The past year has seen the emergence of what PNC Financial Services Group's Chris Ward calls the "immediate economy," and that has made all the difference for the bank's real-time payment program.
More than 250 of the bank's wholesale clients are now regularly using PNC's connection to The Clearing House's RTP network, which is up from just a handful a year ago.
"As so much more gets digitized, there's more of a need to have funds immediately," said Ward, who is the executive vice president and head of product for treasury management at PNC, which is connected to both TCH's RTP network and the bank-backed Zelle peer-to-peer transfer app.
The quick uptake stems from a wish to improve liquidity for supply chains, and to support alternative payrolls as firms add early wage access and hire more contract workers, breaking away from the traditional two-week wage cycle. The bank is also building a bill-pay feature that supports real-time payments, enabling a request for payment, disbursement and account availability almost simultaneously.
"The benefits you get for having a fast confirmation versus a wire, where there can be delayed settlement, are immense," Ward said. "That has really contributed to a different way of thinking about execution. We're really just touching the tip of the iceberg with real-time bill pay."
The past year's economic crisis and mass digitization of business have required firms to move funds faster and with better visibility, and once real-time payment is seen as a problem solver, it's easier to deploy.
"In a large number of cases, the person who is sending or receiving doesn't even know the RTP network exists," said Steve Ledford, senior vice president of products and strategy at The Clearing House. "They just know the funds can be sent immediately."
The Clearing House introduced its
The RTP network has 123 members, and recently partnered with Early Warning's
"What deals like this do is demonstrate the benefits of real-time payments," Ledford said, adding the RTP network is adding several new banks each week. "When we launched there was a lot of promise but many could not see the value. But a lot of use cases have emerged, including things we haven't thought about."
As an example, Ledford mentioned The Clearing House's recent partnership with Mazooma, a Toronto-based online gaming firm, to allow gambling winnings to be instantly deposited into the recipient's bank account.
The Clearing House is focused on finding new ways to use the real-time rail. A future deployment will allow Zelle identifiers to support bill payments. There are additional use cases emerging, such as insurance disbursements, payments for mortgage closings and alternative payroll practices.
"The more institutions can see how other banks or fintechs are using real-time payments, the more it draws attention to how the rail can be used," Ledford said.
Linking financial services directly to real-time payments is a longstanding goal of ventures such as Zelle and faster-payment initiatives globally. But there's still debate over a direct revenue benefit for real-time payments via fees, or an indirect incentive through a value-added service that draws more revenue.
At a recent European Central Bank forum, Fabio Panetta, a member of ECB's board, railed against the potential of
In the U.S. TCH has a flat fee structure for all financial institutions on the network, regardless of volume or size; the fee for an institution that sends one real-time payment is the same as one that sends 100,000. There is no fee to receive a real-time payment, and the fee to send a transaction is 4.5 cents.
The RTP also does not have operator fees to receive payments, and it includes incentives for retail banks that respond to requests for payments, or RfP. Since most institutions are currently in receive-only mode, there are generally no fees for real-time payments.
The Clearing House does not comment on or attempt to influence the ways financial institutions charge for any of its services, Ledford said. Real-time payments have produced fee revenue at PNC, Ward said, but he did not offer additional detail.
