In the fog and haze of the rapidly changing development of faster and real-time payments in the U.S., some misinformation is bound to get out. No one in immune from the occasional misunderstanding, but a column in the Washington Post needs a little clarification.
This piece aims to describe why the U.S. needs a real-time payments platform to better serve consumers. It creates a vignette using the characters from The Simpsons:
Let’s say Homer is two days from payday. The family checking account at First Bank of Springfield is on fumes. There’s just enough in the account, Homer thinks, to gas up his Plymouth sedan and buy Bart a Squishee at the Kwik-E-Mart.
But Marge checked the account balance too, and thought she could safely buy groceries. Because Homer and Marge didn’t realize they were spending the same money, one of the transactions triggers an overdraft fee. Plus, they forgot the power bill is due, and utility owner Mr. Burns charges a wicked late fee.
Homer hits up Lenny and Carl for a loan, but Lenny uses Venmo, Carl uses PayPal and Homer uses only Zelle. Lenny writes Homer a check, but it’s from National Bank of Springfield, so First Bank puts a hold on the deposit. Desperate, Marge breaks into Lisa’s piggy bank for money to pay the power bill, but has to pay a fee to “expedite” a same-day bill payment
To clarify, a consumer can quickly and easily sign up for a PayPal, Venmo or Zelle person-to person (P2P) account and receive funds. Funds can be received in those apps regardless of where they bank. Using balances as soon as they appear in a Venmo account or PayPal account will require that the Kwik-E-Mart accepts these forms of payment.
The scenario also suggests that faster payments will help Homer receive access to the amount of the check he received from Lenny instantly. This is actually not a part of the U.S. faster payments plans. While new, faster, better, and cheaper solutions may give consumers and businesses a reason to discontinue writing checks, the emergence of real-time payments will not make checks instantaneous.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group