Gain customer loyalty with real-time payment experiences
Faster payment platforms present organizations with an opportunity to improve customer experience and loyalty while boosting operational efficiency. A type of financial transaction for instant settlement, real-time payment services allow both individuals and institutions to send funds with immediate and irrevocable availability to others over a secure payments network. Senders can directly confirm receipt of funds, completing the experience in seconds, rather than hours or days. Often implemented using cloud technologies, more modern payment platforms can also help organizations process larger payment volumes and better manage their cash positions to control costs.
In 2015, the United States Federal Reserve Faster Payments Task Force established criteria for a successful faster payments system in the U.S. Composed of more than 300 delegates representing financial institutions, corporate treasurers, consumer advocates, financial technology firms, industry associations, academics, and others, the task force set 2020 as the target date for faster payment offerings to be available to every U.S. consumer and business.
The trend to deliver faster payments is not limited to the U.S. Worldwide, financial organizations are establishing real-time payment initiatives. While these initiatives may be called instant, faster, or immediate payments across North America, Europe, and Asia, all aim to process higher volumes of payments more quickly. Globally, 51% of banks will increase their IT budgets for payments-related projects, with 61% of banks in Asia increasing investment. Additionally, 85% of all banks expect realtime payments to create revenue growth. As a result, many banks are now modernizing their infrastructure to support real-time payment processing operations.
This overview will discuss a framework for building faster, modern payment platforms to meet global initiatives.
Connect to a new network for delivering payments faster
In the U.S., payments services have historically used automated clearing house (ACH) networks to deliver funds. Payments are posted to payees on the same day funds are sent, while banks settle the transaction via the ACH network. Because the ACH network uses batch processing, there is a delay in ACH transfers. As a result, banks deliver funds to the payee before the bank itself actually receives them.
In response, organizations are developing fast payments initiatives. For example, The Clearing House (TCH) banking association launched its real-time payments service. The first new payments system in the U.S. in more than 40 years, the RTP network is a real-time payments (RTP) platform that allows federally insured U.S. depository institutions to transfer funds between bank accounts in only five seconds. The RTP network is separate from ACH and wire transfer networks and RTP payments do not interface or clear through these mechanisms.