Even before Steve Ledford became one of the architects behind the development of The Clearing House's RTP® network, he personally experienced the need for a globally interoperable, instant payments system.
"I was at a conference, and I got a call that my mother, who was on vacation in Britain, had fallen and broken her ankle," recalled Ledford, TCH's recently retired Senior Vice President, Products and Strategy. "She was in the hospital and needed medical transport to the airport, but the transport service didn't take credit cards; they said, 'Send me an instant transfer.' I had to tell them, 'I'm American; we don't have that yet.' Thankfully, my colleague was British, so she made the instant payment to the medical transport driver, and I went to an ATM to pay her back. It was clear that we needed to make sure RTP works internationally."
And since that experience, the demand for global instant payments solutions had continued to rise. In fact, in 2021, businesses and consumers made 118.3 billion real-time payments across the globe, up 64.5 percent from 2020, and that number is set to nearly quadruple to 427.7 billion by 2026. But so far, the bulk of those transactions have been: 1. occurring outside the U.S.; and 2. contained within specific country-based systems-globally interoperable real-time payments have not commercially launched. But those trends could be changing as early as 2023.
Introducing Immediate Cross-Border Payments
On April 28, EBA CLEARING, SWIFT, and TCH announced plans to deliver a pilot service for immediate cross-border payments-which they are referring to as IXB-by the end of 2022, followed by a full service offering in 2023. The initial service will support instant payments in the U.S. dollar and euro currency corridor.
"We're well on the way, working with this group of about 20 banks in the overall advisory body, 11 who will follow through with a pilot to show how this will work at a commercial scale," Ledford remarked. "This is as real time as you can get. The whole idea is to synchronize the way they work together to have the transaction completed within a minute or so. That's really something that's never been done before."
Scaling for Success
With the proof of concept completed in 2021 and the pilot launching late this year, the nation's largest banks, who are owners of TCH, along with a number of European banks, which are EBA CLEARING members, will be testing out and refining functionality. But TCH has also begun conversations with core providers. The goal is to ensure availability of and access to this cross-border RTP functionality for all FIs who are interested as the service phases into full-scale deployment.
"The intention is to make this service available to anyone on the RTP or RT1 network, starting with pilot participants to work through those start-up issues. Once we move to the full-blown service, we will open it up to anyone with access to those networks on an opt-in basis," said Ledford. "The third-party players are already working on this. It will be something FIs will need to be able to add to their standard messages, and support will be needed from vendors, but it's not designed to be a heavy lift."
So, while waiting for the service's availability, what steps should FIs be taking? Ledford advises taking a closer look at international transactions today to determine how those processes could align with RTP.
"Make sure you have thought through AML and sanctions' compliance. Look at what you do with wire transfers and IAT [international ACH transactions] today. You probably have the capability to do it now; it's just a matter of integrating with the RTP network," Ledford counseled.
In addition, Ledford encourages those FIs wanting to tap into global real-time payments to contact their providers and indicate their interest.
"It's never too early to start talking to providers to learn how they plan to support this. We're happy to work with those vendors who are using the RTP network," he indicated.
And TCH has big plans for expanding the international scope of the RTP network. Once they have gone live with the euro, they plan to apply the same concept to immediate payment systems in other geographies.
"It won't be solely U.S./euro for that long a period; we're having parallel discussions with payment system operators in other countries," Ledford concluded. "I can say the interest has been very strong from a lot of the corridors that make up much of the cross-border trade for the U.S. and Europe."
To learn more about developments with global RTP and other payment trends, join us for NEACH's Future of Payments Symposium, a virtual event on December 1, where Steve Ledford, in his new consulting capacity, will be a featured speaker, as well as Elena Whisler, SVP, Sales and Relationship Management at The Clearing House, who will be speaking on cross-border payments.
AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.