The Future of Payments

RTP at 1 110 BANKING PERSPECTIVES QUARTER 4 2018 Continued from p. 35 “RTP at 1: Citi” To drive maximum value for the entire industry, it is vitally important that banks explore participation with both commercial and consumer transactions because RTP has applicability for both use cases. The true power of RTP can be realized only if retail and commercial experiences are built in a cohesive and synergistic fashion. Doing so will present significant new business opportunities for technology providers that can play a critical role by offering turnkey solutions to both banks and corporates. Regulators and central bank authorities can further help expedite market adoption by creating best practices and guidelines to ensure transparency. By continuing to support existing schemes, they can be true catalysts to help drive ubiquity. Perhaps most persuasive of all would be for the federal government to contribute a material use case to help usher in a wave of adoption. In markets like the U.K., for instance, tax payments have significantly spurred adoption. Such an example in the U.S. could demonstrate ecosystem value, helping to highlight the importance of marketplace- wide action. BANKS TAKE A LEADERSHIP ROLE With the investment and launch of the TCH RTP platform, banks are in a unique position to drive adoption and support continued innovation in the payments space. Whether delivering value directly or through multiple networks, banks are well placed to lead this change. The banking industry has provided tremendous leadership in bringing real-time payments forward in the U.S. while helping to develop a marketplace for the future. Citi, in particular, has taken a leading role in developing and launching the TCH RTP platform that has made real-time payments possible in the U.S. In addition to the TCH initiative in the U.S., 29 countries offer real-time payments around the world. Citi is a direct clearing member in 17 of those international markets and has been facilitating real-time payments for many years. The bank is utilizing its considerable experience to support RTP in the U.S. and is committed to delivering a truly global and ubiquitous payment experience. Continued from p. 45 “RTP at 1: Sysco” ELIMINATION OF RETURNS Financial institutions are responsible for verifying fund availability before processing real-time payments from a customer’s accounts. As a result, the risk of returns shifts from the receiver to the sender’s financial institution. This shift benefits both the receiver and sender. The receiver decreases bank fees associated with return and reprocessing fees. Additionally, most companies do not have automated return processing for their enterprise resource planning systems. As such, returns usually have to be logged to customer accounts manually. Advantages to the sender include fewer overdraft fees from its financial institution and return fees charged by its vendors. CUSTOMER ADOPTION Businesses experience cost and efficiency gains when they successfully convert customers to electronic payment options, especially when they initiate the transaction. However, customers balk at signing up for these payment methods. Customers often cite feeling a lack of control on the exact timing of their payments. Also, to initiate the transactions manually, customers must typically log in to a vendor web portal to schedule the payment. The number of web portals with associated user IDs and passwords can become quite large if the client does business with a broad range of vendors. Companies are becoming more efficient at the expense of their customers. With real-time payments, customers can initiate or approve payment requests in their chosen bank’s website. Clients that the funds will leave their accounts within a few seconds. Also, customers can avoid overdraft fees. Banks will not allow customers to release payments that exceed their available balance and associated credit lines. The ability to eliminate overdraft fees is a major advantage over all other traditional payment methods. Although there will be a learning curve as customers become more educated about real-time payments, the time spent will be well worth the effort. CONCLUSION Because of emergency payments, the elimination of returns, and the likelihood of higher levels of customer adoption, real- time payments could fill gaps in the existing payment landscape. Financial institutions can expect that businesses will begin communicating the names of the banks that are capable of real-time payments processing to their customers, vendors, and employees. Those institutions with real-time payment capabilities will be in higher demand as the public learns more about this option. n