US bank payments go live

Two US Banks have launched real time payments platform which should help the US catch up with leading players like the UK which has offered real-time payments for some years.

The first ever live payment on the new US system was initiated between BNY Mellon and US Bank last week.

Shortly, Citi, J.P. Morgan, PNC Financial Services and SunTrust will join in to form a broader consortium to process transactions in real time. 

The new platform, which will includes e-invoicing, bill pay, and consumer payments is owned by the banks but developed by The Clearing House with technology from Mastercard-owned Vocalink.

Transforming the US

“Real time payments is one of the most important payment transformation efforts in our industry,” Ian Stewart, chief executive of BNY Mellon treasury services, said in a release late last week.

“It goes far beyond helping financial institutions address the legacy challenges of payment processing in the US and improving the client experience.

“Bringing online a truly real-time, two-way, 24/7 payment and messaging system will create new scenarios and entire new markets in ways we have not even anticipated.”

"It has the potential to revolutionise the way payments are made in the US," added Jim Aramanda, chief executive of The Clearing House.

"Our real time payments system was designed from the ground up to be fast, safe, and a platform for innovation that enables banks and credit unions to build products that are more responsive to their customers' needs."

A 40 year leap

According to Stewart, the new platorm is the first new core US payments infrastructure since the Automated Clearing House - the electronic network for US financial transactions - was introduced in 1974.

The fragmentation of the US banking market is why it has taken 40 years for instant payments to happen.

As a consequence, banks, credit unions, regional lenders and community banks are at wildly different stages of 'tech' maturity.

It is expected that initial roll out of the real-time payments system will create a snowball effect as the larger banks come on board.

The industry believes that it will take until 2020 for the network effect to kick in - which will see all most of the banks processing payments in real time.

Big end of town

BNY Mellon said it can provide real time payments to its bank and corporate clients through their existing payments accounts and services so that clients can "plug and play" the new capabilities as they see fit.

"As an industry, real time payments positions us like never before to meet the evolving needs of our customers and commercial clients," said William S. Demchak, chairman of The Clearing House's supervisory board.

“At a time when our clients are asking for the ability to conduct their business with greater speed, efficiency and security, real time payments will make everyday financial tasks such as paying bills, issuing invoices, making payroll or settling insurance claims faster, safer and more satisfying for businesses and consumers across the country,”

However, while the new payment system will mean a massive change for consumers, as well as big corporates who want to send payments to smaller vendors, a transaction cap of US$25,000 has been imposed by the Clearing House in concert with the banks.

In terms of the large corporate transactions, the industry is hoping that transaction level will be raised.

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