The Future of Payments

9 BANKING PERSPECTIVES QUARTER 4 2018 November marks a year since The Clearing House (TCH) processed the country’s first payment to clear and settle in real time, a step that represents a major leap forward for the country’s payments system. Completed on TCH’s RTP network – the first new payments infrastructure to be introduced in more than 40 years – this transaction stands as the first of the billions of real-time payments that will follow. Likewise, this first payment also signaled the start of a new wave of innovation that will be driven by financial institutions on top of this important new payments rail. Built for the digital age, RTP has been built to meet the demands of the modern economy by delivering 24/7/365 clearing and real-time settlement, along with extensive messaging and data-handling features. With these capabilities, financial institutions are already starting to use RTP to deliver innovative products and services to add speed, safety, and efficiencies to the financial transactions conducted by all Americans while also improving efficiency for U.S. commerce. That first payment transmitted a year ago and the ongoing expansion of the RTP network since are the result of a multiyear effort to develop and launch a modern payments rail that meets the demands of the modern digital economy. This process has involved not just the technical build- out of what is likely the most advanced payments network in the world but – importantly and as part of this process – industrywide engagement to ensure that the RTP network meets the needs of all financial institutions and their customers. Not only have TCHmember banks provided input and direction on the development of RTP, but during every stage of the development process TCH sought out and received essential input from regional banks, community banks, credit unions, and technology providers to ensure that RTP has been designed and built to serve all institutions, regardless of size. In addition to providing various means for financial institutions to connect to RTP, this universal approach is evident in the pricing – the RTP network’s low, flat-pricing schedule is the same for all participants, regardless of institution size, with no discounts, volume commitments, or monthly minimums for participating institutions. Further, throughout the process of developing the RTP network, corporate financial professionals and consumer interest representatives have provided guidance on end-user needs. The arrival of real-time payments in the U.S. through the RTP network has benefited immensely from the strategic vision of the Federal Reserve’s U.S. payment system improvement initiative and the broad-based collaboration of the Federal Reserve-sponsored Faster Payments Task Force (FPTF). The Federal Reserve’s work in this area has helped drive a national understanding of how real-time payments will benefit consumers, businesses, and the nation’s economy. TCH’s effort to deliver a real-time system to the U.S. through RTP began in 2014 before the FPTF was formed. Following the formation of the FPTF, TCH served as an active participant in this effort in order to ensure that RTP was fully synchronized with the FPTF’s goals and recommendations to bring real-time payments to the U.S. Along these lines, TCH developed RTP to incorporate the 36 criteria identified as necessary for a successful U.S. real-time payment system. Likewise – and, consistent with FPTF’s challenge to implement a fast, efficient, safe, and secure new payment system by 2020 – TCH is working toward this important goal by increasing awareness with corporate customers and all financial institutions on our collective real-time future. Likewise, RTP provides for multiple avenues through which financial institutions of all sizes can connect to the system. The RTP Network Turns 1: TCH’s Commitment to Faster Payments BY JIM ARAMANDA, THE CLEARING HOUSE FOR THE RECORD UPFRONT LEADER THE FUTURE OF PAYMENTS 2018 may be a pivot point in the history of the banking system. PAGE 12 STATE OF BANKING BILL ROGERS The chairman and CEO of Suntrust discusses the role that banks play in boosting the economy. PAGE 18 JIM ARAMANDA is President and Chief Executive Officer of The Clearing House.