The Clearing House is building a system to support real-time payments for the US. As a result, consumers and businesses will be able to send and receive payments instantly, directly from their accounts at financial institutions. Moreover, financial institutions will be able to use data and non-payment messages to build innovative digital commerce solutions.
Real-Time or Faster Payments
Real-time payments are also called instant payments. They’re defined by the Euro Retail Payments Board (ERPB) as electronic retail payment solutions that are available 24/7/365
Real-time payments are a service valued by their customers. This is the service that US customers are after when using instant payment services like PayPal and ApplePay. The Federal Reserve has begun a review of real-time payments and has set a target for their introduction by 2020.
Steve Ledford, SVP products and strategy at The Clearing House (TCH), says real-time payments should cover half the US by the end of 2018. As Ledford notes, The Clearing House will be able to reach everyone. To get to 100%, it may take until 2020. Ledford thinks, by mid-2018, the country will mostly be covered. Their goal is to reach ubiquity as quickly as they can.
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Instant Payments in the US
In the US, regulators, organizations, banks, and customers are increasingly becoming more focused on faster and more efficient real-time payment systems. To fight the competition, banks can’t avoid this shift. They need to enable real–time payments so not to lose a market share to new market entrants. New innovative strategies can provide a basis for a more effective payment system for the years to come.
Thanks to this new payment system, big banks will be able to provide real-time payments, as well as up-to-the minute data analytics that will result in improved customer services, increased revenue and reduced costs. Banks will use the flexibility of digital systems to respond faster to market changes, develop new products more quickly, and apply better systems to fight fraud.
As for smaller banks, they’ll indirectly participate in real-time banking by outsourcing the service to a partner with a suitable payment facility. They’ll need to make some internal adjustments, meaning they’ll need to upgrade their technology and retrain their staff. This will help them send batches of payments 2, 3 times a day or even more often instead of sending 1 batch overnight.