Real-time payments are one of the most buzzed about developments in the payments industry. But behind the buzz, is there a real desire among businesses to adopt real-time payment rails? The answer is a resounding yes, according to a recent survey from Citizens Bank.
To unpack the key findings of the survey and to gain a deeper understanding of real-time payments in the United States, PaymentsJournal spoke with Matt Richardson, Head of Product Solutions at Citizens Bank, and Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.
Around 90% of business leaders are interested in real-time payments
The only real-time payment rail currently operating in the United States is The Clearing House’s Real-Time Payment (RTP) network, first launched in 2017. Since real-time payment capabilities are still an emerging aspect of the payments industry, it can be hard to assess how interested businesses are in adopting them.
Mercator Advisory Group has researched how real-time payment providers are approaching the space—and The Clearing House released data showing an increase in B2B transactions on the RTP Network—yet more needs to be done to gauge interest levels among potential business customers.
This is why Citizens Bank conducted its second annual Real-Time Payments Outlook, a nationwide survey of 252 corporate decision makers. The survey offers an informative look at how businesses are approaching real-time payments.
Overall, there is considerable interest among the surveyed businesses in RTP, with nine out of 10 business leaders reporting being interested in the network. The widespread interest in RTP makes sense given that the vast majority of respondents (81%) expect real-time payments “to transform the way payments are done in the United States,” explained Richardson, noting that he also shares this sentiment.
The survey also revealed that the interest in RTP among business leaders informs what they look for when selecting a banking partner. “There were some really good results in terms of what businesses felt about choosing a bank based on if they offer real-time payments or not, or if they planned to offer real-time payments,” said Richardson.
For example, a bank’s ability to provide RTP was cited as the second most important factor in choosing a banking partner, slightly behind the bank’s ability to provide solutions throughout their business lifecycle. Interestingly, RTP solutions were viewed as a more important service than the bank providing expertise in the businesses’ industry.
The number of U.S. banks offering RTP is small, but their reach is large
Despite the widespread interest in RTP, the majority of banks are not yet connected to the network.
“There are only 42 banks that are connected to RTP, either directly or indirectly through third party service provider,” noted Murphy, a fact that “suggests to me that the demand is out there but the supply is not.”
Richardson agreed, but pointed out that while a relatively small number of banks are connected, those banks represent over 50% of total checking accounts in the United States. This reflects how “RTP has already established a pretty far reach in the U.S.,” said Richardson.
The next step is for the network to bring smaller banks onboard. Since many smaller banks work through financial service providers, it will be easier to connect them to the RTP. “If you can enable those providers, you can effectively enable all of those banks that use those providers,” explained Richardson. Efforts to do this are already underway, and Richardson expects that a lot of progress will be made in the coming year.
Real-time payments support many use cases, especially during the pandemic
With the pandemic forcing people to work from home, paper-based payment processes have become even more inefficient and difficult. In response, many companies have accelerated efforts to digitalize their processes. Real-time payments are one effective tool in doing so, a fact that business leaders seem well aware of.
For instance, the survey found that the two most commonly anticipated applications of real-time payment solutions were to manage cash flow more accurately (cited by 52% of respondents) and to conduct accounts payable (AP) activities (46%). Other major applications were payroll and replacing paper checks.
One of the biggest draws of RTP is how data rich it is. RTP utilizes ISO 20022 messaging standards, which “allow for a much more common and consistent exchange of payment related information,” said Richardson. This empowers companies to become more efficient when posting receivables, in addition to many other areas.
The transaction speed is also an obvious draw of real-time payment solutions. Richardson explained how a lot of customers rely on RTP for “emergency use cases.” When a company forgets to fund payroll, for example, RTP allows payroll to be paid in seconds. Additionally, RTP is helpful when there is a need to make an immediate, one-off payment.
“Those have been some of the earliest use cases that we’ve been looking at and, in some cases, are in the process of setting up,” concluded Richardson.