SMP: Who’s Winning the Race for Real-Time Payments?
Real-time payments (RTP) is a hot topic in the US financial sector. Since 2017, when The Clearing House (TCH) launched its RTP system (TCH-RTP), the US has been gradually adopting technology that allows instant transfers of money between bank accounts. However, the US is still lagging behind other countries that have implemented RTP more widely and quickly. Why is that?
One of the main reasons is the sheer size and diversity of the US banking system, which means it takes more time to hit a similar percentage of adoption than in other countries. Another reason is the uncertainty created by the Federal Reserve’s decision to launch its own RTP system, FedNow. The Fed announced FedNow in 2019 and finally launched it in July 2023.
Many banks and credit unions were reluctant to join the TCH-RTP network before knowing more about FedNow’s features and pricing. It is risky to invest in a system that might become obsolete or incompatible with FedNow. Additionally, the extent to which the Federal Reserve will take measures to hold back TCH-RTP’s growth was not yet clear (and maybe it still isn’t). With all of this in mind, many banks and credit unions took a “wait and see” attitude, which slowed the adoption of RTP in the US.