Put your payments strategy on the fast track

The pace of change of real-time payments technology and infrastructure has only gotten quicker in the past year. Here’s what you need to know about what’s changing and what resources exist to help your community bank adopt new payments technology.

By Colleen Morrison

The race to faster payments accelerates. Those players with skin in the game—the Federal Reserve, NACHA, The Clearing House, card networks and select fintech providers, among others—are working to expedite the exchange of funds between end users.

But what is pushing the pace? Everything points to customers. In today’s culture of immediate gratification, businesses and consumers hold real-time expectations, especially when it comes to their payments.

The Clearing House’s RTP network is one solution that meets that need. “The RTP network has built-in functionality that gives community banks the ability to offer commercial and small-business clients payable and receivable capabilities that are competitive with the most sophisticated cash management products in the market,” says Steve Ledford, senior vice president of products and strategy for The Clearing House.

Quick stat


of firms say real-time payments would improve payroll operations

Source: PYMNTS.com

But The Clearing House’s RTP network isn’t the only player in town. Other faster payments possibilities continue to emerge. For example, Mastercard and Visa are announcing partnerships with Stripe and others to move money faster. Nonbank providers like PayPal and its payment app Venmo tout near-immediate payments and are linking into The Clearing House’s RTP network infrastructure to further expedite offerings. Same-day ACH offers new windows to move traditional transactions faster. Community banks face opportunity, laced with competition, throughout the faster payments space.

It’s no wonder that when the Federal Reserve issued an invitation for public comment (see sidebar below) on its role in real-time gross settlement, community banks applauded. Yet, experts caution community banks to consider the impact of waiting for the Fed.

“If the Fed decides to be an operator, how long do we think it will be for it to be operational?” asks Jennifer Lucas, managing director in EY’s Financial Services Advisory payments practice. “You’re giving the critical mass of DDA [demand deposit accounts] providers possibly a three-year head start, and then you’re coming out of the starting block. The catch-up period is something I would take into serious consideration when determining my payments strategy.”

A faster payments path

The frenetic pace of industry change may leave a community banker’s head spinning. The good news is that banks’ current strategies create the guideposts for incorporating faster payments, and resources exist to help them. ICBA Bancard’s Payments Strategy Guide will offer a step-by-step solution that helps community banks explore how to incorporate faster payments into their current strategies. And EY’s Considerations for a Real-Time Payments Strategy white paper provides underlying principles for a faster payments framework. The report details four core tenets community banks want to evaluate when considering faster payments: individual business strategies, technology delivery mechanisms, operations readiness, and regulatory and risk controls.

“You need to find solutions that are flexible and not tied to one end product,” says Michael Bilski, CEO of $550 million-asset North American Banking Company in Roseville, Minn. “You have to spend a little money to set up the right things for your customers. If you’re afraid to buy technology because something new is going to be around tomorrow, well, you’re already behind.”

And, as the race to faster payments continues, community bankers remain central to its evolution. “Community banks are vital to the future of faster payments,” says Kevin Christensen, acting executive director of the nonprofit U.S. Faster Payments Council (FPC). “They serve as a pivotal connecting link, ensuring faster payments reach all end users. By incorporating faster payments into their business strategies, community banks will remain well positioned to meet the needs of commercial and retail customers.”

Timeline: The faster payments race

November 2018:
Born out of the industry-inclusive Faster Payments Task Force, the U.S. Faster Payments Council launches. This nonprofit membership association boasts a mission to “work toward the goal of a ubiquitous, world-class payment system that allows Americans to safely and securely pay anyone, anywhere, at any time and with near-immediate funds availability.”

December 2018:
More than 400 comments pour in as a response to the Federal Reserve’s October 2018 request for comment on real-time gross settlement. To date, the Fed has been mum on next steps.

Mid-March 2019:
The Federal Reserve Board informed NACHA that it would need more time to enable a new window to extend Same Day ACH submission times until 4:45 p.m. ET. Because of this delay, the implementation of this new window will be pushed back six months to March 2021.

Late March 2019:
The Clearing House issued two real-time payments announcements with relevance to community banks: one focusing on business principles of the RTP network, the other emphasizing a role for community banks and credit unions in its RTP Business Committee.
And beyond: In such a dynamic industry, new developments continue to affect the way community banks think about faster payments. A concrete payments strategy that aligns with overall business objectives remains a community bank’s grounding force for all that is to come.

Colleen Morrison is a writer in Maryland.