Although COVID-19 restrictions are beginning to ease in some parts of the country, aftershocks are still rippling out, affecting every segment of the industry, including real-time payments. The fact that a significant number of consumers said they would switch from their current financial institutions to one that provides real-time payments is revealing. In addition, RTP® continues to gain traction, and FedNow(SM) released message specifications for the initial launch of its FedNow Service based on the standard set by the International Organization for Standardization, or ISO.
Read on for more of this month’s latest developments.
May 2021 At-a-Glance
COVID-19 Impact: Real-time payments are expanding with businesses, banks, and consumers looking for ways to send and receive funds as quickly and easily as possible.
Faster Payments: Same Day ACH (SDA) payments will be further enhanced with a new $1 million limit, starting March 18, 2022.
RTP® and FedNow(SM): Corporate One Federal Credit Union is now live on RTP, and the Fed released message specifications for the initial launch of its FedNow Service.
The New Role of Operations Workgroup: The New Role of Operations Workgroup is in the process of identifying and addressing disruption factors in banking; Keith Gray, SVP of Strategic Partnerships for The Clearing House answered questions about its Real-Time Payments (RTP) network.
Other News: Venmo customers can now buy, hold, and sell cryptocurrency directly within the Venmo app with as little as $1.
According to the PYMNTS April 2021 Real-Time Payments Tracker, “The pandemic has accelerated real-time payments’ expansion, with businesses, banks and consumers all seeking ways to send and — more critical for some — receive funds as swiftly and easily as possible.”
This follows on the heels of news that “a recent PYMNTS report found 35 percent of consumers in the United States consider the ability to receive funds in real-time as "extremely" important. And a separate PYMNTS study discovered that approximately 24 percent of U.S. consumers would switch from their current financial institutions to those that provide real-time payments,” the news source says.
According to the April 2021 Tracker, “Businesses and FI’s around the globe made 70 billion such payments in 2020, a 41 percent jump from 2019 figures. "The report attributes much of this increase…to the health crisis's lingering effects on how banks, businesses, and consumers want or need to send and receive payments.” During this time, checks and cash declined dramatically.
For financial institutions, real-time payments are quickly becoming table stakes. To remain competitive, financial institutions need to learn all they can about real-time payments and decide where in their payments strategies and plans they fit.
Also noteworthy: Nacha, in a recent news release, reported that Same Day ACH payments will be further enhanced with a new $1 million per transaction limit.
Nacha members approved a measure to increase the per-payment maximum from the current $100,000 to $1 million per transaction starting March 18, 2022,” the release stated. It will apply to all eligible Same Day ACH payments, including credit and debits for both businesses and consumers.
“Nacha has made a significant enhancement to Same Day ACH every year since it was introduced in 2016,” Jane Larimer, Nacha President and CEO, was quoted as saying in the release. “This enhancement reflects our commitment to see that the modern ACH Network meets the nation’s needs for fast and efficient payments.”
The approval follows just weeks after Nacha announced the extension of Same Day ACH operating hours. Since March 18, 2021, financial institutions have had two additional hours to initiate Same Day ACH payments, raising the number of settlement times to four each business day.
RTP® and FedNow(SM)
The Clearing House recently announced that Corporate One Federal Credit Union, a leading wholesale financial services provider to more than 750 of America’s credit unions, is now live on the RTP network. Corporate One’s Funding Agent Service facilitates the 24/7/365 funding management for credit unions on the network.
“Our Funding Agent Service has been designed to support credit union adoption of instant payments by offering a 24/7/365 liquidity and settlement management service that eases the operational challenges many credit unions may face when wanting to offer around-the-clock payment solutions,” Melissa Ashley, Corporate One’s President/CEO, was quoted as saying in the release. “Serving as a funding agent fits right in our wheelhouse of partnering with credit unions on payments and cash management.”
Also of interest, the Federal Reserve recently reported it released message specifications for the initial launch of its FedNow Service for instant payments based on the stand set by the International Organization for Standardization, or ISO. According to the release:
The FedNow ISO 20022 specifications define the message flows and formats that the service will leverage when operational in 2023. The release of these specifications is an important step that allows financial institutions and other payments providers to begin preparing systems and developing solutions to support FedNow payments.
“Our work with payments industry stakeholders revealed unanimous support for developing our messaging specs in alignment with the ISO 20022 messaging standard to enable broad interoperability, end-to-end efficiency of payments and future innovation on top of the FedNow platform,” Nick Stanescu, Senior Vice President and FedNow business executive was quoted as saying in the release. “Our adherence to the ISO 20022 standard means more opportunities for implementation across products and market segments.”
The Federal Reserve has also recently released resources to help customers and stakeholders better understand how a payment is cleared and settled through the FedNow Service and what role financial institutions play in the process. You can view the Fed’s video, “How the FedNow Service will work,” and its payment flow diagram on its website here.
Also included is a list of frequently asked questions, which dive deeper into payment flow. You can check them out here.
The New Role of Operations Workgroup
The New Role of Operations Workgroup met on March 25 to continue exploring the shifting role of operations in the wake of COVID-19 and inherent in the accelerating digitalization of payments. While existing subgroups (Defining What Operations Are Today, Challenges Facing Operations Today) are close to finalizing their work, other subgroups are still early in the process of identifying and addressing disruption factors in banking and brainstorming potential sessions and topics to explore at NEACH's fall 2021 Faster Payments Symposium.
The March meeting also featured guest speaker Keith Gray, Vice President, Strategic Partnerships, for The Clearing House (TCH), who presented on The Clearing House’s RTP® network. He answered questions from workgroup members during the presentation, including a question we’ve heard many times: How does a financial institution get started or connect with RTP?
“Most small banks start with receiving RTP payments through a third-party service provider because it is a light lift,” responded Gray. “The easiest path to receiving is typically through your core provider, but that’s not your only option. Most banks connect through various technology providers.”
Gray also mentioned that the RTP Network sees increased volume on weekends, which speaks to consumers’ preferences for immediate payments.
In other news, Venmo customers can now buy, hold, and sell cryptocurrency directly within the Venmo app with as little as $1, Venmo recently announced. Rolled out on April 20, “crypto on Venmo offers customers a way to start their crypto journey alongside the many ways they already use Venmo to spend and manage their money,” the release stated.
“According to the 2020 Venmo Customer Behavior Study,” noted the release, “more than 30% of Venmo customers have already started purchasing crypto or equities, 20% of which started during the pandemic…The launch of the feature furthers PayPal's commitment to educating its customers on the potential of digital currencies as they continue to grow and drives understanding and utility of cryptocurrencies on a mass scale.”
We will keep NEACH members apprised of this development as more news becomes available.
On a different note, let’s talk cyber security. Although changes in technology seem to happen overnight, the original purpose of our Cyber Watch posts has remained the same: Provide updates on what's happening in the industry regarding cybersecurity threats and the tools that can address them.
Fraudsters are exploiting the increase in digital communications-accelerated by the COVID-19 pandemic by using increasingly sophisticated techniques to breach systems and leverage their findings.
In fact, according to a recent Forbes article, cyber-attacks against major financial institutions have grown significantly, recently. An analysis in 2015 found that financial organizations were targeted four times more than other industries. And just four years later, financial firms experienced as many as 300 times more cyber-attacks than other companies. That's why we're reaching out to NEACH members to learn about the topics you feel are critical to your organization's safety and success.
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NEACH—Your Strategic Partner
For more on what’s happening in the world of innovating payments, please stop by our Innovating Payments website. You also can look to key operational topics as part of our Payments Management Conference, taking place virtually May 10 – 11.
As always, consider NEACH your strategic partner. We are here to support you. For questions, call our payments hotline at 855-NEACHQA.
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.