For RTP to take off, banks must collaborate with Fintechs
As more and more financial institutions sign up for The Clearing House’s RTP©, it may seem that the U.S. is well on its way to achieving the Federal Reserve’s target for real-time payments to achieve ubiquity by 2020. But the reality is that with many early adopters still in receive-only mode, volumes remain low.
There are several reasons for this. Obviously, the lack of a regulatory mandate or validated business cases are factors. But a less considered reason is the sheer novelty of the proposition. RTP is the first new payment rail in the United States since the introduction of Automated Clearing House (ACH) in the 1970s. There is little institutional memory—not just in banks, but across the whole industry—of how to roll out a new payment rail, identify use cases, and increase adoption.
For RTP to succeed, it is not enough for financial institutions to just connect to the network. New RTP-based payment services need to be brought to market, and the industry needs a broad-based education program aimed at consumers, corporates, banks and credit unions, outlining RTP’s myriad opportunities and benefits. It will require expanding the knowledge of how and where friction can be removed from current payment services in order to drive innovation that will allow FIs to differentiate. But FIs cannot go it alone here—collaboration with Fintech partners is essential to drive education and innovation.
More than ever before, consumers and corporates are turning directly to Fintechs for payment services, and financial institutions, in turn, are increasingly reliant on Fintechs to provide essential real-time connectivity and processing systems for new payment rails. Fintechs are also masters of agile marketing—many having learned to sell their offerings not only to investors, but also to customers in a crowded marketplace. They are evangelists by nature, having had to beat the drum, blaze the trail and establish critical mass of support for innovation.
The fresh approach of the Fintech community, combined with the decades of experience in regulatory compliance, risk management, and account servicing that FIs bring to the table, is ultimately best positioned to deliver success for RTP. Banks should embrace collaborating with Fintechs every step of the way to harness the wealth of innovation happening outside of their institutions. Consumers and businesses will continue to demand more real-time services and it’s up to the industry to act—with RTP, we can finally deliver.