‘It’s more than just speed’: Why real time payments are a data opportunity for banks

Real time payments are here, but it's the data that has caught banks' eyes. “For us, there’s so much more to the payments than the sheer speed of it,” said Anuradha Somani, a product manager on Citi’s North America payments and recievables team, at the Finastra Universe conference in New York Tuesday. “It’s the incredible amount of data being introduced, the unique identifier being created and the fact that its going to stick with the transaction through the life of the transaction.” Last month, the Clearing House launched The Real-Time Payments Network, a platform allows banks and companies to move money near-instantly. BNY Mellon, U.S. Bank, Citi, J.P. Morgan, PNC and SunTrust are its inaugural members. But speed of payments, while important, tends to come with much bigger headaches: like not knowing whether or not a large payment has gone through, or missing critical information necessary to give context to an incoming payment. Real time payments is a subplot of the much broader open banking narrative unfolding in the U.S.: the role of banks is shifting from being a provider of financial services to a partner in customers’ financial journey — and that goes for both consumer and corporate customers. By joining the RTP network, banks have already had to collaborate more than they’re used to doing with peers and competing banking institutions. Moving forward, they’ll be able to collaborate with corporate customers to solve some major payments problems in areas like bill pay or insurance payments. The Clearing House charges banks four and a half cents per transaction, which is comparable to same-day ACH, but more expensive than standard ACH. It’s cheaper than a wire transfer. For the time being, Somani said she sees an opportunity for ACH and RTP to co-exist, but as time goes on, the data sets that banks receive through payments messages will determine the dominance of each player. Speed is going to be important on the consumer and retail sides of a payment, said Paul Trozzo, svp of treasury management at PNC Financial. But the real value on the corporate side is in enhanced messaging companies can take advantage of in requests for payments, requests for the return of funds and requests for information on a transaction. “Speed is nice but it’s really the contextual data that goes along with the payment itself,” he said. That contextual data was the missing piece all along — or in the past 40 years, last time the U.S. got a new payments system. Payments are just messages, but the ability to attach information about the payment that doesn't detach throughout the process is helpful when it comes to straight through processing of the payment, reconciliation; it can potentially even cut out some back-office work — both for banks and corporations, said Irfan Ahmad, vp of product development and strategy at The Clearing House. The information supports the payment that’s happening or helps resolves an issue once a payment has gone through. “We’re trying to stay away from recreating existing capabilities," he said. "I’m figuring out how to make immediate payments along with contextual data so it can immediately go straight to processing, it has immediate value and is something that can be applied and reconciled very easily for our corporate customers along with their partners.”