Payments in the US are undergoing a significant transformation, with ACH’s recent inclusion of same-day settlement and real-time, or instant payments likely to drive far-reaching changes in the payments landscape.
With the Fed providing oversight, a number of real-time schemes are coming to market with different but overlapping use cases – how this market evolves and which schemes gain critical mass for which purposes will be very interesting!
The Clearing House (TCH) Real-Time Payments scheme is scheduled to go live in the first half of 2017. Based on ISO2022, the new service will enable U.S. consumers and businesses to send and receive real-time payments from their existing accounts and provide a platform for a range of new services. The scheme is supported by the 24 owner banks, some of which already have advanced plans.
Zelle, owned by a different but overlapping group of banks, went live on a limited P2P basis in the first quarter of 2016 and is scheduled to fully launch in 2017. Initial focus has been on the consumer proposition, with the service available through mobile banking channels. Ultimately the service will be available to consumers and businesses.
For many banks, developing clear use cases and a business case has been challenging. But with non-bank providers, such as PayPal and Venmo, competing aggressively, rapidly evolving consumer and business expectations for instant/real-time services and existing legacy systems creaking, banks are increasingly recognising that they have no choice. Payments are the lifeblood of banking. To compete in banking they need to compete in payments …and real-time is where it is inevitably going.
The choice then becomes how, what and when, not if…with the acknowledgement that real-time payments have to be provided as efficiently as possible, in a way that facilitates the roll-out of the associated added value services and works with existing legacy systems – since all are key to the business case, even if it is long-term/strategic.
So getting the approach right is key … what do banks do?
While many local and smaller regional banks outsource their payments processing, depending on providers to offer the latest in processing capabilities, including real-time, banks requiring more control over their developing payments capabilities, with on premise systems, have a number of options themselves.
The optimal solution is a complete payment system transformation, in which a single payment hub solution is introduced that consolidates all transaction types, including ACH, Fedwire and real-time and provides efficiency, resiliency and speed to market advantages that others cannot match.
But in the real-world, with constraints on time and costs, a more tactical approach can be more effective. Progressive modernisation, with a smart gateway solution addresses the immediate real-time connectivity and processing needs, with minimal impact on existing legacy systems, while also providing a platform for future payment service development.
While there remain a number of unknowns, whichever approach you take you want to minimize risks and maximize futureproofing options.
Dovetail has best-in-class out of the box solutions for all US clearing and settlement services, including real-time, that get you fast to market with minimal risk – and, all being based on our single Dovetail Transaction Architecture, offer an unsurpassed level of futureproofing.