The Real-Time Payments (RTP) network in the U.S. went live in 2017 when BNY Mellon completed the very first payment. A single transaction, it was the culmination of some two years of development and preparation.
Our approach to technology innovation has always been that the client’s perspective is the primary consideration as to how we drive change. So, prior to that first payment, we had been an early participant with The Clearing House in developing the system. We worked with potential clients to design our offering, inviting them into the process so that we could better understand what they anticipated and expected, and how best to shape our solutions to meet those expectations. In so doing, we positioned ourselves and those participants to begin using the system almost from day one.
From then until now, as new clients have been brought onto the platform, we have continued to work closely with them to modify and customize our RTP offering to meet their particular use cases. We currently offer the service directly to clients, to banks as a private-label service, and to select fintech and back-office solution providers. Yet, even as we grow and vary our offering, and despite the game-changing value of RTP, there remains an enormous educational component.
There are still many corporate and banking leaders who, though aware of RTP, don’t fully understand or appreciate what it is or grasp the benefit it can provide. Some think it will not be of importance to their particular user base and, therefore, not worth the investment. Some smaller banks and credit unions are wary of RTP being a Clearing House initiative, which is to say a big bank initiative, while the Fed1 has indicated they will build a public sector competing solution and alternative for faster payments in the U.S. So, for all its obvious value, selling the solution is often painstaking and involves much demonstration and discussion.
BNY Mellon supports clients in many business segments and, in each, one finds an array of responses to RTP. Some are ready and eager to embrace it. They recognize the value and see it as an opportunity to claim a competitive advantage and enhance their reputation as leading-edge companies. Others are interested, but more comfortable taking a wait-and-see approach and letting the early adopters serve as examples of the relative benefits and pitfalls. This seems to be truer for smaller than for larger companies.
The issues aren’t only lack of information or excessive caution. RTP marks a big change and makes demands on resources. Small to medium-size companies often have resource constraints, which may be compounded by internal competition for investment dollars among various projects and initiatives. (Even in a large multinational, the treasury operations function is a cost center with a mandate to build efficiencies and keep costs low.) So, education is often necessary as a first step in addressing resource concerns. We attempt to identify to potential clients where the most immediate opportunities lie and where they might focus first.
There are many options: a company might choose to optimize its B2B payments as a supplier or optimize its refunds or billing strategy. Based on the market, one area may be more in need of address than others. We emphasize to smaller companies that they can start small and scale up, according to their priorities.
An irony in this is that small businesses can benefit greatly and immediately from these models, more in many cases than larger ones. Consider liquidity management. Small businesses often have tighter cash constraints and smaller credit lines than larger ones, making liquidity trickier to control. The ability to manage liquidity on a 24/7 basis – being able to receive payment on a night or a weekend or a holiday – can help keep a small business up and running.
We recognize that caution is in many instances a sensible approach. Companies don’t only differ among themselves, they may serve very different clients with different expectations and demands so there may be varying degrees of urgency, independent of issues of resource allocation. But there are benefits to RTP for any company and exposure and education will reveal that.
To the extent possible, we try to be transparent and public as we pilot initiatives and build out proofs of concept with early adopters, then demonstrate their adaptability and scalability more broadly. In so doing, we create learning models and case studies that offer solutions to the issues that keep slow adopters on the fence. We help our clients build workable models and demos that they can then share with their own sales and client relationship teams – and risk and fraud prevention teams – to demonstrate what these new capabilities can bring to the market. In this way, we hope to broaden RTP’s appeal within a company and help free up the resources to implement it.
Most important is to make clear how RTP provides an enhanced client experience. RTP can be combined with other technologies to create new experiences downstream, demonstrating also how a client’s own clients will benefit, which is very powerful, as in the following examples.
Leveraging RTP with an Alias-based Directory
Alias-based directories are typically used for peer-to-peer payments, but they can serve businesses as well. An insurance claim processor or an investment manager could use a person’s email or phone number to send a notification that a payment has been sent and, by the time the message is received, the money has already been deposited in his or her bank account. In the instance of a casualty of some sort, a client can gain access to a settlement payment immediately, as opposed to a few days later, after receiving a check and waiting for it to clear.
Instant Requests for Payments Both to Businesses and Consumers
A phone or utility company can acquire the ability to send an e-bill to someone’s phone in seconds, have them authenticate themselves with their bank, click pay and, within seconds, on a 24/7 basis, those funds can be deposited back to the utility. Not only are the funds received, API integration can instantly update the utility’s local accounting system and online platform. The entire process takes only seconds and can eliminate mailed bills, payments by phone, card payments and web visits.
The development of RTP in the U.S. follows the development of networks elsewhere around the globe, such as Australia’s New Payments platform and the UK’s Faster Payments scheme. Indeed this capability exists in over 30 countries, laying a foundation for a genuinely global real-time payments capability.
Many of these networks also provide value-added services such as payment-related messaging e-bills or request-for-payment capabilities. This enables the presentment of invoices to consumers and businesses across the industry and the seamless interaction between businesses and consumers to request, pay and inquire about services and provide immediate acknowledgement across the payments ecosystem.
In the U.S., tokenized or alias-based services and directories are providing value-added authentication, validation and security services that both add speed and maintain the privacy of sensitive data.
Global connectivity is a monumental goal with many parts and much to be worked out, but it is certainly doable. BNY Mellon is much involved in the effort, working with the RTP network in the U.S., and with SWIFT on the interconnection of networks globally. We are also one of 14 bank partners in Fnality International, which is developing a Utility Settlement Coin to facilitate the global tokenized settlement of five fiat currencies – Canadian dollar, Euro, Pound Sterling, Japanese yen and U.S. dollar.
Education and awareness are key and critical to driving the market toward the delivery of simpler, smarter, safer payment services that optimize business processes and client experience across the industry and around the globe. BNY Mellon will continue to help drive this, as both innovator and advocate.
1 The Fed announced on August 5 that they are moving forward with a FedNow ServiceSM real-time payment offering.
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Chairman, BNY Mellon Pennsylvania and Global Head of Relationship Management & Business Development, Treasury Services
Eric is the Chairman of BNY Mellon Pennsylvania and the Global Head of Relationship Management & Business Development for BNY Mellon’s Treasury Services business. Prior to this role, he worked in Global Client Management where he led the enterprise-wide relationships with a small group of BNY Mellon’s most valuable and strategic clients in the asset management industry.View Profile