Reflecting on the State of Faster Payments

Published on November 1, 2024
Updated November 6, 2024 to correct the number of RTP transactions in 3Q 2024

AUTHOR

Angi Farren, AAP, APRP
President & CEO

Fall is a perfect time to pause and reflect on the progress we have made throughout the year, both personally and as a collective payments community. As the leaves change and the year begins to wind down, it's a natural moment to celebrate our accomplishments. At the same time, fall offers a chance to plan, set goals, and envision how we want the next year to unfold with renewed focus and energy. As we reflect on the advancements in faster payments this year, there is much to celebrate, though we acknowledge that work remains.

State of Instant Payments
November marks the 7-year anniversary of The Clearing House’s launch of RTP. What began with a single real-time payment between BNY and U.S. Bank on November 13, 2017, has quickly evolved into the highest volume instant payment rail in the United States. In the third quarter of 2024, The Clearing House reported a record 87 million transactions and $69 billion flowed through RTP, reflecting the continued growing adoption of instant payments. This impressive growth has been powered by the over 600 financial institution participants in the RTP Network.

The Federal Reserve Bank recently reached a milestone of its own with the FedNow Service surpassing 1,000 financial institution participants shortly after its July one-year anniversary. In a recent statement, Mark Gould, chief payments executive for Federal Reserve Financial Services stated, “We expect participation will continue to grow in the months and years ahead as financial institutions build out use cases that drive value for themselves and their customers.”

The Federal Reserve Bank has not yet publicly released FedNow transaction volumes.

The Faster Payments Council (FPC), of which UMACHA is a proud member, recently conducted its ‘2024 U.S. Instant Payments Adoption Quantitative Study’ (off-site). The study, which included a survey of 25 core banking providers that support 90% of United States-based financial institutions, helped shed light on anticipated adoption of instant payments in the U.S. as well as laying out some of the work that is still ahead.

There were some key points that stood out to me:

By 2028, an estimated 70% to 80% of financial institutions will be enabled to receive instant payments.
By 2028, an estimated 30% to 40% of financial institutions will be enabled to send instant payments, contingent upon anticipated progress being made.

Respondents were also asked what actions should be prioritized in the near-term (12-24 months), mid-term (24-48 months), and long-term (5+ years) to accelerate the adoption of instant payments.

Near-term priorities focused on growing the network of receivers of instant payments. Having many financial institutions capable of receiving instant payments is necessary to enable widespread adoption of sending instant payments.

Mid-term priorities focused on accelerating the network of senders of instant payments. Specifically, respondents indicated “confirmation of payee to prevent push fraud” and “payment options that do not require sharing account numbers” could help drive this acceleration. Additional comments included recommendations such as federal, state, and local governments adopting usage of instant payments, including for payment of benefits. Financial institutions and corporate end-users will need to think strategically about viable use cases to help drive adoption of instant payments.

Longer-term priorities focused on more sophisticated use cases, including cross-border instant payments and POS integration. It is noteworthy that Walmart recently entered a partnership (off-site) with Fiserv to enhance its pay-by-bank offering. Jamie Henry, vice president of emerging payments at Walmart, said, “When the transaction processes as a real-time payment, customers get immediate access to see that payment come through, I see it hit my account, and I can properly budget. It’s not as if I’ve got this phantom payment out there that’s going to take place a couple days down the road.”

State of the ACH Network
While the roots of the ACH Network extend over 50 years, it is far from stagnant, with continued adoption, impressive growth, and ongoing rule revisions to enhance the quality of payments. In the third quarter of 2024, the ACH Network processed 8.4 billion payments and a total dollar value of $21.5 trillion – in just one quarter. These figures reflect 7.4% growth in the number of payments and 8.9% growth in the value of payments compared to one year ago.

Same Day ACH is experiencing significant growth, with over 355 million Same Day payments and a total dollar value of over $844 billion processed in the third quarter of 2024. This represents increases of 67.5% in the number of payments and 38.8% in the value of payments compared to one year ago.

The ACH Network continues to evolve to meet the needs of the industry, and this couldn’t be truer as we look ahead to what’s in store for the network. With continued focus on moving payments faster, Nacha recently released a Request for Comment (off-site) with two specific proposals:

Adding a fourth daily Same Day ACH processing window aligned with the close of the business day in the Pacific Time Zone.
Accelerating funds availability for certain non-Same Day ACH credits.

Nacha also issued a Request for Information (off-site) seeking industry perspectives that could lead to future Rules revisions on two specific topics:

Should the Nacha Rules be amended to eliminate the use of 2-day ACH credits, meaning that all ACH credits must settle either on the next banking day (1-day credits) or on the same banking day (Same Day credits)?
What steps can the industry take to better utilize the Same Day processing of ACH returns?

While UMACHA will always be the voice of its membership and respond to any of Nacha’s Requests for Comment and Requests for Information, all industry stakeholders are encouraged to review and respond to these requests. Collectively, we can help shape the future of the ACH Network.

Looking Forward with Excitement
The payments industry is in an exciting era of transformation, driven by the pursuit of faster, more efficient payments. The potential for innovation in payments is boundless. However, realizing this vision will require collaboration across the entire payments community—financial institutions, third-party providers, and corporate end-users must work together to ensure success. By embracing this collective effort, we can build a future where payments are not only faster but also delivering enhanced value for businesses and consumers alike. It’s such an exciting time to be in this industry, and UMACHA is proud to be your key partner, walking alongside you in this journey.

Stay connected with Angi Farren and UMACHA on LinkedIn!