Digital Transactions Authoritative, insightful and timely information for payments professionals
Are you ready for real time? Ready or not, here it comes—in more than one guise, and in far more than one application.
When FedNow debuted commercially 14 months ago, the story mainly focused on the general concept of immediate money transfers. But since then, the payments industry has been busy working on service-ready applications.
You may have noticed one of the most talked-about of these applications: request for payment (RFP). This enables a party to send a “bill” digitally to another party to trigger an immediate digital payment in return. Now, with more than 900 financial institutions participating in FedNow, that concept is quickly taking shape, according to Fed officials.
In offering RFP, FedNow has joined The Clearing House’s RTP network, which has enabled the service since it began operations in 2017. Now, TCH, owned by 20 of the world’s biggest commercial banks, is moving to expand RFP dramatically this year.
So, ISO 20022 is “a standard, one that many different payment rails are coalescing around,” said Blake McDaniel, an assistant vice president at the Federal Reserve who spoke as part of a panel discussion last month at the MPC24 payments conference in Atlanta.
That “coalescing” is unfolding rapidly. Mark Majeske, a senior vice president at Alacriti Inc., a money-movement fintech, noted his company had already seen “about 80,000 transactions” for RFP in the previous few months. “We’re looking at another year to year-and-a-half” for a breakout, he noted, at which point, the service “is going to be huge.”
Why this optimism? Banks that have joined FedNow are getting onboard RFP as an essential application, Majeske said. “There are people putting in turnkey systems” that “can automate the entire transaction flow,” he told the audience. This effort, he said, could help commercialize RFP and “lower the cost of the transaction.”
What markets are ripe for instant payments? Well, there’s real estate. Title companies may welcome the service as a way to combat fraud, Majeske said. The title company sends an RFP, and the recipient sends the payment, which is received “in milliseconds,” he added. Plus, this can work seven days a week.
The Fed’s McDaniel said earned-wage access is another ripe market. This technology allows employees to collect their earnings at times when they need the cash sooner than payday. “We’re working with EWA providers,” he said.
Yet another likely application, Majeske noted, lies in utility payments, where consumers could avert a shut-off after receiving an RFP during a phone conversation with the utility company. “The person pays it on the phone,” Majeske said.
“RFP seems to be pretty solid,” he concluded. Are you solid behind it?
—John Stewart, Editor john@digitaltransactions.net
