Real-time Integrated Payables: The Killer Use Case for Real-time Payments?
The COVID-19 pandemic has accelerated the move to digital-first strategies in all areas of financial services, particularly payments. The Clearing House’s RTP® real-time payments network, for example, is seeing its best growth since its original launch in 2017.
There are now over one hundred institutions connected to RTP®, representing 57% of all US DDAs (Demand Deposit Accounts). However, with nearly 5,000 FDIC-insured commercial banks in the U.S., and almost as many credit unions, real-time payments still have a long way to go. RTP’s path to ubiquity will be slow if it remains the exclusive province of early adopters.
Speeding up RTP adoption
Technology limitations often stand in the way of further RTP uptake across the mid-tier and community bank population. Many of these institutions are still running legacy cores and payment systems that need significant modernization or replacement to support RTP.
But technology is just one piece of the RTP puzzle. The other pieces deal with finding compelling business use cases for real-time payments, particularly for corporate treasury clients. The key is finding applications for RTP that build on services already provided by financial institutions, and that do not require complex onboarding or onerous technical requirements for corporations.
At its simplest, an integrated payables service allows an FI’s corporate clients to send mixed payment files (containing wire, ACH, SWIFT, card, and other types of payment requests) directly from their treasury or ERP systems to the bank’s treasury management portal. Clients receive statements and acknowledgements in their preferred formats. Some institutions may offer additional services such as cash forecasting and financing.
While some financial institutions already offer integrated payables services, there are few that combine integrated payables with real-time payments. Many RTP participants elect to begin on a receive-only basis, leaving send capabilities for a later time. The reason is that sending real-time payments is inherently more complex than receiving them: send capabilities must be incorporated into digital channels, payment initiation workflows, and other payments processing steps.
These challenges are considerably reduced in the context of integrated payables. Most banks, including those that do not yet offer integrated payables, already support file-based payment submissions. All that is needed to transform these existing channels into engines of real-time payment growth is a connection to the RTP network and the ability to smoothly route non-RTP transactions to the bank’s current non-RTP payment fulfilment mechanisms.
Keys to Success for Real-time Integrated Payables
An effective real-time integrated payables service should have the following characteristics:
- Secure, compliant TCH RTP® Connectivity: FIs should have a secure, compliant connection to the RTP network that can be easily integrated into the institution’s existing payments infrastructure.
- File format flexibility: banks that mandate specific ‘bank standard’ file formats will find themselves engaged in complex integration projects that slow corporate onboarding times and increase risk potential.
- Payment routing flexibility: the term ‘integrated’ means that banks need to be able to handle multiple payment types – ACH, wire, SWIFT, and a mix of real-time and non-real-time – in the same file or API submission.
- Extensibility: in the fast-changing world of payments, payables services must be extensible and future-proofed, allowing FIs to incorporate future real-time networks such as the FedNow instant payment service.
To learn more about Volante’s cloud-native real-time payments solutions and how they can help FIs create compelling integrated payables products, visit our U.S. Real-time Payments as a Service page.