Real-time payments are seeing rapid uptake during the pandemic

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Recently, The Clearing House's (TCH's) real-time payments (RTP) network has seen a speedy increase in the number of new payment originators sending business-to-business (B2B) payments worth thousands of dollars, according to Steve Ledford, TCH's SVP of products and strategy, per PaymentsSource.

TCH, which is owned by several major banks, believes it may double the number of US banks and credit unions on its RTP network, which currently works with approximately 30 financial institutions (FIs), over the next two months. Additionally, ACI Worldwide launched several new capabilities for its RTP solution, as it also expects RTP volume to surge and is gearing up to help firms use the payment method.

The pandemic is highlighting use cases for RTP, which may be pushing previously skeptical FIs to take an interest in RTP.

• Prior to the pandemic, some firms didn't use RTP because they didn't think they needed it or weren't familiar with its value. Thirteen percent of treasury and finance professionals polled by TD Bank at the October 2019 Association of Financial Professionals (AFP) Conference said they weren't convinced there was a need for RTP in their area, while another 13% said they weren't very knowledgeable about RTP or its value proposition. If firms didn't believe RTP was valuable for them, or didn't understand its benefits, they likely wouldn't adopt it, limiting RTP's reach.
• But the pandemic has likely elucidated the importance of RTP to more firms as transactions shift online and people need to quickly transfer funds. Some firms need to pay suppliers in advance to get products during the pandemic, while consumers may have needed to quickly move their stimulus funds, Ledford said, per PaymentsSource. RTP's speed should be appealing for situations like these because firms want to be able to get products as quickly as possible and people would benefit from instantly moving their funds. These scenarios may have caused previously skeptical FIs and firms to see new value in RTP, leading to greater adoption of networks like TCH's.

And because the pandemic may be creating a more urgent need for RTP, it could lead fewer FIs and firms to wait for the US Federal Reserve to launch its own RTP network. The Fed is set to launch FedNow, its RTP network that's meant to compete with TCH's, in 2023 or 2024.

Some firms may have planned to put off adopting RTP until FedNow launched because FedNow will only need to break even, potentially making its fees lower than TCH's, and isn't owned by major banks, avoiding concerns about competition. But now that firms' need for RTP may be more urgent, fewer firms may wait for FedNow, boosting the ranks of TCH's network and making it harder for FedNow to lead the market down the road.

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