Real Talk About Real-time Payments

As some of you may know, advancing real-time payments has been a pet project of mine for several years. There are many factors involved in creating a successful real-time payment system and one of those factors is education. This month I have invited Steve Ledford from The Clearing House to share some information about real-time payments and to provide an FAQ about the RTP® network. Steve is the senior vice president of products and strategy at The Clearing House. 

With the launch of the industry-wide U.S. Faster Payments Council and the Federal Reserve analyzing comments on its potential real-time payments role, real-time payments are top-of-mind for many banks and payments stakeholders.

Since November 2017, The Clearing House (TCH) has operated a real-time clearing and settlement system called the RTP network. The RTP network is the culmination of work that began in 2014, and enables any bank to offer cutting-edge products in a competitive environment.

TCH did not build the RTP network on its own. TCH brought together experts from financial institutions of all sizes, payment associations, trade associations (including  ICBA), the Fed, consumer advocates, regulators, technology providers and corporate practitioners. TCH also participated actively in the Faster Payments Task Force (FPTF) sponsored by the Federal Reserve, embracing the 36 criteria for faster payment systems proposed by the Task Force.

Based on collaborative input, we designed a new payment system with the following features:

  • Immediate credit transfers, settled instantly and with immediate confirmation for all parties. Settlement is final, so banks can give customers immediate access to funds received without risk.
  • Support for extensive payment data and messages for delivery of invoices, consumer bills, fulfillment information and other value-added services–all within a secure interbank network.
  • An access model that removes barriers to participation for smaller financial institutions – vital for achieving ubiquity.

The RTP network is a platform for all banks to deliver the payment products customers demand, not just now, but for decades to come.

As a new payment system, RTP has generated a lot of questions. I’d like to answer a few of them:

Who can participate? Any federally-insured depository financial institution in the U.S. can participate. Participants do not need to be members of TCH. Access, use, fees and rules are the same for TCH members and non-members.

What does it cost? TCH fees for payments are 4.5 cents per credit transfer originated, the same for all participants, regardless of volume. There is no fee to receive. Fees to send requests for payment (used to deliver bills or invoices) or remittance advices (for large amounts of payment data) are 1 cent per message sent. There are no fees to join the network, no monthly fees, and no minimum volumes. The only other charge is for telecom, passed through to banks that connect directly to the network. If you are using a third party to connect to RTP, there may be additional charges.

Are there any other economics? If a bank’s customer pays a bill or invoice presented through a request for payment, that bank will receive 10 cents for fulfilling that request. The bank that initiated the request for payment pays the 10-cent incentive because its customer benefits from receiving prompt payment.

How can I connect? Any bank can connect directly to the RTP network, but many will want to use a third-party processor. TCH is working with core processors and other gateway services to simplify the implementation process. Even if a bank connects through a processor, however, it is a full participant in the RTP network.

I thank Steve for his insights into one of many real-time payments systems that is sure to affect the community bank business model and digital strategy for many years to come.