Note: The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute treasury services advice, or any other business or legal advice, and it should not be relied upon as such.
In November 2017, BNY Mellon originated the first real-time payment in the United States. This marked both the culmination of a project begun in 2014 by The Clearing House and its member banks and the beginning of a new era in U.S. banking. Built on the first new payment platform in the U.S. since Automated Clearing House began more than 40 years ago, the Real-Time Payments (RTP) system for the first time allows U.S. dollar payments to be made 24/7/365 and to settle instantaneously.
It was not serendipitous that BNY Mellon originated that first payment. Early in the project’s development stage, BNY Mellon committed to collaborate with The Clearing House as an early adopter and to actively participate in realizing the project’s vision and work toward its completion.
This early commitment was not necessarily the obvious or the only choice. That RTP would become a reality was never seriously in doubt, and it will be made available through a number of bank and non-bank providers. Therefore, it made sense for many banks to wait for the project to mature and become available, then sign on with a provider, as many of our clients already have done with us – and more will follow suit. But it was BNY Mellon’s opinion that an active developmental role, with the goal of becoming an early provider, made good business sense and fit well with our evolving role in the industry as a technology innovator and as a bank for banks (Note: BNY Mellon was named Global Winner as “Best Bank for Financial Institutions” by Global Finance magazine in 2017 and 2018).
It made sense for many banks to wait for the project to mature and become available, then sign on with a provider, as many of our clients already have done with us – and more will follow suit.
During the development period in 2015–2017 leading up to the go-live date, BNY Mellon was in constant discussions with our payment clients and potential clients to determine their interests and priorities. This not only helped us shape our offering as we developed it to best meet their needs, it also provided an opportunity to ready those participants to avail themselves of RTP on the day it went live, as in the case of the recipient of our first-ever payment, Apex Clearing. By taking this course, we have been able to develop a solution set that not only provides payments in real time but also integrates RTP with our other existing payment offerings.
RTP is capable of integrating with current systems so that clients can use their existing accounts, and it supports complex business payment services, including electronic invoicing, rich remittance data, and confirmation of delivery. Clients are able to initiate payments from smartphones, tablets, electronic wallets, application programming interfaces (APIs), and file transfers as well as via the internet. RTP provides immediate confirmation of payment plus value-added messaging, such as requests for payment and notification of receipt. It allows for liquidity and cash-flow control, offers real-time fraud prevention, and supports multiple message types through the use of the ISO 20022 protocol.
Waiting for Ubiquity
Every bank in the U.S. eventually will be connected to the Real-Time Payments network; the projected date for this is the end of 2020. Until then, clients can send real-time payments only to beneficiaries with an account at a bank on the RTP network. BNY Mellon recognized that if we were to avoid a loss of momentum, we would need to incorporate RTP within a broader solution set so that its benefits could be realized today to the greatest extent possible. Put another way, we needed to shift focus from development and readiness to offering a workable product. The result is a comprehensive solution set called Immediate Payments.
Utilizing a new technology platform, Immediate Payments provides clients with access to all methods of payments from a single source and via a range of input methods: front-end platforms, mobile applications, the internet, and APIs. Furthermore, embedded in Immediate Payments is a routing technology that automatically translates and settles payments among multiple clearing channels to the payment option that best addresses its cost and timeliness, according to criteria of a client’s choice. So, if a client wants us to make a real-time payment on its behalf but the beneficiary’s bank is not yet an RTP participant, we can automatically send that payment via the next-best route – same-day ACH, for one example – but according to predetermined parameters (of speed, cost, visibility, etc.) that the client has set. The intention is to make the process as seamless as possible during the period that the RTP network expands.
If a client wants us to make a real-time payment on its behalf, but the beneficiary’s bank is not yet an RTP participant, we can automatically send that payment via the next-best route.
Immediate Payments also provides Tokenized Payments, now available with Zelle, which automates business-to-consumer payments using only the end client’s email address or mobile phone number, meaning that there is no longer a need to store complex banking information. This solution allows clients and their end clients to pay anyone in the United States with a bank account domiciled at a U.S. bank utilizing existing ACH and debit card networks.
Another feature that distinguishes BNY Mellon’s offering is that we can provide our complete solution on a private-label basis so that our client banks, via our user interface EnternetBank, can offer RTP as their own solution to their clients. All logos, colors, and contact information are a client’s own, reinforcing and maintaining its brand identity and enabling it to market the service as proprietary. EnternetBank also offers the capability for single sign-on integration with an institution’s online banking application so that its end clients can quickly and easily access EnternetBank from our client’s site without an additional logon step. Further supporting this, BNY Mellon’s solution offers a self-service model for administrative messaging, inquiries, and exception handling to greatly assist the operations teams of our clients to complement an around-the-clock coverage model for Real-Time Payments. Whereas services offered by third-party service providers and FinTechs will require their clients to staff, train, and monitor their own operations team, BNY Mellon’s team will assist in best practices and provide servicing tools used by our own operations team, assisting in efforts to prevent increased costs and allowing clients to focus more on running and growing their own businesses.
Present and Future
RTP transactions are currently processed with the following stipulations:
- The beneficiary account must be within the U.S. at a U.S. financial institution.
- Transactions cannot exceed $25,000.00.
- Payments must denominate in U.S. dollars only for domestic transactions within the U.S.
- RTP is a 24/7/365 immediate payment network.
- RTP credit transfers are final, irrevocable transactions.
In the future, we expect that the cap on transaction amount will rise and, beyond that, that the system will allow for currencies other than U.S. dollar and will be able to interact with real-time networks in other countries. For this last reason, RTP’s designers have based its messaging on ISO 20022, which already is being used in several foreign networks.
BNY Mellon’s team will provide servicing tools used by our own operations team, assisting in efforts to prevent increased costs and allowing clients to focus more on running and growing their own businesses.
Furthermore, added security will be made available through alias accounts, an alternate identifier for a user’s account or routing number, and account tokenization, the assignment of a random credential or token for an end user’s account number.
It is difficult to overstate the change Real-Time Payments will bring to the way the industry conducts business here in the U.S. and, eventually, around the world. To be involved so intimately in this from the very beginning and to have had the opportunity to help shape the future of payments has been a personal satisfaction, one made possible only through the foresight of BNY Mellon’s executive team in recognizing RTP’s potential for the bank, for the banking industry, for our clients, and, ultimately, for the global economy.