Project Description

Looking down at a group of 5 individuals with their hands stacked.
With the recent launches of Same Day ACH, Zelle®, Real-Time Payments (RTPSM), and push to card solutions like MasterCard SendTM and Visa Direct, the U.S. joined more than 35 countries that have real-time or near real-time payments systems. These include Japan, Mexico, Poland, Singapore, Sweden, and the U.K.

Definition
Real-time payments are payments that transfer funds between accounts at participating financial institutions (FIs) in which the beneficiary receives use of the funds and the sender receives confirmation of the status of the transaction within several seconds. These faster payments mean there’s no more waiting for funds to arrive, or wondering about transaction status for you and your payee.

Most real-time and near real-time payments systems share these characteristics:

  • Immediacy
  • All-time availability
  • Irrevocability
  • Certainty
  • Delayed settlement

To achieve optimal usage, they also need to reach ubiquity, so payers can reach the majority of their payees.

Why not?
Demand for real-time payments by U.S. businesses and consumers is growing, driven somewhat by the question “Why not?” Everything else seems to be happening in real time today, so why not payments?

In fact, three-quarters of consumers — across all age ranges — believe real-time payment is important; the numbers rise even higher among Gen X and Millennials.1

The most obvious use cases for a real-time payments system hinge on urgency. Businesses might use real-time payments to provide emergency pay to employees, disaster relief payments to consumers, and just-in-time payments to suppliers holding goods until payment is confirmed.

Consumer uses include urgent account-to-account transfers (parents to students, investors to brokers, for example) and last minute bill payments.

However, many real-time payments uses are non-urgent. Friends splitting the cost of dinner or a gift purchase. Individuals paying on-the-spot for services such as babysitting and snow removal. These are nice to have, not need to have.

Four options to accelerate your payments
In the last two years, the U.S. has made up for lost time and closed the gap with its European and Asian counterparts. Four distinct faster payment methods are now available to accelerate B2B, B2C, and P2P transactions.

Zelle. Backed by more than 90 banks and credit unions, the Zelle network uses a consumer’s email address or U.S. mobile phone number to initiate a payment. Consumers sign up just once through their bank or directly with Zelle. Funds move quickly, electronically, and securely between bank accounts. Consumers love Zelle for its convenience and to replace cash. Businesses can also use the service to replace cumbersome checks. Zelle even facilitates transmission of remittance data.

Push to card. This method uses the Visa and MasterCard merchant system to move funds. In the same way that merchants “push” a credit for a product return, businesses can now issue a credit to a checking or savings account for any type of B2C payment. Funds are available to consumers in just minutes. For businesses, there’s less risk, as the service requires only a debit or credit card number and expiration date; there’s no need to capture and store sensitive bank account numbers in your system.

Same Day ACH. Perhaps the most ubiquitous faster payment method in the U.S. is Same Day ACH, which enables you to pay almost any business or person with a checking or savings account, using the established Automated Clearing House network. Any domestic ACH transaction under $25,000 (credits and debits) can now qualify for same day processing; only international payments are exempt. Same Day ACH transactions still require a payee’s bank account and routing number, but unlike regular ACH payments which take 1 to 3 days, same day payments settle in just hours, by 5:00 p.m. local time.

Real-Time Payments. Real-Time Payments are the newest entrant, launched in November 2017 when The Clearing House moved $3.50 between bank accounts in just three seconds.2 RTPs represent the first new bank-to-bank payments system in the U.S. since ACH was introduced four decades ago. Payments can occur 24 hours a day, with settlement taking place within seconds.

In addition to moving funds for B2B, B2C, and P2P payments, RTPs open the door for a new level of digital commerce, collaboration, and efficiency between buyers and suppliers. They support “requests for payment,” where suppliers issue an invoice for RTP payment. They also feature rich data and real-time communication tools to resolve invoice discrepancies quickly and easily.

Which methods will you adopt?

Americans are embracing faster payments quickly and enthusiastically. In its first full year of operation, the ACH network processed 75.1 million Same Day ACH transactions, valued at more than $87.1 billion.3 Zelle moved more than $75 billion in 2017.4 The Clearing House expects it will reach four billion in less than five years.5

For businesses, nonprofits, and government agencies, it’s no longer if, but when — and which methods — your organization will adopt. Faster payments can speed your cash flow, optimize your working capital, reduce your fraud risk, and deliver a stronger experience in the market.

1. FiServ, “Expectations & Experiences: Consumer Payments,” April 2017
2. PYMTS.com, “Real-Time Payments Successfully Gets Through Its First Test Drive,” November 14, 2017
3. NACHA, “2017 Same Day ACH Volume” infographic
4. Early Warning Services, “Zelle® Moves Record $75-Billion in 2017,” January 29, 2018
5. The Clearing House, “Everything You Need to Know About Real-Time Payments,” January 16, 2018