Can real-time payments transform the US market?
By Steve Nogalo, vice president and general manager, NCR Payment Solutions
While the U.S. market has been at the forefront of many innovations in banking and payments technology over the years, one area in which it has been conspicuously behind the curve in recent times has been the adoption of effective real-time payments solutions.
More than 20 nations already have access to this technology, and some of these have enjoyed it for some time — the UK's Faster Payments system was launched back in 2008, for example. However, the U.S. has fallen behind, in part due to the lack of a centralized regulatory environment to lead efforts.
But this is changing, and real-time payments infrastructure has now officially arrived in the U.S. In November, The Clearing House announced the launch of its RTP system, with the first payment taking place on Nov.13 between BNY Mellon and U.S. Bank.
So what will this development mean for the U.S. payments market, and will it bring the revolution that has been promised to how the U.S. makes payments?
'The most important payments transformation'
TCH, which is owned by some of the world's largest banks, has worked with MasterCard Vocalink payment infrastructure company to manage the change. Vocalink has already driven real-time payments systems in several countries, including the U.K., Singapore and Thailand, to reduce the time taken to process payments from days to seconds.
The introduction of a similar service to the U.S. may be long overdue. Indeed, TCH notes that the launch of RTP marks the first new core payment system in the U.S. for more than 40 years, and during that time, the expectations of consumers and businesses when it comes to payments have changed dramatically.
Ian Stewart, CEO of BNY Mellon Treasury Services, described RTP as "one of the most important payment transformation efforts in our industry," and one that will go far beyond addressing the traditional challenges payments processors face in the U.S.
"Bringing online a truly real-time, two way, 24/7 payment and messaging system will create new scenarios and entire new markets in ways we have not even anticipated," Stewart said.
Businesses and consumers stand to benefit
One feature offered by RTP that differentiates it from other real-time payment solutions elsewhere in the world is its ability to send more information — such as confirmation messages — along with payments. TCH said that this will help provide additional transparency and certainty by notifying both parties that payments have been settled.
"Confirmations provide businesses [with] the ability to free up working capital by more precisely managing cash flow and make life less stressful for consumers on tight budgets," the company said.
Expected use cases for RTP include e-invoicing, bill pay, insurance claim payments, cash on delivery payments and more, with the system set to be used by all the biggest banks in the U.S. by the end of next year, and with the goal of achieving ubiquity by 2020.
Business Insider noted that the technology is likely to be highly popular among both consumers and business users, while RTP will help overcome many of the barriers to adoption that has held back banks' implementation of faster payment solutions.
The fact that RTP is simple to integrate and globally interoperable, and that it offers education functionality and a quick return on investment will make it highly accessible, and therefore an attractive option, in an environment where consumers and business users expect faster payments resolution.
Companies: NCR Corporation