In making its pitch to credit unions, the RTP network — which is backed by banks — has to overcome a long-standing rivalry between the two types of financial institutions. But it seems to be doing just that.
A growing number of credit unions are adding instant payments to their products and services, and some of them are choosing to use both — rather than either one — of the leading platforms.
The Federal Reserve's instant payments network,
One differentiator is RTP's $1 million transaction limit compared with FedNow's $500,000 ceiling.
Bluestone Federal Credit Union in Sioux Falls, South Dakota, joined RTP recently because of the relationship created and fostered by its core-data-processing partner, CU*Answers, and the $4.4 billion-asset
But Jeffrey Jorgensen, president and CEO of the $181 million-asset Bluestone, said the credit union also plans to also join FedNow as soon as it is feasible — probably in 2024.
"There are some distinct differences in these two instant payment channels, but we believe they are both too young to pick only one as the survivor, and to put all of our eggs into one basket right now would not be prudent," Jorgensen said.
Some smaller institutions have shied away from RTP because they don't want to support their larger competitors. But Jorgensen said a concentration of financial services in the government's control (with FedNow) may not be a good thing either.
"Many times the private, for-profit sector can deliver a product or service that is better than what the government can offer," he said. "This may be one of those instances."
Its president, Greg Kidwell, said member convenience was the driving factor in the decision to begin offering faster payments.
"If we can help members receive their funds faster, then we are obligated to make real-time payments available to them," he said.
Kidwell said he is not sure that offering faster payments will attract new members, but providing the convenience ensures that Pathways stays competitive with other financial institutions.
Corporate One FCU's tight integration with RTP was the deciding factor for Pathways in starting out with that channel, but the credit union also expects to go live with FedNow in mid-2024, Kidwell said.
Corporate credit unions are sometimes referred to as "the credit union's credit union" and help those smaller institutions with things such as loan participations and liquidity needs. Corporate One FCU said it connected 18 credit unions to the RTP network in 2023 and expects to connect another 20 credit unions to RTP and/or FedNow in the first quarter.
"Establishing a connection between credit unions and the RTP network and the FedNow Service is a fundamental part of our vision for credit unions to embrace immediate payments, and the interest we've seen in the last year indicates an increasing recognition of the tangible benefits that immediate payments offer and that they constitute a strategic imperative for the future," Corporate One's President and CEO Melissa Ashley said in a press release.
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That's because many of the 300 users are enabled to only receive FedNow payments, not send them. Rengachari said that is due to the limitations of legacy core technology, which is holding banks and credit unions back from fully adopting FedNow.
Jorgensen from Bluestone said that without Corporate One and CU*Answers committing the resources to make it a priority, the credit union would not have been capable of adopting real-time payments by itself.
"I don't think we have heard from any members asking for this service, but we believe it is a service that they will want access to sooner than later, even if they don't realize it yet," he said. "Although we have not modified our marketing materials to include this service, we will in the very near future."
