Lessons learned and the exciting future of real-time payments

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New use cases and solutions are making real time the default expectation for consumers and businesses


Most people think of real-time payments (RTP) as a recent innovation, but the practice actually started in Japan, way back in 1973. Today, of course, the pace of innovation and participation in real-time payments is greatly accelerating. It’s hard to keep up with developments, let alone predict what’s next.

At Forum 2023, the Fiserv client conference, I sat down with three industry experts to discuss the payments landscape in the U.S.:

  • Keith Gray, Vice President of Strategic Partnerships, The Clearing House®
  • Ryan Riveland, Vice President of Market Development for Early Warning Services, the originator of Zelle®
  • Erik Van Bramer, Senior Vice President and Head of Customer Relations and Sales for the Federal Reserve Bank of Chicago

The participants shed a lot of light on how far the real-time payments phenomenon has come, and where it is going.


What lessons have you learned so far in your experience with real-time payments?

Riveland: We found ourselves launching Zelle® in 2017 without knowing much about what the transactions would look like, how we would build it out or the various use cases for it. We also weren’t sure about potential return on investment, but that often comes in ways you’re not looking for or expecting. 

We found that Zelle® increased debit transactions for new banking customers who are not active, but then enroll in Zelle®. They drive four times the debit transactions. So, engagement with Zelle® helps drive other business across the institution.

A lot of the success with Zelle® was driven by banks and credit unions working together on marketing campaigns that we put out as a network. Fiserv was a key partner in providing marketing materials to participating banks for those campaigns. Where the use cases for Zelle® were heavily promoted, that’s where we saw success.

Gray: I’ve been involved since before the beginning of the RTP® Network from The Clearing House more than five years ago. In our planning, we believed there was pent-up demand at both the consumer and business levels that would drive many financial institutions to join the network quickly. Today we have over 500 banks on the network, and that continues to grow.

We knew real-time clearing and settlement were critical. But many use cases are not driven just by immediacy, but by other capabilities – including the ability to process or make a payment on Saturday or Sunday, such as a restaurant owner paying employees same day.

In the business-to-business world, there’s a need for perfect timing of payments. A corporate needing to make a $1 million payment at midnight can schedule the payment for 11:59 p.m. and keep the money in the company account until then. That’s especially useful if there is a rising interest rate environment.

Van Bramer: Our journey at the Federal Reserve began in 2015, with strategies for improving the payment system and the work done with the Faster Payments Task Force and the Fed notice process.

There’s a lot of value in and a need for instant payments in the United States. The disintermediation of traditional financial institutions and payments has encouraged the level of interest and excitement we’re seeing now. It’s been a great groundswell. Real time is starting to become the default expectation for consumers.


How serious is the fraud problem in real-time payments?

Riveland: In the Zelle Network®, 99.9% of transactions go through without any report of fraud or scam. But as the network grows, so does the fraud potential. For the most part, our institutions were already managing fraud under Reg E, and had a lot of effective measures in place. Scams, however, are more problematic because it’s a consumer who is duped and knowingly authorizes the transaction. In those cases, there’s only a handful of things we can do to help.

One is introducing friction at the right time during the transaction, when the consumer goes to send funds from their mobile device. We do this with pop-up messages asking the user if this action is really what they intend. As we’ve added those, we’ve continued to see fraud and scam rates decrease.

Next, consumer education. We can do a lot automatically and electronically within the app, but the consumer also needs to be aware. So, we’ve worked with consumer advocacy groups on educational campaigns that promote safe use of all P2P solutions, including Zelle®.

Finally, we have to remember that it’s the receiver side that is the scammer; it’s the send side that’s getting scammed. We’re working with institutions on better account opening processes and the like, to make sure the accounts that are set up and receiving funds are legitimate. We’re doing everything we can to weed out bad actors.


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How should a financial institution think about the journey of getting into real-time payments?

Gray: It starts with a business case about implementing the receive capability of RTP. With today’s network volume, when a bank or credit union goes live, payments literally start coming in immediately. There’s instant validation; it creates a new deposit channel and provides a service customers want. On the send side, the business case is unique for each individual use case. Is it a treasury app that you charge fees for, or a bill pay app that you can’t? But there are huge fees being generated on the send side by businesses like Venmo, Square and others on the RTP network, which pass a portion to their banks. There’s a big revenue opportunity there.

Van Bramer: It’s important to expand people’s ideas about the possible use cases. I love Keith’s comment about starting with receive as an option. It’s an easy way to get your feet wet in instant payments, and there are a lot of use cases that bring immediate value to customers, such as earned wage access, downloading digital wallets and disbursements, whether from an insurance company or the U.S. Treasury. 

A long-time concern within the Federal Reserve is how to get those pesky checks out of the payment stream. A lot of the checks still in the stream are associated with small businesses. So, with small business use cases, there’s opportunity for revenue generation, but also for reducing the operational costs of paper-check processing.

And fewer checks means less opportunity for check fraud, which can bring significant savings.

Van Bramer: Absolutely. There’s little actual fraud in real-time payments networks today. We see the most fraud with checks, both in the percentage increase and the dollar impact. Moving transactions from paper checks to modern payment solutions will help.

How important is the request for payment (RFP) in a real-time payments model?

Van Bramer: We wanted to have RFP in our solution on day one, because we have a long roadmap of value-added services we want to incorporate. In order to maximize small business value chains, the ability to send out a request for payment, and then have someone respond with a credit push-back, is critical. It’s a great way to benefit from a very robust ISO format that can include a lot of information and move us away from mailing invoices and processing checks.

Gray: We have about 10 banks and large bill pay banks that have certified on request-for-payment, and significant volume is coming through the network originated by RFP. The beauty of it is that a small business can put a request for payment on the network that also includes what the payment is for, and where to put the money. Use cases that originate with a request are big volume drivers.


What will be the next killer use case domestically? 

Riveland: Zelle® is going to continue to push and grow P2P, because that’s the base that will grow everything else. We’ve already embarked on paying rents with Zelle®. We’re getting into consumer-to-business payments. We’ll continue to look at places in the market where cash and checks dominate, and how we can digitize and reduce the cost of those payments. Our focus right now is making sure that, as we expand into other use cases, we’ve got the fraud and scam problem as tightly wrapped as possible. 


A lot of firms want to enable real-time payments. What should be their first step?

Van Bramer: Once you’ve made the strategic decision to be engaged in instant payments, the first priority is finding a really good, trusted partner, because it is a complex process. There’s a lot going on behind the scenes. So, identify a partner who has a good solution that fits into what you’re doing today.