Instant payment settlement is ready for its next phase, where the transactions will be agnostic to the underlying network, says fintech entrepreneur Stephany Kirkpatrick.
"It's not going to be finished with just the launch of [The Clearing House's] RTP and FedNow," said Kirkpatrick, CEO and co-founder of Orum, a three-year old firm that uses an application programming interface to enable instant payouts for brokerages, lenders, digital asset firms and payroll. "There's push payments, crypto payments, billing, etc. Whatever comes up, we need to be in a position to unlock real-time settlement."
Orum, which powers real-time payments via The Clearing House's RTP network, is also part of a showcase for firms that sell technology that supports the pending FedNow real-time payment system, which is set to debut between May and July.
The RTP network, which has been live for more than five years, and FedNow have a similar list of tech partners. Only a few hundred financial institutions in the U.S. support real-time settlement, so these partnerships are crucial to expediting adoption.
The goal is to enable transfers to be sent to a person's email, mobile number or other easily-remembered identifier — and settled instantly — with a common user experience that's routine, Kirkpatrick said.
"Someday we'll say 'we sent payments using account numbers? Really?'" Kirkpatrick said.
But that's not quite yet a reality, even with only two networks to work with.
"There's a lot of different technology implementations, so there is technology work left to make the networks interoperable," said Rusuri Gunasena, senior vice president of the RTP network, adding RTP recently added its 300th participating financial institution. " I do think that's a conversation that is happening right now."
Show and tell
The Federal Reserve in March 2022 launched a FedNow showcase website of technology providers. The site — which classifies providers in verticals such as B2B payments, bill payment/presentment, P2P, payroll processing, risk management, security and others — listed
FedNow is not directly involved with the showcase; it's not a hackathon or developer event in which FedNow picks winners or provides inside access to experts. But the showcase does provide visibility to firms that want to sell systems to banks or other parties that want to connect to FedNow.
One example is WorkMade, which uses underlying technology from Orum. WorkMade is a payment fintech that serves mostly freelancers and other gig economy workers.
"A payment 'window' [of three to five days] doesn't really work for users in our category," said Nick Simpson, founder of WorkMade. Both RTP and FedNow aim to provide an instant settlement alternative, Simpson said.
The addressable real-time payment market for gig economy workers is immense. Thirty-six percent of Americans work in the gig economy at least part time, according to
"Contractors can't do jobs and projects quick enough," said Simpson, adding real-time payments for gig workers could help people manage their expenses even if they are paid irregularly.
FedNow can contribute to the scale and reach of real-time payments, said Jessica Cheney, vice president and head of product management for digital banking solutions at Bottomline Technologies.
"The Federal Reserve has thousands of financial institutions and customers," Cheney said.
FedNow will be offered to all of these banks, potentially providing exponentially growth for real-time payments and removing the "let's see" posture that many banks are taking today, according to Cheney. "The FedNow network brings a level of comfort for many financial institutions as the Fed is their preferred payment processor," Cheney said.
Fiserv categorizes the FedNow showcase site as a way to get information to a broader corporate audience.
"The showcase is a valuable educational tool to help financial institutions understand real-time payments, possible applications, and key considerations as they define a roadmap for their institution," said Justin Jackson, senior vice president and head of product for Fiserv.
Fiserv has also partnered with the Clearing House in an effort to boost adoption of TCH's RTP system. Fiserv has about 12,000 financial institution clients, and could provide access to gig-economy disbursements, real-time billing and insurance payouts.
The FedNow Showcase represents a major step forward in modernizing the payment landscape in the U.S., said Yasser Abou-Nasr, senior vice president of product at showcase member Dwolla, in an email.
"FedNow will not only help expand our ability to help our customers manage their liquidity needs, but also open up use cases with real-time payments that are yet to be unlocked," Abou-Nasr said.
Making a list
TCH's
Like those on the FedNow list, TCH's fintech partners include a mix of large core banking providers like Jack Henry, FIS and Fiserv that connect banks and credit unions to the real-time payment network and provide connections to other financial services as part of a broad menu.
There are also smaller technology firms that specialize in APIs that connect mostly small banks or credit unions to real-time payments. The companies on the TCH list undergo a certification process, though it's not an endorsement. The
One of the major benefits of the TCH list is it allows financial institutions to simplify management of complex issues like the
"The banks and credit unions don't need to understand or keep up with all of the enhancements to standards," Gunasena said.
TCH additionally plans to work with technology sandboxes, which allow development in an experimental and collaborative environment, to spot technology that can address new uses for instant settlement.
The work includes a focus on increasing traction for real-time billing, or "Request for Pay," which pairs digital bill presentment with the RTP network to speed up payments. RfP has attracted
There will be many use cases that rely on instant payments, said such as payroll, wallet transfers, merchant account settlement, and insurance claim payments, said Tede Forman, president of payment solutions at Jack Henry, in an email. "We can expect much more, including freight payments at the dock, car loans to be funded evenings and weekends, title companies to experiment with closing outside current business hours, etc.," Forman said.
But while a lot of technology firms are working on technology for both FedNow and RTP, that alone does not make FedNow and RTP interoperable.
"That would really depend on how the technology stack is built," Gunasena said, adding a core vendor may support transfer systems like RTP or Zelle. But if that vendor wanted to offer FedNow as a redundancy, it would require more work on specifications to make RTP and FedNow work together.
TCH is
"It was a five-year journey for us, so there's a lot of maturation to be done once the [FedNow] network is up," Gunasena said.
Even as that work is done at the Fed and TCH, the technology firms can still help smooth differences between FedNow and RTP, according to Cheney.
"A person or business wanting to make a real-time payment or send a request for payment isn't going to want to have to ask 'Does your bank use FedNow or TCH?'" Cheney said. "Likely they have no idea what that actually means."
