We’ve got a long way to go before we see anything close to universal acceptance — or a shift to a corporate world awash in real-time payments — but a growing number of corporate treasurers and billing and payment executives are paying more attention than ever to the benefits.
Real-time payments represent 2% of all corporate payments sent and 1.3% of corporate payments received today, but among the companies using the tool regularly, 75% expect to increase the payments they receive in real time in the next year — and almost seven out of every 10 plan to make more real-time payments in that time, according to recent PYMNTS research.
Almost one in seven surveyed businesses with annual revenues between $50 million and $1 billion (15%) said they make or receive payments in real time, with the figure jumping to 86% when it comes to businesses with annual revenues between $500 million and $1 billion.
In the June/July 2022 edition of the Real-Time Payments Tracker®, PYMNTS takes a closer look at the ecosystem of third parties that help support and facilitate the RTP network and offers information for potential participant financial institutions (FIs) and businesses to consider when looking to enable true real-time payments.
Get the report: Real-Time Payments Tracker
“The benefits of real-time payments extend to both consumers and businesses, with merchants able to fulfill customer demands immediately and businesses able to conduct transactions with clarity and finality that is lacking in legacy payment solutions,” the Tracker noted. “These faster payments have revolutionized existing payments practices and opened the door to further advancements and new business opportunities that could not exist without real-time payments.”
The Clearing House’s RTP network provides the means for settlement within two to three seconds at any hour of any day, fueling the growth of real-time payments and allowing enhanced client experience and improved liquidity management.
By September 2021, the RTP network had about 150 FIs connected as participants, accounting for more than 50% of demand deposit accounts (DDAs) in the U.S. The most recent information from The Clearing House places that number at 251 FIs able to send and receive real-time payments through the network, reaching 61% of U.S. DDAs. Only two dozen of those FIs are integrated directly into the RTP network.
“Unlike other payment options touted as fast or same day, the RTP network enables transactions that actually happen in real time,” the Tracker said. “With payment information traveling both ways during the transaction, end-to-end messaging prevents fragmented communication that can slow a payment.”
The RTP network accomplishes this with adherence to the ISO 20022 standard, meaning that all messages comply with a global standard that aids in interoperability and makes it easier for FIs and third-party service providers (TPSPs) to integrate the messaging into their interfaces.
See also: Small FIs Tap Third-Party Payments Providers to Fast Track Real-Time
The Federal Reserve’s FedNow payment network is planning to utilize the same standard, making for smoother interoperability for FIs using both networks.
As the Tracker noted, “The two-direction nature of RTP payments also enables a request for payment to be sent through the network to a payee, with the payor initiating the transaction and the payee confirming. The data-rich nature of RTP network payment requests also enables easier marrying of payments with accounts receivable (AR) information, saving time and the work involved in reconciliation.”
According to The Clearing House, most RTP network participants connect through a third party using a multitude of technology providers, funding agents and entities that act in both capacities to support the network.
“Working with one of these third parties can provide several benefits, such as offloading the job of creating and maintaining a native interface that connects the FI to the network,” according to the Tracker. “Depending on the provider an FI chooses, the FI may be able to act as a full participant or choose a tiered service that provides fewer capabilities at a lower cost.
“With an overwhelming share of DDAs already connected to the network and new participants constantly being added, even enabling the receipt of payments through the network has clear advantages for any size FI,” according to PYMNTS’ research.
Read the report: Real-Time Payments Tracker
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