“Faster payments hold a tremendous promise for corporates. Once in place, treasury will be able to dramatically shorten the time frame for recognizing a receivable, which will help to speed up the flow of commerce and at the same time make it easier to manage vital working capital.” – Fifth Third Bank
The benefits of RTP systems are not limited to increased speed of commerce. Among other benefits, Alacriti, which specializes in developing payment and money movement-related technology solutions, outlines a significant positive impact on a business’s cash flow, as faster payments enable faster availability of funds, allowing for a greater precision in budgeting and a sharpened approach to overall cash management.
The company also adds that since businesses are often required to pay various fees to process and receive payments via credit card, ACH, and other methods, RTP holds a promise to help reduce or eliminate these kinds of expenditures.
“Faster payment systems will likely also relay more information than current systems allow. This is especially promising when compared to checks, which carry little data that can be used to drive further treasury efficiency. Real-time payment systems can be expected to provide invaluable information that flows with the payment transactions, allowing businesses to attain efficiencies in straight-through processing, achieve a better view into cash flows, and enable more informed operational decision-making.” – Fifth Third Bank
To grasp the specter of important hallmarks of RTP, ACI Worldwide, a technology company that delivers electronic banking and payment solutions for more than 5000 financial institutions, merchants, billers and processors around the world, shares the following comparison.
Chart: Differences between same-day ACH and real-time payment systems – Same-day ACH and Real-time Payments — The increasingly diverse US payments ecosystem
Chart: Use case overview, Same-day ACH and Real-time Payments — The increasingly diverse US payments ecosystem
RTP systems offer benefits to every party involved, with user experience being one of the most important elements. User satisfaction is the baseline for commerce and the main facilitator of business. Speed, ubiquity, and transparency can make or break an experience. And RTP offers a full support for all three pillars when compared to same-day ACH (SDACH).
2017 YouGov survey found that since increased competition in the payments space brought more choice to the consumer, the competitive edge that RTP brings to businesses is a reason important enough to switch a bank. The survey identified that in some of the developed economies the majority of SMEs will consider switching bank providers for the offer of RTP: 90% in Italy, 75% in France, 65% in the US, and 58% in Germany.
Three areas where SMEs expect RTP to improve their banking-related business processes include receiving payments from customers (74% of SMEs believe so in the US), paying vendors and suppliers (54% of SMEs believe so in the US), and reconciliation (39% of SMEs believe so in the US).
Fortunately, while the FinTech community was quicker to drive value from RTP, old dogs have proven to be able to learn new tricks. Certain national banking ecosystems are taking control over national payments industries with faster payments services – Zelle in the US, NPP in Australia, UPI by NPCI in India, newly launched MoneyTap in Japan, and a dozen more example of jurisdictions where central banks have real-time interbank payments solutions, powered by a range of institutions.
Source: Global State of FinTech 2018, MEDICI
In danger of disintermediation by proprietary interbank RTP systems, payments networks are taking steps to transform their businesses.
In November 2017, for example, Vocalink, a Mastercard company, supported The Clearing House (the only private-sector ACH and wire operator in the United States, clearing and settling nearly $2 trillion in US dollar payments each day, representing half of all commercial ACH and wire volume) in the launch of its RTP system in the US, which empowers consumers and businesses to send and receive immediate payments domestically. Financial processes that used to take days can now be concluded in seconds. Two banks – U.S. Bank and BNY Mellon – have completed the first live transactions.
RTP is one of the most important drivers of businesses. If banks cannot help businesses drive purchases, startups will. It’s clear, however, that banks do not intend to lose positions, and more national banking systems will come together to build the next generation of payments solutions.
“In 2018, the implementation of real-time payment systems across the globe are expected to help banks regain some of the ground lost to new-age players in payments.” – Global State of FinTech 2018, MEDICI