Real-time payments, for real

Private and public initiatives bring faster payments to life.

By Cary Whaley

As the United States gets ever closer to making real-time payments a financial services industry reality, community banks have been an instrumental part of the process every step of the way. With the Federal Reserve, The Clearing House (TCH) and NACHA advancing critical faster-payments initiatives, ICBA community bankers have worked closely with these and other public- and private-sector partners to ensure they meet the needs of community banks and their customers.

Private-sector collaboration
TCH recently launched the first new payments infrastructure in the United States in more than 40 years with its real-time payments system, RTP. Under the RTP system, which fulfills the criteria established by the Federal Reserve Faster Payments Task Force, clearing occurs within three seconds, and funds are available immediately instead of at the end of the day.

RTP also allows users to both request a payment and provide critical information about a payment. The system, which was used for the first time last fall to transfer a small sum between U.S. Bank and BNY Mellon, will help the United States catch up to the United Kingdom and other countries that have already employed instant payments.

While large banks have in recent years attempted to hamper efforts to include community banks in initiatives to expedite the processing and settlement of electronic payments, the new RTP system was designed and built through a collaborative effort that included input from ICBA. Over the past three years, ICBA Bank Operations and Payments Committee members, as well as ICBA and ICBA Bancard executives, have worked with TCH on the system.

That collaboration will continue throughout the industry adoption process. ICBA leadership community bankers Jeff Dick of MainStreet Bank in Fairfax, Va., Sheila Noll of Midwest Independent Bank in Jefferson City, Mo., and Kathy Strasser of River Valley Bank in Wausau, Wis., have been named to the RTP advisory council and will continue to articulate community bank positions. Meanwhile, community bank core processors Fiserv, Jack Henry and FIS are building the necessary connectivity to support community bank access to RTP.

Also last fall, phase two of same-day automated clearing house debits concluded 11 processing days of operation. Between Sept. 15 and 30, ACH originators could send same-day transactions to accounts at any receiving financial institution. According to NACHA, there were nearly 2 million same-day ACH debits in that period totaling $1.5 billion, an average of more than 178,000 transactions processed per day and $650 per payment.

As advocated by ICBA and others in the financial services industry, the same-day enhancement includes an interbank fee for receiving banks that will allow them to recover their costs.

NACHA also recently requested industry comment on four proposals to: 1) add a third same-day ACH processing window that expands access to later in the day; 2) provide faster funds availability to receivers of both same-day and non-same-day ACH credits; 3) raise the per-transaction dollar limit on same-day ACH transactions to $100,000; and 4) explore the industry’s interest in ACH processing on weekends and holidays.

Public-sector involvement
While ICBA and community bankers have worked closely with our private-sector partners on developing an inclusive faster-payments infrastructure, we are also working to promote a continued operational role for the Federal Reserve in delivering real-time payments.

In a recent meeting with Kansas City Fed president and CEO Esther George, ICBA and other financial services groups urged the Fed to serve as an on-ramp or bridge to real-time payments. That meeting followed and reiterated the coalition’s April 2017 letter encouraging the Fed to:

  • provide central bank settlement capabilities to support faster payments
    use its connectivity to provide all financial institutions with access to real-time payments
  • serve as an operator for real-time payments as it does for checks, ACH payments and wire transfers
    operate a payments directory that could link to financial institutions and other private-sector payments directories.

By playing an operational role in real-time payments, the Fed could provide safety, integrity and equitable access to all financial institutions, which is why it serves that role for checks, ACH payments and wire transfers.

Next steps
The Federal Reserve has continued to serve an important role in the development of faster payments since its Faster Payments Task Force released its final report last July.

In releasing the final report before its dissolution in August, the coalition of more than 300 diverse payments stakeholders offered recommendations to enhance the speed, efficiency and security of the U.S. payment system.

The 10 recommendations focus on three key areas—governance and regulation, infrastructure, and sustainability and evolution—and call upon the entire payments industry to continue collaborating to establish ubiquitous payments.

The final report also includes 16 end-to-end faster-payments proposals, including a joint proposal by ICBA and North American Banking Company. That plan features a white-label mobile application and a payments directory to enable secure transactions that clear and settle through the ACH network using same-day ACH.

Now the Fed is again bringing together industry stakeholders with the recent formation of its Governance Framework Formation Team (GFFT). That group was established by the Faster Payments Task Force to achieve its vision of ubiquitous U.S. faster-payments capabilities by 2020. The formation team will focus on the structure, decision making and processes of a governance framework. It will ultimately work to establish the framework and its membership in the second half of this year. ICBA leadership community bankers Michael Bilski of North American Banking Company in Roseville, Minn., Barbara Gross of Bankers’ Bank in Madison, Wis., and Mark Keeling of The Bankers Bank in Oklahoma City, Okla., have been elected to the GFFT and will continue to articulate community bank positions.

In our hyperconnected world of instantaneous communication and electronic transactions, the financial services industry must upgrade its traditional system of batch payments to remain relevant to consumers. ICBA and community bankers will continue leading the push for faster, more efficient and ubiquitous bank-centric payments, which will improve the payment system and benefit consumers, businesses and community banks alike.

Know your regulators

The Trump administration now has its crop of federal banking regulators largely in place. Here’s a look at who’s taking charge at key agencies.

Jelena McWilliams, FDIC chairman nominee
McWilliams comes to the FDIC from Fifth Third Bank in Cincinnati, where she served as vice president, chief legal officer and corporate secretary. She was formerly chief counsel and deputy staff director with the Senate Banking Committee and an attorney at the Federal Reserve Board.

Jerome Powell, Federal Reserve chairman
With Federal Reserve chair Janet Yellen’s term ending this month, the Fed’s Jerome Powell will take over the central bank. A member of the Fed board since 2012 with nearly three decades of business experience before that, Powell is expected to bring continuity and a steady hand to the agency.

Joseph Otting, comptroller of the currency
Joseph Otting took over as the 31st comptroller of the currency after Keith Noreika held down the fort for several months as acting comptroller. Otting is a former president and CEO of OneWest Bank, where he worked alongside the bank’s founder and current Treasury secretary Steven Mnuchin.

Mick Mulvaney, CFPB acting director
Following the departure of former Consumer Financial Protection Bureau head Richard Cordray, White House adviser Mick Mulvaney was named acting director. Despite the temporary protests of Cordray’s chosen successor, Leandra English, Mulvaney has taken charge and worked to rein in bureau regulations.
—Thomas Warren, ICBA vice president, communications

Cary Whaley ( is ICBA’s first vice president for payments and technology policy.