How The Clearing House is using billers to boost real-time payments

Bess Adler/Bloomberg News

The search to find uses for real-time payments is turning to collections, as The Clearing House plans to expand a service that links transaction requests to instant processing.

In the coming months, TCH plans to expand Request for Pay (RfP), which thus far has focused mostly on utility billers, to include more types of collectors. RfP enables parties to present invoices or other transaction requests through the RTP Network, which enables instant settlement for payments.

Early bank users include Bank of America, U.S. Bank, Citigroup , PNC, BNY Mellon and JPMorgan Chase , and billing adopters include T-Mobile and Verizon. TCH, which formally launched RfP in July 2023 following two years of testing, launched a second phase for RfP in late May that includes government invoices for tolls and other types of payments to city, state and local government agencies.

"The market really wants to see improvements in cash collections," said Jim Colassano, senior vice president for RTP business product management at The Clearing House. "Banks are interested in using it for some of their own collection services and businesses are also looking at using RfP."

TCH is trying to boost use of the RTP's real-time payments network by using it to closely match payments to a consumer's balance and ability to pay on time.

"I think it's not just real-time billing but real-time interaction," said Gareth Lodge, an analyst at Celent. "In most schemes, the customer chooses how much to pay and when. So while the customer may not be able to pay today, they get paid on Friday and will schedule that payment for that time."

RfP is one of several areas where TCH is tying its RTP rail to existing payment types that can benefit from more speed and an easier digital experience. TCH is also focusing on enabling RTP to support cross-border payments and improving the link between earned wage access and real-time payments. It is also upgrading integrations with bank technology providers to onboard real-time billing and payment processing at a larger range of institutions, including credit unions and community banks.

There's plenty of room for instant payment settlement to grow domestically. Real-time transactions in the U.S. are on pace to grow from 1.4 billion in 2021 to 11.4 billion in 2026, according to Statista. That would be about 4% of U.S. payments in 2026 based on current trends. That lags other countries such as Brazil and India, where real-time payments are 14% of all transactions in Brazil and half of all transactions in India. In the U.S., real-time networks such as RTP and FedNow are required to generate their own demand.

"In the U.S., real-time payments are market driven. There are no mandates here," Colassano said. "It will take some time for the bank technology to get up to speed."

That makes RfP a key service to boost demand for real-time payments, according to Carl Slabicki, executive platform owner for treasury services at BNY Mellon, which is enabling funding for brokerage accounts, monthly bills and other recurring payments through RTP's instant settlement.

"This activity is at an early stage and we anticipate what we learn will drive better user experience consistency across the network and all participants. It will also draw larger transaction volumes and more 'requestors'," Slabicki said. "As we expand use cases, we see high demand for digital wallet funding, point-of-sale and other use cases where the consumer experience and instantaneous nature of these transactions can leverage the RTP network."

Request for payment, depending on the use case, is a great way to optimize a payer's cash flow and meet the payee's expectation for the timing of the payment, according to Ben Turner, the CEO and president of Verituity, a company that offers electronic payouts.

For government transactions, RfP can speed FEMA disaster-payment requests and disbursements. It can also boost supplier payments and customer refunds for B2C or B2B payments, Turner said.

"RfP can lower payment cost, reduce the use of checks and combat fraud, errors and exceptions," he said. "However, to realize these benefits payers must align their controls, processes and banking relationships to support an end-to-end digital payment process."

For billers and their customers, RfP and real-time payments can fill a void when a customer needs to make a one-time/urgent payment and the biller wants the assurance of "good funds," said Robin LoGiudice, a strategic advisor at Datos Insights.

"This is particularly important in the utility and insurance industries, where a service disconnection or insurance-policy cancellation could be avoided with the receipt of irrevocable funds by the biller," LoGuidice said, adding that in these scenarios, a traditional ACH payment does not guarantee funds and the customer may not have a credit card to offer.

"Real-time billing can augment traditional billing practices such as recurring autopay, which requires the customer to enroll their banking or credit-card information with a biller for withdrawal of payment by the biller on a specific date for a fixed or variable amount," LoGuidice said.