As U.S. banks go slow with real time payments, Ingo Money sees pockets of demand
As the major banks grapple with the slow and steady implementation of The Clearing House’s Real Time Payments (RTP) system, one organization, Ingo Money, is forging ahead in delivering faster payments for its clients and their customers using the card networks’ push payments rail.
When The Clearing House launched its RTP network in November 2017, it was understood that achieving complete coverage of all U.S. financial institutions by the end of 2020 would be a massive undertaking. Possibly even a stretch goal. Questions of its progress quickly surfaced as banks have been slow to join the network. Additionally, a recent study from Aite Group showed that banks still have a lot of issues to iron out before rolling out real-time payments to their corporate clients.
Ingo Money is tackling these issues issue head-on.
“From our lens it’s a customer differentiator. In the insurance industry you earn the business the day there is a claim, and how you pay it makes the difference," said Lisa McFarland, executive vice president and chief product officer at Ingo Money. "If it takes three days to pay the claim versus instantly, it can completely change the customer experience and perception of the insurance company."
McFarland other executives spoke at SourceMedia's annual PayThink conference, taking place this week in Austin.
A large proportion of insurance claims are still paid by check, a process which can often take weeks to settle. So the matter is even more critical for those insurance companies that are still mailing paper checks.
Ingo Money has been making major strides in driving real-time payments with an emphasis on B2C payments from the insurance industry. It partnered with KeyBank this summer to actively solicit insurance companies who are using ACH and paper checks to serve consumers in the $160 billion insurance claims market by offering them a faster way to pay claims by leveraging the card networks’ debit rails. This was quickly followed by Ingo Money landing a major client, Safelite Solutions, to widen its instant claims pay footprint.
“Demand for B2C disbursements is growing, especially in the insurance industry, because consumers want to get their money fast,” McFarland said.
Though the U.S. may be moving slowly, Ingo Money sees customer demand in other markets.
“In Q4 Ingo Money will send real-time payments to the U.K., and then next year  to Africa with direct integration to MPesa," McFarland said. "The cross-border opportunity is really big."
The question of what is taking so long to get real-time payments live with widespread coverage in the U.S. was succinctly answered by Glenn Geil, senior vice president of payments delivery at Endava: “It will take a lot longer since it’s not a government mandate. The challenge is that banks are struggling with the amount of change required to be able to connect to a real-time network. The banks have been too optimistic in terms of what it takes to connect.”
Steve Ledford, senior vice president of product and strategy at The Clearing House, offered some positive (albeit muted) news on the slow and steady RTP implementation progress.
“We had about 23 to 24 percent coverage of U.S. financial institutions by the end of Q2 and had seven banks signed up," Ledford said. "We are on track to reach about 50% coverage by end of Q4. That’s when we’ll have regional institutions to come on directly, followed by our RTP network partners as the third tranche. These are CUSOs, bankers’ banks, EFT networks, etc. We are on track to achieve nearly 100 percent coverage by end of 2020.”
While the implementation process of the RTP network may appear to be slow to many onlookers, there are major challenges that need to be grappled with, the first being that it’s the first major network installation since the 1970s, when the ACH network was created. Secondary issues include addressing real-time fraud mitigation, weaning corporate customers from B2B checks and finally the consumer expectation of free payments.
Meanwhile, companies are increasingly looking to the Visa and Mastercard to satiate growing consumer and business demand for the ability to send money much more quickly than standard bank solutions. However, the card networks’ solution does not provide instant settlement.
“We push $16 billion a year and most of it’s through the card networks," McFarland said. "But the majority of settlement occurs the next day. ... At some point when the amount of funds grows to be very large, you will need a real-time payment to settle the funds because of the size of risk."