The Clearing House and Comerica Expand RTP Use Cases to ‘On Behalf Of’ Use Cases

Watch more: TCH, Comerica Unlock More RTP Network Use Cases Under New Rules

The Clearing House (TCH) debuted the RTP® network seven years ago and broadened its capabilities this year to accommodate a wider array of real-time payment scenarios.

A development in this expansion is the introduction of revised rules for “on behalf of” (OBO) payments. OBO payments, simply put, are RTP transactions initiated by a sender to facilitate a payment for or on behalf of another individual or entity, where the sender holds the titled ownership of the account from which the payment is dispatched.

Comerica Bank, a long-standing partner and early adopter of the RTP network, has become one of the first financial institutions (FIs) to embrace these updated OBO rules.

Comerica and its client, Monex USA, a provider of international payments, announced June 16 that they executed one of the inaugural OBO domestic payments under the new framework, demonstrating the enhanced speed, efficiency and flexibility now available to direct and indirect customers.

TCH Vice President of RTP Product Management Cheryl Gurz and Comerica Bank Executive Director of Payments Allysun Fleming told PYMNTS that the new OBO capabilities unlock a range of disbursement use cases.

The Imperative for New OBO Rules

Initial volumes over the RTP network were typically lower-value, direct account-to-account transactions, such as payments between individuals, an insurance company paying a client, or an employer disbursing payroll, Gurz said.

“But as the market has expanded with intermediaries, the payment supply chain has really grown over the last 5 to 10 years,” she said. “We have so many platform providers — intermediaries that are bringing value-add in conjunction with their financial institutions. There’s the ability to enhance how many of these customers are coming into the different payment networks.”

But there were challenges, Gurz added.

“We began seeing a group of payments that weren’t covered by our rule set,” she said. “And it was payer-to-payer, but we had a sender in between.”

This gap in coverage, particularly from a risk management perspective, necessitated a revised approach.

The core concern for receiving FIs in an irrevocable, 5-second payment environment is the need for complete transparency regarding all parties involved in a transaction. “The receiving FI wants to know who all the parties in the payment are,” Gurz said. “I want to make sure I know every single party in this payment.”

According to Fleming, OBO can be viewed as “third-party clearing,” involving “sending payments on behalf of our customers’ customers.” Historically, this model was primarily supported by wire networks, particularly for entities like money service businesses (MSBs) or broker-dealers needing to send payments on behalf of their clients.

The new rule integrated this established model into the RTP network while ensuring that all due diligence and transparency requirements are met, thereby mitigating risk for all participants.

Eliminating Cutoff Times: A Paradigm Shift

One of the most significant advantages unlocked by the revised OBO rules on the RTP network is the elimination of traditional cutoff times, enabling 24/7 processing. Fleming said that in discussions with clients, regardless of whether they were a money service business or a broker-dealer managing deposit sweeps, the issue of cutoff times consistently emerged as a point of friction.

“One of the opportunities that jumped out at us right away is the idea of removing cutoff times,” Fleming said, as this shift allows businesses and their customers to move money around the clock, unshackled from the operational constraints imposed by traditional wire transfer windows. This constant availability promises to enhance flexibility and operational efficiency for entities managing fund flows on behalf of others.

Diverse Use Cases

As for the emerging use cases, Gurz outlined several key areas where TCH anticipates growth. She pointed to network settlement as a key example, benefiting closed network settlement providers that disburse funds on behalf of multiple companies or “in-house banks” managing disbursements for various brands under a single corporate entity.

Many micro-deposit providers, which operate on behalf of numerous corporates, will now be able to use OBO, ensuring the ultimate debtor is known.

“We also see multiple payment providers in the real estate title environment,” Gurz said.

In addition, under the previous TCH definition, MSBs faced a more elaborate onboarding process. The new framework simplifies this, allowing MSBs to operate through their banks, with due diligence primarily shifting to FIs to know their customers and know their customers’ customers, Gurz said.

Fleming further expanded on the use cases from Comerica’s perspective. Broker-dealers can now manage excess deposits and optimize for extended FDIC insurance around the clock, using real-time rails to manage their balance sheets more dynamically. The gig economy has already seen an uplift in real-time payroll, but OBO capabilities will allow payroll providers to make payments on behalf of their own customers.

Both Comerica and The Clearing House are charting ambitious paths for the latter half of the year to further propel the adoption and utility of instant payments.

For Comerica, Fleming outlined key strategic priorities. The bank is prioritizing the integration of new OBO capabilities into a single API, alongside the origination of ISO 20022-compliant wires.

“This allows us to do some of the best ‘value routing,’” Fleming told PYMNTS.

The consolidation of payment capabilities within a single API is designed to simplify interactions for embedded finance companies, making it easier for them to integrate with Comerica’s services.

Gurz said TCH is working with the nearly 1,000 banks currently on the network primarily for receiving payments, encouraging and enabling them to transition to send capabilities. This is crucial for expanding the reach of real-time services to more corporates, consumers and small businesses.

Broadening the Receive Network

Simultaneously, TCH is focused on bringing more of the “long tail” of FIs onto the receive side of the network, recognizing that a two-sided network is essential for robust growth, Gurz said.

Fleming underscored the broader impact of the new functionalities, asserting that OBO is “one of the keys that will help the U.S. unlock demand for real-time payments holistically.”