Payments Innovation AllianceUS Faster Payments Council

Introduction

What Does "Faster" Mean?

  • Immediate - can be sent 24 hours a day, seven days a week (subject to the service offering of the financial institution) and receives a response to the sending bank within 15 seconds, confirming that the receiving bank has accepted or rejected the payment
  • Instant – an electronic retail payment solution available 24/7/365, resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payor (within seconds of payment initiation)
  • Same Day – a payment for which the effective entry date is the same as the date on which the entry was initiated by the sender

*The terms "instant" and "real time" are often used interchangeably. However "real time" should not to be confused with The Clearing House’s Real-Time network.

Purpose

  • The Playbook has been developed by a diverse group of industry participants and is designed to provide financial institutions of all sizes information about the faster payments landscape in the U.S.
  • With a new technology introduced seemingly daily, it is hard to know where to focus, this Playbook will help
  • Use it to determine if faster should become a strategic priority for your organization. If so, then learn how to best communicate the business need to your senior leaders, Board and employees to gain full commitment
  • The Playbook also includes tips to support implementation

What is "Faster?"

  • The term "faster payments" is broadly used in the payments industry to indicate simply that increased speed, convenience and accessibility are essential features for the future of the payment and settlement system
  • In addition to the expedited movement and availability of funds, the more efficient and transparent provision of information about the transaction is a key component of the faster payments value proposition

Terminology: Clearing, Posting, Settlement & Availability

  • Clearing, Posting and Settlement – the process of managing electronic payment transactions so they can clear and be made available to the recipient
  • Availability – recipient of funds, or a portions of funds are available for full use

Clearing, posting and settlement occur between the payor and the payee of the transaction

Terminology: Information Formatting & Performance

  • Message Standards - standards ensure that messages are robust, interoperable and reusable for many business sectors and governments

    • ISO 20022 - as developed by the International Organization for Standardization (ISO), this is the global messaging standard for financial business transactions, including payments
    • XML (Extensible Markup Language) - a markup language that defines a set of rules for encoding documents in a format that is readable by both humans and machines
  • Payment Message - typically contains information related to the payment, such as the identities of the parties involved, relevant account information, and the payment amount
  • Remittance Data - ties the payment to a product or service (e.g., invoices or billing information)

The Current & Evolving Faster Payments Environment

  • Faster payments solutions contain differing attributes according to the platform

    • Solutions can be push (a credit transaction when money goes into an account) or pull (a debit transaction when money goes out of an account)
    • Ability to offer messaging and information with payment
    • Dollar limits apply to most solutions
    • Use cases (B2B, C2B, P2P, etc.) vary by solution
  • Faster payments solutions could be provided by financial institutions, fintechs or other service providers, or some combination

Comparing Attributes of U.S. Faster Payments Solutions

This represents a sample of the more commonly used faster payments solutions in the marketplace as of February 2019.

Funds Posting:

Real Time

Same Day

 

Payment Type

(Includes only monetary
transactions)

Dollar Limits

Cleared Mechanism

Payment Messaging
Standard

Amount/Type of Information with Payment

Settlement Timing

Primary Governance

Same Day ACH

Push, Pull

$25,000
(Will increase to $100,000
on March 20, 2020)

ACH Network

Nacha, ISO 20022, XML, ASC X12 820,
ASC X12 835, ASC X12 Data Segments,
UN/EDIFACT, Nacha-endorsed
banking conventions

Up to 799,920 characteres

Same Day

Nacha Operating Rules

RTP®
network

Push

$25,000

RTP®

ISO 20022

140 bytes

Immediate 24/7/365

RTP®Rules,
Service Level, Agreements

Zelle®

Push

Varies by Fl

ACH Network,
Debit Card Network

Propietary, Nacha,
Debit Card

200 Characters

Same Day for
Debit Card,
1-2 Days for ACH

Zelle®Operating Rules,
Card Agreements,
Service Level Agreements

Visa Direct

Push

PSP: $10,000
Disbursements: $50,000

Card Network

ISO 8583

Varies by Case

Same Day or Next Day

Visa Rules

Mastercard
Money Send

Push

P2P: $10,000
A2A: $25,000
B2C: $50,000

Debit Card Network

ISO 8583

Varies by Case

Same Day or Next Day

Mastercard Rules

Shazam
Network

Push, Pull

$49,999

Card Networks

ISO 8583

170 Characters

Next Day

SHAZAM Operating Rules

ExcheQ

Push

Varies by Fl

ACH Network

Nacha

Standard Nacha
information + email/SMS

Same Day or Next Day

Nacha Operating Rules

Current Offerings

  • Offerings could be a product or a payment channel rail
  • Many offerings in the marketplace currently come from well-known organizations

    • Same Day ACH from Nacha
    • Real-Time Payments (RTP®) from The Clearing House
    • Zelle® from Early Warning
    • Mastercard Money Send from Mastercard
    • Visa Direct from Visa
    • FedNow from the Federal Reserve (as proposed in August 2019)

 

*This list is not all inclusive

Faster Payments Globally

  • This Playbook examines the U.S. landscape, but the faster payments movement has existed globally for many years
  • The move to instant payments internationally is oftentimes prompted by government mandate
  • Capabilities and characteristics vary by country

The Emerging Marketplace

  • As technology continues to change, new offerings and trends may emerge
  • The use of APIs, standards, and regulatory changes may all impact new entrants to the marketplace
  • It is imperative that financial institutions remain educated and keep monitoring the environment to understand new trends and technology, particularly as consumers become familiar with new capabilities

Why Does My Organization Need a Faster Payments Strategy?

  • Traditional banking models are being challenged by peer organizations, fintechs and other disruptors
  • Not being informed about faster payments or not having a strategy at all could have a negative impact on deposit and lending bases
  • A decision not to offer faster payments solutions – either in the short or long term – can be a strategy of its own

Faster Payments Strategy Considerations

  • If your organization decides to offer faster payments solutions you might not need to offer all available solutions
  • Consider appointing a faster payments team to monitor what is happening in the space and to develop your internal expertise
  • Think about a staged-in approach:

    • Could be based on product (i.e., P2P or mobile app)
    • Could be based on channel (i.e., focus on B2B payment types)
  • Consider the goals of the strategy

    • Is your decision based on revenue production? On customer needs or wants? Both?