Zelle Gets Access to TCH’s Real Time Payments Network As an Integration Goes Live

Peer-to-peer transactions have taken off as a way to pay digitally during the pandemic, and now the biggest bank-owned P2P network is getting a big lift through its integration with the country’s most extensive real-time payments network. Early Warning Services LLC announced early Thursday payments on its fast-growing Zelle P2P payments system can now be cleared and settled on the Real Time Payments network, owned by The Clearing House Payments Co. LLC. 

The first two institutions to leverage the new capability are Bank of America and PNC Bank, both of which are among the owners of Early Warning and of TCH.

With the integration, senders’ financial institutions will see faster availability of funds on Zelle transactions and Early Warning will be able to access features of RTP such as request for payment and bill pay. For its part, TCH will benefit from Zelle’s ability to route transactions via simple yet secure tokens like a phone number or email address.

The latest agreement follows small-scale tests between the two organizations that began last fall and represents yet another pathway to real-time payments for many of the nation’s biggest banks. Early Warning’s seven owners—Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, US Bank, and Wells Fargo—are among the 24 major institutions that own New York City-based TCH.

Executives in charge of the integration with both firms see it as simplifying operations and smoothing the way for banks to launch new faster-payment services that are more likely to succeed in the open market. “What this agreement does is it comes up with a common process, so if an institution on Zelle wants to expand [services], this provides a way to do it through a common experience. It’s easy to understand, and you don’t want everybody doing it as a series of one-offs,” says Steve Ledford, TCH’s senior vice president for product strategy and development.

The most immediate result of the integration will be a simplified process for Zelle institutions when customers use the service to send money. As things stand, those funds are fronted to the recipient immediately but the recipient’s bank must wait for reimbursement through the automated clearing house from the sender’s bank. Through RTP, that lag will largely dissolve. “A financial institution may need to make funds available to a customer on a Friday, but have to wait until the next week to have the funds available to them. The integration with RTP closes that settlement risk,” notes Sarah Grotta, director of the debit and alternative products advisory service at Mercator Advisory Group, a Marlborough, Mass.-based research firm.

Even more problematic than the time lag is the back-office bookkeeping the delay requires, according to Lou Anne Alexander, chief product officer at Scottsdale, Ariz.-based Early Warning. “The problems are in reconciliation—what did I get paid for, what not paid for, out-of-balance situations,” she says. These issues, she adds, “are what RTP solves for us.”

Other features are also involved that could prove useful for both companies. The RTP network’s request-for-payment capability, for example, could clear the way for Zelle to move more rapidly into bill pay. And what Ledford refers to as Zelle’s social tokens—the recipient phone number or email address—can benefit RTP as the service adds more and more users who may not care to be bothered with more complicated identifiers. “Social tokens is where the Zelle network excels,” says Ledford.

The strengths of both networks, then, could come into play with functions like bill pay. “If there is a bank and they want to offer the ability to pay bills through request for payment based on a Zelle social token [as opposed to an account number], they could do it,” says Ledford.

Meanwhile, Zelle will benefit through shorter development time for features like bill pay. “Request for payment is the big one, the ability to send an invoice to a phone number or email.” says Alexander, referring to the RTP feature. “That’s definitely the synergy that comes together here.”

The Zelle service, which competes with PayPal’s Venmo app, Square’s Cash App, and other rivals, launched in June 2017. The RTP network followed five months later. Early Warning reported earlier this month that Zelle last year processed $307 billion in volume, up 62% over 2019, on 1.2 billion transactions, up 58%.