The Race for Real Time

As the market for real-time payments continues to develop in the United States—and as the Federal Reserve prepares for a commercial launch of its own real-time network next year—the race is on to capture market share. There are a number of contenders, but one clear frontrunner is The Clearing House Payments Co., which celebrated last month the five-year anniversary of its own nationwide service.

The company’s real-time payments network—known as RTP—went live in November 2017 with two participating institutions and quarterly volume of 1,000 transactions. Now, the system claims 285 participating institutions and an expected 50 million transactions for the December quarter, up from 45 million last quarter, according to numbers the company released a few weeks ago. Transaction volume has now grown at a rate of 10% or better for 16 straight quarters.

There have been a few surprises along the way for TCH, which is owned by many of the nation’s biggest financial institutions. One of these has to do with the payroll application, which has won wider adoption on the RTP platform than TCH expected. “We thought payroll was done and dusted,” Jim Colassano told us when we talked to him about real-time payments last month. Colassano is senior vice president of RTP product and development for New York City-based TCH.

But now, with the steady growth of digital functions such as earned-wage access, payroll is becoming “one of the dominant use cases” for RTP, he notes.

What else has surprised TCH along the way? Colassano points to the slow development of business-to-business volume. Ultimately, the company discovered its dollar limit per transaction was too low. “Businesses wanted to take the bulk of their payroll activity and move it over” to real-time processing, he recalls, leading TCH to raise its cap from $25,000 to $1 million. Now, TCH is “seeing business-to-business use cases open up,” Colassano told us. With this kind of growth, TCH is eyeing new applications for RTP, including cross-border payments.

But RTP, perhaps the most ambitious exercise in real-time payments to date, will soon get an outsize challenger. FedNow, the Fed’s real-time payment service, has been in development for three years and is set to launch in July. With the Fed behind it, this platform is expected to offer formidable competition. But even this development could offer certain benefits for the RTP system. “The Fed has really raised the visibility [of real-time payments] in the marketplace,” Colassano told us.

The bottom-line lesson in all this is that competition is the tide that will ultimately lift all boats. That’s worth cheering on, no matter what role you play in the industry.

—John Stewart, Editor john@digitaltransactions.net