Cash & Working CapitalThe NeuGroup Insights Interview

Fast Funds: Finding a Fit for Real-Time in the Payment Frontier

By May 22, 2024No Comments

The Clearing House CEO David Watson on how his company’s RTP Network can fit into a corporate’s payments infrastructure.

The buzz around real-time payments among NeuGroup members has picked up since the launch last year of the Federal Reserve’s FedNow system. It joined the RTP Network, introduced by The Clearing House in 2017, and various blockchain-based platforms as options for instant USD payments. However, low limits on transactions ($1 million for RTP, $500,000 for FedNow) and a lack of use cases are reasons some treasury teams have cited for sticking with traditional payment methods.

  • But at a recent meeting of NeuGroup for Payment Strategy sponsored by HSBC, David Watson, president and CEO of The Clearing House, discussed with members specific areas where real-time payments can add value, such as account-to-account transfers, earned wage access and fraud reduction.
  • In a new NeuGroup video you can watch by hitting the play button below, Mr. Watson unpacks some of these use cases, and how corporates may benefit from integrating real-time payments.

Benefits and keys to growth. Mr. Watson said RTP’s consistent year-over-year growth in transaction volume since the network’s launch has been fueled in part by a number of benefits it provides users, including fraud controls, data richness and transaction confirmation—advantages also offered by FedNow.

  • In the meeting, Mr. Watson highlighted a need for greater interoperability—the ability to exchange information—between RTP and the Fed to fully realize the potential of real-time payments in the US. He noted that the Fed said it would continue to explore interoperability with RTP when it announced that FedNow would go live last summer.
  • “In the ACH world there is an entirely interoperable environment,” he said. “In our wires environment, there are two systems that actually leverage each other and have similar interchangeability. We do not have any interoperability between RTP and FedNow.”
  • He expressed a desire for the Fed and RTP to unite on this front, saying, “we at The Clearing House would welcome that opportunity at any time, because the key goal here is for the growth of the US economy to drive towards an instant payment landscape as we’ve seen hugely successful in other regions.”

Next steps. Members in the session and Mr. Watson agreed that it’s critical for treasury to stay ahead of the curve and understand how to effectively use real-time technologies. “RTP is just a piece of a larger move toward real-time credit and real-time liquidity; it’s a different landscape,” one member said. “You’ll need to find out how you’ll deal with them in your shop: which banks are talking to you about those things, and which have most experience?”

  • Mr. Watson recommends working closely with banks that partner with RTP, including HSBC. “I strongly encourage corporate treasurers to ensure that when they’re talking to their bankers on these questions, they make sure they’re talking to institutions who are live on RTP, ACH and wire businesses so they get an educated, unemotional conversation around what’s the best answer for them.”
Justin Jones

Author Justin Jones

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