Navigating the Fast Lane: The State of Faster Payments

Published November 1, 2023

AUTHOR

Angi Farren, AAP, APRP
President & CEO

It has been a transformative year for payments as together we have reached several milestones, including the launch of the FedNow Service on July 20th, the RTP network surpassing one million daily payments on September 1st, and Same Day ACH continuing to see impressive growth, with 212 million Same Day payments processed in the third quarter of 2023. As your partner in understanding electronic payments, we are thrilled to be working alongside our members during this time of innovation and growth in faster payments.

Same Day ACH

Since the inception of Same Day ACH in September 2016, we have continued to see not only widespread adoption, but also continued rulemaking focus to bring enhancements to the functionality and usability of this service. What started as credits-only with a per-eligible-entry dollar limit of $25,000 has evolved over time to accommodate both debits and credits with a per-eligible-entry dollar limit of $1,000,000 and settlement occurring three times each business day.

In the first three quarters of 2023, more than 597 million Same Day payments valued at $1.78 trillion have been handled by the ACH Network. These figures represent increases of 16% in the number of payments and 42.4% in the dollar value of payments processed compared to the first three quarters of 2022.

Over time, we expect to see continued rulemaking attention on Same Day ACH intended to enable even greater availability, encouraging greater adoption by businesses and organizations looking for ways to move funds quickly in a manner that is cost-effective and efficient.

Real-Time Payments via the RTP Network

First launched in November 2017, the RTP network was the first new payments infrastructure in the U.S. in more than 40 years, and the first real-time payment rail in the country.

The RTP network had 385 participating financial institutions at the time of writing, reflecting reach of approximately 65% of U.S. DDAs, according to data from The Clearing House. In the third quarter of 2023, the RTP network processed 64 million transactions valued at $34 billion, reflecting growth of 11% in volume and 18% in value from the second quarter of 2023.

Both The Clearing House’s RTP network and the Federal Reserve Bank’s FedNow Service utilize the ISO 20022 messaging standard, although variances in the way that each operator implements the standard means that the two instant payment systems are not interoperable. Neither operator has indicated plans to address interoperability in the near-term, requiring financial institutions to think strategically about which network to participate in – with some choosing to participate in both so they are able to send and/or receive to end points on either network.

Instant Payments via the FedNow Service

July 20, 2023, marked the launch of the long-anticipated FedNow Service, reflecting the culmination of years of collaboration with industry stakeholders.

Despite its recent summer launch, there are already 150 financial institutions participating in the FedNow Service at the time of writing. Notably, the U.S. Department of the Treasury's Bureau of the Fiscal Service is also participating.

When asked in a recent Pioneers of Now interview what the federal government’s usage of instant payments looks like today, Dave Lebryk of U.S. Treasury indicated, “We are piloting the use of the FedNow Service for one-time, manually processed disbursements where speed to access funds is particularly important. Treasury currently uses Fedwire Funds Service for immediate settlement and Same Day ACH settlement windows for these payments. This often includes urgent or unpredictable payments such as reissued payments resulting from post-payment issues, such as non-receipt claims.”

Dave also broached the topic of whether recurring benefit payments currently being processed through the ACH Network may be displaced by instant payments, indicating that recurring and regularly scheduled payments such as Social Security and Supplemental Security Income payments, veterans benefits, vendor payments for invoiced services, federal employee salaries, and tax refunds are largely disbursed through the ACH today, and he expects that will continue to be the norm for the coming years.

UMACHA is Here to Help

We recognize that the knowledge and understanding of instant payments varies greatly from one organization to another. While some of UMACHA’s membership is live on both the RTP network and the FedNow Service, other members are still in the research phase, trying to understand how the push towards faster payments will impact them and what their strategy should be moving forward.

Earlier this year, UMACHA hosted an Instant Payments Town Hall, giving members an introduction to instant payments – explaining what FedNow and RTP are, what an instant payment is, and things to think about while developing your instant payments strategy. If you missed this event, or want to listen again, members can access the recording on our Faster Payments webpage.

You can find lots of other valuable resources on our Faster Payments webpage, including tips for developing an instant payments strategy, FedNow resources, RTP resources, resources of fraud prevention, and more.

We are excited to be offering several upcoming education events related to faster payments:

Faster Payments: What the U.S. Can Learn from Lessons Across the Pond
- Date: 11/14/2023
- Description: Leading the fraud strategy of a top-tier bank in the United Kingdom during the country's roll out of Faster Payments was a pivotal time for modernization for both fraud and payments strategy. Fast forward to 2023, some of the same lessons learned and insights can help U.S. banks get off to a good start with a better checklist of "day one" capabilities to align payments and fraud risk strategy. Join Mary Ann Miller, VP of Client Experience and Executive Fraud Advisor for Prove for a walk down memory lane during her time of leading fraud strategy in London, UK.
Payments Forum
- Date: 11/16/2023
- Description: Regardless of payment type, payments continue to evolve. And because of this fact, we too must evolve as payment professionals. With many financial institutions preparing to adopt an instant payment rail with the advent of FedNow and Real Time Payments (RTP), we must reflect on where we've come to know where we are going.
Instant Payment Use Cases (Featuring ‘The Payments Professor’)
- Date: 11/28/2023
- Description: Everyone keeps talking about how instant payments are going to change the world of electronic payments. But the question really is, who, and how will anyone use these instant payments? Will it be a consumer-only or business-only use case? Will it be both? How can your financial institution benefit from instant payments and find a use case to take advantage of RTP and FedNow? Join Mary Williams, COO of UBB, and Kevin “The Payments Professor” Olsen, SVP of Payment Solutions with Pidgin to learn and discover more.

We firmly believe that sharing knowledge creates understanding and understanding creates peace of mind. If you have questions about instant payments – or any type of payment – we would love to connect with you. As an exclusive members-only benefit, our team of accredited payments professionals are here to help. Give us a call at (763) 549-7000 or send us an email at info@umacha.org any time you need us!

Stay connected with Angi Farren and UMACHA on LinkedIn!