The Future of Payments

35 BANKING PERSPECTIVES QUARTER 4 2018 Beyond speed, real-time payments systems offer important potential advantages, such as driving treasury efficiency, enabling more-effective use of cash flows, and minimizing exposure to fraud. strong value proposition, they are being developed to enable interoperability with the goal of driving ubiquity. However, despite encouraging “coopetition” and spurring development, some believe that the lack of a central mandate has had the unanticipated effect of causing some banks to take a wait-and-see approach before committing to one of the available real-time payments approaches. CORPORATES SEE POTENTIAL IN REAL- TIME PAYMENTS Up to this point, corporate adoption of real-time payments has been modest, which can be attributed to a number of factors, including: • An overall lack of ubiquity (the number of participating banks that can send and receive real-time payments is limited) • Low awareness and education related to the new payment rail • Uncertainty surrounding which real-time payment system will ultimately be successful • A low allowable limit per transaction ($25,000 for TCH’s RTP system) • Investment required to modify technology architecture, operational processes and liquidity management to support item versus batch-oriented processing To further encourage adoption, many of the largest enterprise resource planning providers are working to provide plug-and-play solutions that will facilitate corporate back-end financial payments, settlements, and reconciliation processes. For corporates, moving from batch payments to a real-time process using application program interface technology makes good business sense. Beyond speed, real-time payment systems offer important potential advantages, such as driving treasury efficiency, enabling more-effective use of cash flows, and minimizing exposure to fraud. Because such payments dramatically shorten the time frame for recognizing receivables, they in essence speed the flow of commerce and straight-through reconciliation, making it easier to access much needed liquidity and achieve better working capital management. WHAT’S COMING NEXT While adoption has been modest thus far, the encouraging news is that the banking industry expects that approximately 50% of banks in the U.S. will be connected to RTP by the end of 2018. Reaching this threshold should further encourage corporates to take advantage of the tremendous benefits to be gained by investing in real-time payments. To help ensure this happens, the banking industry as a whole needs to do more to educate corporates on RTP’s value proposition and the potential applications that address corporate treasury’s key pain points, such as accounts payable, accounts receivable, customer service, supplier relations, and new business development. In addition to creating a simpler payments experience, banks must address the confusion in the market head-on and create forums for dialogue, education, and advocacy. Story continues on the top of p. 110 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.