Whether you intend to jump into RTP or start slowly, be sure to plan for the future of payments at your credit union.
Credit unions already offer their members many different options for payments: debit cards, credit cards, online bill-pay (which typically results in an automated clearing house transaction), old-fashioned checks and wire transfer, along with digital issuance to push credit union-branded credit or debit cards into mobile wallets. But there is currently a revolution underway in payments, and it’s called real-time payments.
RTP represents a new payments “rail,” meaning a completely different method of access. Moving money from the sender’s account to the recipient’s account—otherwise known as the settlement of a real-time payment transaction—happens at the same time as the payment authorization. Real-time payments cannot be stopped or reversed once they are approved.
This new payment access has many upsides:
- Funds are available immediately in the recipient’s account
- There is lower potential for fraud since there are only “push” payments (credits) and no “pull” payments (debits), and each send request is validated prior to payment authorization
- Immediate confirmation of the payment is provided to both the sender and to the recipient
- Payment requests are data-rich and can contain all the information needed by a business to marry a payment with an accounts receivable
This new payment type does not replace ACH or credit and debit card networks. Instead, it sits beside them and offers several differentiators that credit unions should consider on behalf of their members. Even if members do not specifically know what a real-time payment is—similar to how they probably do not know what ACH is—they certainly understand the benefit of getting their money faster, and getting positive confirmation that their payment was successfully sent to the correct recipient.
Here are five reasons why credit unions should consider RTP to better serve their members:
- Payroll. Approximately 40,000 payroll payments are currently being made each day over the RTP network, and several payroll companies have moved at least some of their payments to real-time. Grubhub is paying more and more of its contractors using RTP. The quick-service restaurants category has surpassed other categories to become a big driver of the use of RTP. The need for these workers to get their money immediately following their shifts may be enough motivation to switch financial institutions to one that allows them to do so.
- Peer-to-Peer Payments. Even if a credit union is not participating in an RTP network directly, members can expedite the received money from the stored value account of their favorite P2P app, such as Venmo, Square or PayPal, into their share draft account for a small fee when they receive a payment. But this is only an option if their credit union is set up to receive real-time payments.
- Account to Account. When a member wants to move money, for example, from his or her taxable investment account held at a brokerage to the safety of a credit union’s share certificate, the member wants to see those funds immediately, not in two to three business days. RTP not only ensures the funds are transferred within milliseconds, but it also provides positive confirmation that the funds have been moved, ensures the transaction is irrevocable, and makes the funds immediately available for use in the receiving account.
- Small and Medium Business Solutions. Many small businesses rely on their credit union for their banking needs. Businesses, both large and small, are seeing the value of moving money faster and more securely, benefits that come along with RTP, and none of which happen when using checks. For example, a contractor doing a home renovation needs to purchase supplies and needs a progress payment from the homeowner to pay for those supplies. That contractor may be your member, but if the credit union does not offer RTP, he or she may look for a financial institution that does.
- Disbursements. Members want their money faster, and credit unions also benefit by getting their deposits faster. There is a growing list of the use of RTP for disbursements. Many auto insurers allow a customer that has been in an accident to take a picture of the damage and receive an immediate payout based on an estimate of the damage. After a recent hurricane hit the Florida Panhandle, insurance adjustors were out the very next day offering interim disbursements to help homeowners. Many companies offering rebates on purchases want to get the rebate into customers’ accounts as soon as possible to achieve the highest customer satisfaction, and many are using RTP to accomplish this.
Credit unions that may be hesitant about the resources, time and money required to implement RTP should keep in mind that implementing receive-only capabilities can be accomplished with minimal interruption and without involving costly changes to digital banking interfaces. Fraud, which has been negligible thus far in real-time payments, typically occurs on the send side. Implementing receive-only RTP is relatively low cost and risk-free, and all of the above reasons for implementing RTP are specific to members receiving real-time payments.
Whether you intend to offer all of the capabilities of RTP or start slowly, now is the time to discuss and plan for the future of payments at your credit union.
Lou Grilli is a senior innovation strategist at CUESolutions Silver provider PSCU, St. Petersburg, Florida. In this role, Grilli is tasked with building and shaping a superior payment and member experience capability for PSCU and its Owner credit unions. Grilli’s long career in payments includes product management, product development and thought leadership in credit, debit, loyalty, mobile payments and digital wallets. He has spent the last six years in roles dedicated to the credit union industry.