Mercator Blog

New Faster Payments Solutions Being Launched at a Rapid Pace in the U.S.
Date: February 14, 2018
Sarah Grotta
Director, Debit and Alternative Products Advisory Service

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, batched-based transactions.

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.
Mercator Advisory Group releases a new research report on faster payments solutions in the U.S. with forecasts of market volumes by segment to 2021 - Faster Payments: U.S. Forecast, 2017–2021.