And then there were two.
The launch of FedNow on Thursday (July 20) brings the tally of real-time payments networks to a duopoly in the U.S. — where the Fed’s new instant-payments infrastructure debuts alongside The Clearing House’s RTP® real-time platform.
But the availability of yet another payments rail, as Ingo Money CEO Drew Edwards said, despite the crowded headlines and anticipation of a game-changer, is no slam dunk.
In fact, FedNow’s less a payments revolution than an evolution — a necessary one, to be sure.
“It’s been a long time coming,” Edwards remarked to Karen Webster on the evening of FedNow’s launch.
But: The competitive landscape’s already considerable.
As FedNow take a bow, there’s at least a choice for community banks, larger financial institutions (FIs) and FinTechs to consider beyond RTP, which even after years of operation reaches 65% of direct deposit accounts — a significant percentage but far from ubiquitous.
“TCH with RTP hasn’t yet achieved the critical mass needed to ignite its payments platform,” Webster wrote earlier this week. “The introduction of FedNow creates competition for RTP volume and potentially the real-time payments infrastructure for new use cases like merchant payments.”
For FedNow, as with any new payments initiative, the challenge lies with getting to critical mass, and eventually to interoperability with other rails in order to make instant push-to-bank-account functions (and use cases) universal.
If only there were demand.
From Ingo’s point of view, as Edwards observed, “There are few people calling in asking to speed up funds with FedNow or RTP. Most people outside of payments don’t even know what that is.”
And in the meantime, he added, there are any number of larger corporates that have embraced instant disbursements through push to card — and finding wild success. Convincing corporates to add other instant payment rails will take some education, he said.
“You’re trying to have a conversation with someone who has already scratched an itch,” said Edwards, and so the industry “is going to need to go a little further with RTP or even FedNow.” Much of corporate America has already got the account credentials in place for push to card, and to them there’s no rush, with limited resources, to embrace the new, new thing.
Particularly when, push-to-card solutions that are widely available in the marketplace — with 98% coverage.
Interoperability may be a stumbling block, he said, especially as FedNow starts from, effectively, zero coverage.
“If you’re trying to instantly settle from an RTP bank to an RTP bank, that’s going to work beautifully,” he said. “But if you go to RTP to FedNow, and it’s not interoperable, we’re going to go back to a traditional settlement process between banks.”
But there are avenues to success, to bringing a number of rails and payment options together that can satisfy all manner of demand — and help FedNow and RTP cement their place in a faster payments pantheon.
FinTechs, Ingo among them, can create bridges and choice, Edwards said. Interoperability is not simply a matter of linking FedNow and RTP but of helping stakeholders operate across the same alias no matter if it’s ACH, RTP or FedNow in the mix.
“When you’re talking to a consumer recipient,” Edwards said, “and asking them how they want their money — it’s not any of those.”
They simply want to get paid — and pay, depending on the moment — and the choices they make are in the moment. Interoperability won’t be necessary, Edwards predicted, as long as the market has enablers that facilitate that choice. After all, he said, the card networks alone — or RTP/FedNow alone — don’t offer that all-encompassing connectivity across rails, modalities and far-flung digital wallets.
As Edwards told Webster, “Even today, and even before we talk about that interoperability, we have clients that are using four or five different rails through us — push to card, ACH, PayPal, etc. … We’ve been able to stitch together operability so the rails don’t have to. And that’s what the market will have to do with RTP and FedNow until maybe someday we don’t have to.”
Looking ahead, there are indeed some use cases that will take off with the rise of instant payments — including larger-dollar business-to-business transactions, Edwards said. Those use cases are still depending on checks and ACH and cards.
The area of information transmission and invoice transmission is where RTP and FedNow can and will shine, he said.
Instant bank account transfers already exist from the customer’s point of view, and the card networks have a huge lead. However, though the initial uptake may be somewhat hesitant, he was quick to assert: “I believe FedNow and RTP are necessary. I believe the plumbing behind the scenes should be real time.
“The more choices, the better,” he told Webster, when it comes to payments, “and that opens up opportunities for the FinTech enablers to make it all work for the marketplace. In this country, we thrive on competition, and we thrive on choices.”