Considering The Clearing House's Real Time Payments service launched in November and only six banks have signed up in the months that followed, it's clear that there's more work to do to build an ubiquitous network.
Everyone involved in getting RTP operating at scale expects that it will find more suitors as it evolves and ties into more use cases.
"We need the reach, but we also need applications that people are using to initiate payments," said Steve Ledford, senior vice president of product and strategy at The Clearing House. "We should be able to tap into the accounts that are reachable with RTP by the end of this year, including most of The Clearing House banks and some non-Clearing House banks."
The Clearing House expected to take some time to introduce its new network to financial institutions and play up its benefits. RTP was created to run alongside other payment rails and bank legacy systems, rather than replace them.
Faster payments encounter gridlock
The Clearing House launch of the RTP rail dovetails with the Federal Reserve initiative for faster payments in the U.S., a project that is more than three years in the making. The Fed's emphasis on faster payments has created an audience for The Clearing House RTP, same-day ACH and the bank-supported Zelle person-to-person payments service. All of these have varying degrees of adoption.
As it stands now, the RTP rail allows users to push mostly B-to-B payments in real-time, but also to use the Request for Pay application to create a version of a pull payment. This allows users to begin building some bill-paying services or recurring payment processes that would otherwise be missing as options. Through it all, more business-to-consumer use cases are likely to unfold.
"We don't have pull payments, but we do have the request for payment that will enable invoice and consumer bill delivery, which is enabled now," Ledford said. "What we are finding is it needs a little larger base of folks who are able to receive, and they are waiting to get a few more financial institutions on board with this."
Once the request-for-payment aspect is in full use, "that will really be groundbreaking" for the RTP rail, Ledford added.
As with any new payments service, smaller banks are likely to have the most difficulty getting started, said Erika Baumann, senior wholesale banking analyst at Aite Group.
"It makes sense that many of the smaller institutions will utilize a gateway and not go through TCH directly," Baumann said. "But who to partner with is still a looming consideration."
Memories of ACH
Most of what the RTP rail will bring to a bank will be the result of the types of application interfaces used to create and offer services to consumers and business clients.
"In order for the RTP rail to grow, the market's consumers and corporates have to be educated about the value of the rail," said Vinay Prabhakar, head of markets, strategy and payments for Finastra, which operates as a payment hub and banking platform provider that enables RTP connections in the U.S.
Finastra was created last year as a result of Vista Equity Partners acquiring Toronto-based D+H and merging it with U.K-based global software provider Misys.
"We, as banks and fintechs, have to build services that are purpose-built for that rail," Prabhakar said. "It is like saying the rail is good, but you have to have vehicles and trains to run on those tracks. And the public has to be evangelists for the new service."
What makes the education process a little more challenging is the fact that not too many current executives or technology providers were part of the financial and payments industries in the 1970s when ACH was introduced, Prabhakar said.
"There is no institutional memory in our industry about how we roll out a new payment rail and increase adoption," he added. "It's not just an issue for the banks, but for the payments industry as a whole."
There is a similarity with the RTP network and the growing number of mobile wallet and one-click payment options coming to market. Banks and businesses would be wise to offer incentives to use these options if they represent a way to avoid card network interchange or other costs. It would be especially appealing if the RTP rail began to offer various consumer-facing services.
"That's where the APIs and fintechs come into play," Prabhakar said. "Banks roll out the new rail and deliver apps and channels themselves, or they could go through a third-party fintech to create those services and models around them."
Most agree that adoption will stem from the competition and promotion of the different use cases that a faster payments rail can present.
Though it is not likely the U.S. government would ever mandate the use of RTP, it could possibly offer incentives such as breaks on capital requirements or easing of certain regulations, Prabhakar said.
But if a bank's current online or mobile apps don't support the RTP, it is going to slow the adoption process, Prabhakar said. "That is where the platform approach comes in and where we are trying to take this," he added.