Credit Unions Get a 'Fast Pay' Option in Industry Push for Real-Time

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CO-OP Financial Services has vastly expanded its real time person to person payments reach, adding a credit union-led alternative to the faster payment models being pursued by banks.

The Rancho Cucamonga, Calif.-based credit union service organization is tying its relaunched mobile banking app to a person-to-person payment system that uses FIS' PayNet, an ACH-style electronic transaction network.

"This extends the rails, so to speak," said Amanda Smith, manager of emerging products for CO-OP. The organization's members can use Sprig, its existing P2P payment service, for payments within the credit union network and PayNet for transactions going outside the network.

In 2014, FIS completed a project that connected its core processing platforms to PayNet, which is being deployed to FIS' customers over the course of the year, said Peter Gordon, senior vice president and general manager of PayNet at FIS, in an email.

CO-OP's Smith estimates about 15% of the total U.S. market can execute real-time payments through the CO-OP/FIS deployment, and hopes to reach 25% by the end of the year. CO-OP's membership extends to 3,500 credit unions and 50 million account holders.

Other cross-institution efforts to implement real-time payments the Bank of America, Wells Fargo and JP Morgan Chase-led clearXchange, which covers about half of the bank customers in the U.S. P2P transactions are a relatively small part of the payments market, though considered an important gateway to other types of mobile payments and financial services.

CO-OP plans to eventually bring real-time speed to other services. "The service is account-based, so it could be extended to purchase transactions," Smith said. "It's also bidirectional, so we can receive payments coming in from other institutions."

The CUSO's move could also provide a broader boost in near-real-time payment processing, said Ron Mazursky, director of the Debit Advisory Service at Mercator Advisory Group.

"CO-OP has gone beyond the world of credit unions to a much larger universe of financial institutions," Mazursky said. "It's the right place to go…real time payments is a big part of the market and it's growing."

There are several efforts in the payments industry to expand faster processing, including guidance from the Federal Reserve. Others, such as New York banking regulator Benjamin Lawsky and the Consumer Financial Protection Bureau have also encouraged faster payments and have hinted at possible regulation. Nacha, which oversees the ACH network, has also pushed for faster payments in the U.S.

"There are several models out there concurrently," said Mazursky, who predicts the various initiatives such as CO-OP and clearXchange will eventually work with each other. "If real-time payments are arriving, it's because of cooperation between the financial institutions and the various networks that are out there."

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