The US is way behind the rest of the world in terms of offering a ubiquitous way to send and settle funds from one bank account to another instantly and securely. The rest of the world has had this technology for years (ex: SWIFT) and Tern is excited to offer this to our White Labels. Due to the large segmentation and the sheer number of banks in the US (around 5k), the technology to enable instant settlement has been difficult to standardize. This was until the Clearing House developed, tested, and launched the new Real-Time Payments (RTP) rail. This is not to be confused with ACH, the traditional US bank settlement system that has been in place for nearly 40 years. RTP is a brand new payment rail that Tern is offering it to our clients. Real-Time Payments has loads of potential and seeks to modernize the traditional methods
RTP is predominantly used for push payments, but there is a “Request to Pay” function in the specification which can be used to initiate another party to authorize a push payment. We are still waiting to confirm if this “Request to Pay” function can be for recurring transactions, ie. Authorize once to pull funds multiple times or on a schedule. We will update this post once this feature is solidified.
So how can we all take advantage of RTP? If you are one of the top 26 banks who are already integrated, you will be able to seamlessly move money between customers accounts across your banks. If you are not one of the top 26 banks, or if you are a program manager or FinTech company looking to leverage the new rail for a specific business case, you will need to integrate into a provider who is already integrated.
Lucky for you, Tern sees great value in integrating the latest in payment tech as soon as possible, so we now support RTP through The Tern Platform. The official go-live for RTP was slated for Q4, 2019 but has since been pushed back to January 2020. Whatever the release date, we are ready to go and a handful of our current clients are already integrated and just waiting for the spec to be fully released. In looking through Tern’s portfolio of clients and programs, the best suited to take advantage of RTP are in the following industries:
One item to consider when implementing RTP is enhancing your onboarding, KYC, and AML process. Due to the non-reversible nature of the rail, it is even more important you know exactly who is on the receiving end of your payment transaction. Of course, when deploying RTP through Tern you can use our compliance management tools to keep risk in check.
Few of the current payment platform providers have access to RTP and the ability to onboard clients. It will take some time before the rail is generally available to FinTech providers, but within a few years, it will likely be included in most projects.
In looking toward the future, it would be very interesting for Google and Apple to allow RTP to be used with their mobile wallet and payment solutions. We are also looking forward to the ability to use RTP in cross-border transactions. When we these become available? Time will tell.
Here at Tern, we are confident RTP will gain adoption very quickly and (finally) put an end to the legacy ACH network. Now if only RTP was available for cross-border… That might be something to look forward to in the future.