Adoption of Real-Time Payments (RTP)
The growth in the use of real-time payments (RTP) is ongoing, but as per a recent report from Cornerstone Advisors, a majority of American banks and credit unions do not view RTP as an immediate source of revenue. Less than 20% of banks predict that commercial RTP will generate income within the next three years, with only 10% expecting retail RTP to contribute financially. Credit unions are even more conservative, with just 7% anticipating either type of RTP to be a profit center.
Despite this, these institutions plan to increase their use of real-time payments. According to the survey, half of the banks and credit unions surveyed intend to have RTP operational by the end of 2024.
Around half of respondents indicated that they will offer RTP services via FedNow, while nearly a quarter of banks plan to utilize The Clearing House’s RTP rail. Credit unions similarly lean towards using The Clearing House’s RTP rail, with 12% planning to do so.
Cost Considerations and Business Cases
The report notes that many financial institutions see real-time payments as a cost rather than a revenue opportunity, potentially impacting their earnings from wire transfers. However, businesses are willing to pay extra for speed in these transactions. Cornerstone Advisors suggests that if $2.50 is deemed fair for sending $1,000, then $100 could be reasonable for sending (or receiving) $100,000 much faster.
The study highlights that business-to-business (B2B) payments are likely the primary driver behind the move towards RTP. B2B payments were cited as the most important potential use case, followed by payroll payments.
Account-to-account (A2A) transfers remain a significant use case for credit unions, while for banks, A2A payments and last-minute consumer payments are considered equally important real-time payment use cases.
The increased interest in real-time payments has led to more attention toward payments hubs. The survey found that financial institutions are planning to invest in new payment hubs or replace existing ones. In both 2022 and 2023, just 4% of banks and credit unions mentioned a new or replacement payments hub.
