Money is moving faster than ever―the real-time payments industry is expected to reach $294.9 billion in value by 2030. This is in line with consumer expectations for faster payments, which are considered as much of a necessity as internet and utilities. Clearing and settling payments instantly provides members with money management flexibility, the ability to make timely payments, and full access to immediate funds.

Making sense of your options

Although you could implement multiple payments options simultaneously, it will be easier on your team and members to focus on a single service that makes the most sense for your credit union and is compatible with your existing technology. You may consider adding more options in the future. The major services available include:

• FedNow℠ Service, the Federal Reserve Bank’s new instant payment service launching in July, allows financial institutions to send and receive instant payments 24/7/365.
• Same-day ACH transfers are a widely used option to transfer money between accounts. Its usage across multiple business sectors has dramatically increased, rising nearly 74% from 2020 to 2021.
• The Clearing House (TCH) RTP® network reaches 61% of U.S. demand deposit accounts. It debits and credits sub-accounts at the Fed in real time, though on a different payment system than ACH.
• Push-to-card payment services, such as Visa Direct and Mastercard Send, let money move between cards in real time from the consumer’s perspective.
• Zelle, primarily a peer-to-peer platform, gives users the perception of real-time payments, with settlement generally taking place later through the ACH process. Recently, this evolved to settle through the RTP network in instances where both the sending and receiving institution are participants.

Preparing your institution for faster payments

Like most new services you offer, implementing an instant payments service isn’t something that can be accomplished overnight. To ensure the launch is smooth, there are several key steps your credit union should consider first.

1. Check in with your core provider(s). You’ll need to ensure your core systems can handle real-time payment processing. There are a few must-haves that go along with faster payments: a system that accepts ISO® 20022 data-rich messages (the latest ISO standard for data interchanges between financial institutions) and real-time fraud monitoring. You’ll also want to check that your core’s capabilities align with your instant payment strategy.
2. Define your strategy. Consumer-based apps can offer a seemingly similar service for free, so consider what value proposition would encourage members to conduct payments through you instead. Establish what your objective is, what fees you might charge, and who your target market is. You’ll want to ensure you have the resources to support your plan and determine what fees you may need to pay in order to offer the service(s).
3. Choose a partner or correspondent. This could be a fintech or a correspondent bank, like PCBB, that you choose to handle settlement with your master account. The settlement/liquidity management processes are different for each option, so you should anticipate different pricing and support options from different vendors. You’ll want to factor all of these pieces into the equation before you choose.

With their ever-evolving ability to streamline your services and provide unparalleled convenience for your member base, now is the time to put faster payments on your credit union’s radar. To learn more from PCBB’s team on this topic, check out “The Payment Landscape” episode of the CUNA News Podcast.

John Cavanaugh is the senior vice president of international services at PCBB.