Faster, Real-Time Payments Don’t Get Everyone Excited

Jun 25, 2019

Last month, Visa acquired control of Earthport plc, which will enable account-to-account transfers.

London-based Earthport is one of the largest ACH networks in the world and allows Visa to expand real-time payment capabilities to the public. Visa acquired Earthport for $320.4 million after a fierce bidding battle with competitor, MasterCard.

The acquisition connects Visa to ACH and real-time networks in more than 85 countries, which allows the scheme to transfer money to those who don’t have Visa cards. Until this acquisition, Visa Direct service enables real-time push payments but receivers of money needed to have Visa cards to use it.

But Wait There’s More

Though Visa’s chief executive Alfred Kelly championed the acquisition, it was reported that he was lukewarm on the urgency of real-time payments. He wasn’t sure that everyone was going to hurry to adopt faster payments just because some people were making a big deal about it in the industry.

To date, New York City-based Clearing House Payments Co. (TCH), which is owned by many of the nation’s largest banks and vendors, like ACI Worldwide and Fidelity National Information Services Inc., has built or contributed innovations to faster-payments systems throughout the country.

Despite this, Kelly wondered whether there were a need and dependability for competing faster payments networks, cautioning that these types of systems don’t protect merchants and the public from unauthorized transactions. His main beef with real-time payments centered on fraud protections. With transactions completed in mere seconds, he wondered if the world was ready to handle transactions that cannot be returned easily. In a nutshell, he wondered whether real-time systems had the safeguards the world could count on with existing payments landscapes.

Separating Innovation from the Status Quo

The world is indeed abuzz with chatter of faster payments and how they will revolutionize the industry and all involved. Whenever something exciting and most often better, it shakes up the status quo.

For example, the Federal Reserve assembled a task force to explore real-time payments, but the world has heard little about what they plan to do next. This is probably because traditional institutions, specifically banks, are ready for the industry to be turned on its head. Instead, they would rather poke at the flaws.
In reality, it will be probably a least a little while before the payments industry completely embraces real-time payments and figures out how to monetize it. However, the companies that position themselves to profit early from its innovations will see the most opportunities when these tools are fully adopted.

In actuality, this is what Visa is doing. However, it also has forgotten to plant that seed of doubt that some competitors may pay attention to.

In the End

New, faster payment methods will impact everything from payroll disbursements to tax refunds to insurance payouts. And, those are just naming a few. Some part of every sector is thinking about how it can make real-time payments work for them.

No matter where you stand now, the accessibility of real-time payments will impact you in the next decade or so in the U.S. Those that invest now will see the most significant benefits later.

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