Banks often tell The Clearing House, which operates the RTP rail, that adopting real-time payments can wait because of bigger challenges surrounding checks, ACH, credit and debit, peer-to-peer payments and buy now/pay later models.
But fresh economic headwinds are causing faster payments to become a matter of survival for many businesses as cash flow tightens and inventory is in short supply.
“Many banks, especially smaller ones, tell us, Oh, I can’t add another payment network — I can’t even handle what I’ve got today,” Cheryl Gurz, vice president and real-time payments manager at The Clearing House, said Wednesday at the Electronic Transactions Association’s annual meeting in Las Vegas.
The latest demand for RTP is coming from merchants, not banks, Gurz said. “We’re seeing a strong surge of interest from companies asking for RTP, and many of them are frustrated their banks don’t support it yet,” she said.
Merchants worry about chargeback risk, which instant settlement avoids. “Real-time payments mean you don’t have to worry about a dispute,” Gurz said.
Others want to speed up payroll payments. Employers extending early wage access — also called earned wage access or EWA — and companies that pay gig employees per shift are increasingly asking for real-time payments to support these use cases, Gurz said.
The Clearing House, owned by 24 banks, spent years developing a system that enables a one-time “credit push” movement of funds between two checking accounts instantly when banks exchange messages.
Five years after The Clearing House launched its RTP network, 235 banks are now live with the service, covering about 70% of all checking accounts, according to Gurz. In January the network handled 40 million payments, she said.
But getting the remaining 5,000-plus U.S. financial institutions to adopt RTP in order to make it ubiquitous is no small task. "We're now facing [converting] the long tail, which is very hard," Gurz said.
One reason many banks balk at adding RTP is they fear it will displace existing payment networks, but that’s a myth, Gurz said.
“RTP isn’t replacing credit cards or ACH — it’s a complementary approach that addresses certain business strategies,” she said.
Even the smallest financial institutions typically can expand their total transaction volume by adding RTP, Gurz said. And The Clearing House has made significant strides recently in easing RTP adoption for smaller financial institutions, she said.
“Most of the core providers that serve smaller banks now have an express-onboarding process that only takes seven days,” Gurz said.
The prospect of the Federal Reserve’s FedNow faster-payments network going live next year is also encouraging more banks to consider adopting RTP.
“FedNow has given RTP a boost. It’s validated that it’s here to stay,” Gurz said.
As arguments against adopting RTP fade, one of the final hurdles for many smaller banks is getting managers to prioritize it on their list of technological goals.
“Often it comes down to leadership making sure RTP adoption gets the time and attention of the IT department,” Gurz said.
