Real-time payments are changing gig-economy, real estate payments at small banks
Two smaller banks with strikingly different roots — a startup financial institution in Irvine, Calif., and a century-old Missouri-based bank — are seeing similar trends emerge around demand for real-time payments.
Newer real estate and gig economy companies are most interested in real-time payments, while traditional corporations take a bit longer to explore use cases, according to two banks that were among the first to adopt RTP through FIS’ banking platform.
Data about faster payments demand and usage at small and midsize banks is trickling in as FIS completes the first phase of RTP implementations via The Clearing House network, three years after the nation’s largest banks (which collectively own TCH) launched the service.
Smaller financial institutions uninterested in RTP may wait up to three or four years for the Federal Reserve’s proposed FedNow instant-payments solution to launch, and neither Nano Banc in Irvine nor First Bank wanted to wait that long.
Jacksonville, Fla.-based FIS last year began exploring RTP rollouts with interested institutions, with implementations occurring over a couple of months during the pandemic, FIS said.
Nano Banc and First Bank recently went live with RTP for receiving payments, with plans to add sending capabilities in the next few months, as they explore marketing and pricing for the new payments services.
First Bank, based in the St. Louis, serves many small businesses and family-owned firms in the Midwest and California. The bank launched RTP in July and saw immediate interest from its B2B customers looking to pay Grubhub drivers and other gig-economy workers, said Ajay Kothuri, First Bank’s assistant vice president.
“Most of our first RTP use cases are companies who want to get payments to workers and suppliers faster,” Kothuri said.
Several businesses that adopted RTP are pleased with its speed and the inclusion of pertinent remittance information for streamlined accounting, Kothuri said.
“We’re already seeing interest in RTP spread from B2B to B2C," he said, "and in coming months we’ll expand applications so end users can bring RTP to existing ACH and card payments.”
First Bank has not changed its pricing for RTP payments.
“As we expand RTP and begin sending ACH and wire payments, we’ll look at products and pricing,” Kothuri said.
First Bank is unrelated to FirstBank, the Colorado institution that was the first non-founding member of the P2P network Zelle (formerly clearXchange) to sign on to that project.
Nano was the 44th bank out of 18,000 to launch RTP when the service went live in August, said Mark Troncale, the bank’s president and a co-founder.
Real estate companies have been the most enthusiastic participants in RTP since the launch, with faster payments speeding up deals and payouts to real estate agents, according to Troncale.
“We see application in the real estate settlement industry, where agents like to get their commissions very fast and settlement and fiduciary companies like to go past the traditional transaction cutoff time if they can,” Troncale said.
Nano Banc’s current ceiling for receiving payments via RTP is $100,000, which restricts the network’s use for certain higher-ticket real estate deals, but Troncale sees that as a short-term obstacle.
“Eventually we’ll get to the place where we can do larger amounts, and in the real estate industry specifically we see great value with RTP,” he said.
Most of Nano Banc’s customers are local, but the bank also serves some national companies and Troncale expects RTP will help Nano Banc compete more effectively across the U.S.
“I think my competitors in the community bank space will start to adopt RTP very quickly, once they see its advantages,” he said.
Nano Bank is still contemplating how it will price RTP as it expands.
“There’s been lots of talk about how this will be a new, cheaper solution with payment gateways, but you get what you pay for," Troncale said. "I don’t know if our RTP will be cheaper than other options but it’s going to add so much more in terms of security and efficiencies … pricing will be competitive but we’re still exploring what that’s going to look like."