The transition from paper check to electronic payments would seem a logical leap for B2B payments, mirroring the growth happening in consumer-facing commerce.
As James Colassano, senior vice president, product development at The Clearing House (TCH), told PYMNTS, the recent boost in the transaction limits seen on the RTP network, the real-time payments system from TCH, should help hasten the migration away from checks in commercial transactions.
That pivot can take place without the need for an interim step of moving from paper to ACH, he said — chiefly because with RTP, there’s a finality of having the payments settle without delay and with markedly greater transparency.
As reported this week, TCH, which operates the RTP network, has increased the value limit for payments on the network to $1 million from $100,000. The move comes after the limits for same-day ACH transactions had increased to $1 million.
See also: The Clearing House Raises RTP Limit to $1M
He noted that when TCH launched the RTP network in 2017, the initial limit was $25,000 — a level that reflected the newness of the offering itself, as the first new system that had been introduced in the United States in four decades.
As Colassano said, the $25,000 limit was conducive to high volume, smaller value retail and consumer payments. But to get more business-to-business traffic on the network — particularly ACH payments — that limit was then raised to $100,000.
That ceiling, he said, successfully captured about 98% of the size of transactions typically seen across the ACH network (where growth in 2021 was 8.7%). RTP transaction volumes, he said, have been up double-digit percentage points each quarter.
Related: ACH Volume on The Clearing House’s EPN Outpaced Industry in 2021
Different Use Cases, Higher Limits
“But we started to get additional feedback,” Colassano said, “that different [B2B] use cases demanded that $1 million [limit] would be a logical next step.”
The pandemic has shown that relying on paper to get payments done has proved problematic in an age where people can’t always get to the office.
“Many of these businesses have been looking for electronic alternatives, and that’s where RTP comes in,” he said.
RTP, he said, helps companies deal effectively with liquidity and cash flow challenges — and the $1 million ceiling eliminates a gating factor that might been in place in the past. He cited mortgage closings as one example, where settlement over RTP conduits happen immediately and the money cannot be returned (or the transaction rejected) in any way.
Colassano also noted that the benefits accrue to all companies, regardless of vertical, especially for small- to medium-sized businesses (SMBs) and middle-market companies, which have notably been resistant to migrating to electronic payments in the past.
With such high-value transactions, security might understandably be top of mind. Colassano said that inherent in the design of the RTP network itself is the fact that transactions running through the network must be originated and received into a bank account, using secure bank channels.
“You can rely on the fact that you’ve got a bank as the front door and the back door for these transactions,” he said.
The RTP network can also generate non-financial messages, so the request for payment between a buyer and supplier acts as an additional layer of security. There’s the transparency of getting notification back that states the counterparty has received funds, and the transaction can be closed out with finality.
“That’s going to give businesses a lot of comfort that they run these transactions through the RTP rails and be confident in the outcome,” he told PYMNTS.
Looking ahead, TCH will monitor whether $2 million, $5 million or $10 million represent logical transaction limits across a maturing network.
As Colassano told PYMNTS, “We’re looking to increase transaction limits in a disciplined fashion.”
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