Technology is changing the way U.S. consumers and businesses interact, find information and complete transactions. Payments are essential to commerce, yet unlike other industries that have been revolutionized by modern technology; the U.S. payments space has remained largely unchanged. Until now, that is.
"Along with instant delivery and immediate availability of funds to the receiver, the payer receives confirmation of funds delivery"
In the last year alone, the financial services industry has implemented Same Day ACH, launched Zelle and established The Clearing House (TCH) Real-time Payments (RTP) network. The fall launch of TCH RTP–the first new U.S. payments network in more than 40 years– represented a new phase in the evolution of digital payments.
Compared to ACH, which offers same-day transfers with funds available by the end of the bank processing day, network participants in RTP are able to immediately send and receive funds at any time–24 hours a day, seven days a week, 365 days a year.
Along with instant delivery and immediate availability of funds to the receiver, the payer receives confirmation of funds delivery. The built in end-to-end payment acknowledgement, removes the guess work and costs resulting from follow-ups. RTP’s messaging capabilities allow for two-way dialogue between payer and receiver to clarify payment details. Any inquiries can now be resolved faster with robust reporting and real-time messaging.
RTP further differentiates itself from other payment networks by supporting a unique message type–Request for Payment. Request for Payment provides a new way to support business-to-business (B2B) trading partners and business-to-consumer (B2C) billers and payers. A Request for Payment recipient (the payer) can evaluate the request together with related bill or invoice details presented to them by their bank. Billers can predict with greater certainty when they will receive their payment and invoices can be presented to the payer and paid within seconds. Payers can easily accept the request and generate payment or deny the biller’s request if deemed unacceptable, an action that notifies the biller of the decision.
Payments received in response to the Request for Payment travel together with the invoice/remittance detail, making reconciliation simple, while reducing associated overhead costs.
RTP can help eliminate late fees or service disruption when immediate payment is needed and can even support immediate distribution of funds for disaster relief. In addition, RTP accelerates the delivery of goods and services to businesses or their customers in cases when goods will not ship or be delivered until payment is received. It also provides an ideal payment option for cash-on-delivery arrangements.
Finally, RTP has the potential to replace cash and checks, adding security and reducing fraud. Payments and the associated messaging travel through a secure network with real-time fraud screening of all outbound transactions.
The open access to data and easy integration offered by APIs, combined with round-the-clock RTPs, redefines the digital experience—offering a platform for introducing fresh innovating solutions for both corporate and consumer customers.
As RTP matures within the U.S., future phases will include establishing interoperability with other real-time payment systems to support cross-border payments. RTP is open to all U.S. depository institutions with a goal of ubiquity by 2020. With all 25 bank owners of TCH, as well as several non-owner banks planning to participate in 2018, this objective definitely seems achievable.