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and failed to leverage its tech to offer a competitive ACH
Insider’sreport network in the mid-1980s.

on payments The Fed is creating the framework to support real-time
clearing and settlement of payments, called FedNow,
which promises to support instant payments 24/7/365.
FedNow is slated to be operational in 2023.

In the meantime, more than 130 banks and credit unions
are using RTP, supported by numerous core processors
and a handful of funding agents, which fund and manage
client banks' positions on the network in support of
A coming of age for settlement. RTP is regularly used to settle payments sent
via Venmo and Zelle, among other transactions, said Steve
real-time payments Ledford, senior vice president of product strategy and
development at TCH.

By Patti Murphy Merchant use cases
Proscribes Inc. Westside is the third community bank to tap Shazam to
support real-time payments. "Our core is certified [with
have a confession to make. When the Federal RTP] so we can rapidly onboard core clients," explained
Reserve, The Clearing House and others began talk- Janet LaFrence, vice president at Shazam. One of those
ing up real-time payments several years ago, I was banks already is using RTP to offer faster funding of
I skeptical. It's not that I doubted the technological merchant card receivables. Historically, that money has
underpinnings. Well, OK, I was a bit skeptical that the Fed moved into merchant accounts via the ACH, a process that
could make the necessary changes to its clearing appara- can take up to three days to complete.
tus fast enough to keep pace with market demand.
"RTP is being used to provide daily merchant payments,"
After all, it took the Fed nearly a decade to create and she said. RTP charges a flat rate of 4.5-cents per credit
then get all financial institutions (FIs)—particularly small transfer (and no cost to receive), which is competitive with
community banks and credit unions—to buy into an ACH network fees, Ledford said.
all-electronic ACH. (Prior to 1996, many FIs were hand-
delivering ACH files to the Fed in the form of magnetic Shazam was a pioneer of PIN-debit POS payments and
tapes and diskettes.) lays claim to being the only nationwide independent,
member-owned EFT network, processor and core
But times have changed, and market forces are such that provider to community banks and credit unions. Shazam
banks and credit unions that fail to join the march to real- has developed an API that allows any financial institution
time payments risk losing customers to nonbank financial using it for core processing services to link to RTP via
technology challengers. Shazam.
Instant payments via RTP LaFrence said Shazam plans to develop a similar API for
its EFT processing clients. It's worth noting that Shazam is
Westside Bank, a $143 million asset bank operating five not the only core processor with a card-processing network
branches in western Iowa, saw the writing on the wall. It's to sign on with RTP. Both Fiserv and FIS are also part of
the latest bank to offer customers real-time payments using RTP and can be expected to leverage those connections to
TCH's RTP network. Westside's connection to RTP means enhance existing merchant acquiring services.
it now can offer consumers and businesses immediate
availability of payments, 24/7/365, with instant clearing and While the Fed lags TCH on real-time payments, it's not
settlement. Westside is accessing RTP through Shazam, a risking obsolescence. The United States is home to more
regional EFT network and core processor headquartered than 10,000 banks and credit unions, and the Fed is
in Iowa. Bankers' Bank, headquartered in Madison, Wisc., required by law to provide all with payments clearing and
is providing funding capabilities.
settlement services. So come 2023, when FedNow goes
live, every bank and credit union should have access to
RTP is run by TCH, which for a long time has operated technology that gives consumer and business customers
networks that clear and settle bank-to-bank payments access to real-time payments. For real.
(ACH, checks and wire transfers) in competition with
Federal Reserve Banks. Owned by a consortium of large
banks, TCH is the only organization to successfully Patti Murphy is senior editor at The Green Sheet and self-described
compete with the Fed's payment services arm. Visa tried payments maven of the fourth estate. Follow her on Twitter @GS_
PayMaven.
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