New Faster Payments Solutions Being Launched at a Rapid Pace in the U.S.
U.S. companies, through guidance and nudging from the
Federal Reserve, have been developing a modern payments capability that
operates in real time and will eventually integrate with other real-time
payments platforms already functioning in over 20 other countries. Private
sector entities are developing or have launched new payment products. As yet, none
of these solutions actually deliver on all of the Fed’s desired outcomes. Many
offer a more expedited means of moving a payment transaction from one point to
another but not real-time settlement. They are not yet ubiquitous and do not
yet integrate with non-U.S. real-time payment platforms.
The Fed’s initiative has motivated the development of
several new and faster payment options with compelling use cases, including the
four discussed in detail in this research report:
Zelle, the bank-centric, person-to-person (P2P) payments solution
offered by Early Warning, which has been launched with over 50 banks and credit
unions to date, including several of the largest financial institutions. Early
Warning has clear intentions to further develop business-to-consumer (B2C) and
government-to-consumer (G2C) opportunities on its network.
Mastercard Send and Visa
Direct push payments use the card brands’ existing infrastructure to move
funds for several applications including P2P apps like Venmo, PayPal, and
Google Wallet. They are also active in business disbursements and, more
recently, cross-border transactions.
The Clearing House recently launched RTP, its branded product with
a transaction executed between Bank of New York, Mellon, and U.S. Bank. RTP is
a unique new payments rail that allows consumers and businesses to send and
receive payments nearly
instantly, directly from their financial institution accounts. Many other large
financial institutions are slated to integrate The Clearing House RTP
capabilities in the near term and build products on top of The Clearing House’s
money movement capabilities.
ACH is also playing a role in this
market with its same-day capabilities that allow ACH transactions to settle on the
same day they are originated.
Despite the “real-time payments” designation, transaction
speed is not the most important feature for every payment scenario. The 24X7, 365
days a year availability of faster payments and its more flexible and inclusive
transaction messaging than traditional payments are important drivers for the
adoption of this new payment type. The benefits of these features (and the
eventual cross-border transactions) offer users value through savings and
convenience that will help to support a market price higher than legacy,
As cloudy as the financial picture for real-time
payments may be in its current early phase, the need to have a more modern
payment system is ever more apparent. The U.S. needs real-time payments not
just to catch up with other countries that are more advanced in this regard but
also to have more flexible payment capabilities operating with modern
technology that can more easily support new innovation, is nimble in its
ability to detect and react to fraud and can support an “always on” economy.