JPMorgan solves a fintech's pain point with Real Time Payments
The Clearing House's Real-Time Payments Network has been slow out of the gate, but it's getting some much needed adoption via a collaboration between personal financial management fintech Digit and JPMorgan Chase.
The partnership allows consumers to instantly move money from a Digit savings account into a checking account. Digit will be one of the first companies to deploy The Clearing House's Real-Time Payments network (RTP), with Digit's access to the RTP coming through JPMorgan Chase, which operates on RTP's rails.
It's the first time Digit's customers will have an option to obtain their money instantly through the Instant Withdrawals feature.
After a late 2017 launch, adoption of The Clearing House RTP was considered slow through much of 2018 as the network provider tried to sell banks on the concept of the faster payment rails operating on top of legacy systems. Faster money transfers was one of the featured use cases.
"Our customers tell us that waiting one to three days for the standard ACH withdrawal is a major pain point, especially when they need money to make payments for things like rent, gas or unplanned expenses," said Digit CEO Ethan Bloch.
For the past four years, San Francisco-based Digit has helped consumers who struggle to save money by offering to connect a Digit account to their checking account — and automatically setting aside a portion of money to help meet financial goals. But Digit calculates the user's daily savings amount before moving it into the Digit account, using an algorithm that learns the customer's spending and income patterns.
"Digit's technology reads your financial situation daily to know exactly how much to save, how much credit card debt you can afford to pay off, and how you're tracking toward other financial goals," Bloch said. "We believe healthy financial practices should be automated, so you can focus on everything else in life."
JPMorgan Chase's RTP rails allow Digit to guarantee Instant Withdrawals can move money to checking accounts within 30 minutes, though many users will see the transfer post in their account in seconds. Digit supports more than 7,000 banks and credit unions in the U.S.
"More and more payment platforms are being created that leverage real-time payments and that's everything from the Visa and Mastercard networks to the RTP, and everything in between," said Tim Sloane, director of emerging technologies advisory services at Mercator Advisory Group. "It makes it pretty straightforward for a startup like Digit to implement a solution that can reach into an individual's account and move money."
The payments industry is liking seeing "just the tip of the iceberg" in implementing real-time rails to their fullest capabilities, Sloane said. "Clever people will continue to think of new business models that are enabled by faster payments features," he added.
All eligible Digit customers will have access to the Instant Withdrawal service by the end of May. Those who want to withdraw money choose a "withdraw" button within the app and select an amount to transfer and click "instant" if they desire immediate access.
Those who save through Digit for three consecutive months are eligible for a 1% savings bonus, paid every three months and based on the average daily balance savers keep for "Rainy Day Savings" or earmarked for specific goals.
"The power of Digit is that it helps everyone save," Bloch said. "Many of our customers, all in different financial situations, tell us they've never been able to save — until Digit."