,” he said in looking at what the future holds, “and once you see more activity, it feeds itself — there’s a virtuous cycle … what we hear from consumers is that once they receive or make an instant payment, they will do it again and again … the banks realize that instant payments are the payment system of the future, and they need to be in that game.”